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Published On: Mon, Jan 22nd, 2018

Jaiz Bank: Riding the profitability trajectory amidst macro turbulence

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jaiz bank logoBy Bashir Ibrahim Hassan

When Jaiz Bank commenced operations in 2012, not many people gave it a chance. It was one controversy or the other and amidst all these, it was able to weather the storm and broke even within the first three years of its operations. Since then, it never looked back. With just N5 billion when it commenced operations, the Bank has grown its capital base to over N15 billion and also expended its branch network from 3 to currently 30 branches spread across Nigeria.

An analysis of Jaiz Bank’s financial statement revealed that the Bank recorded revenue of N4.97 billion within the period, 21.96 percent rise when compared with N4.07 billion revenue of the previous year. The Bank’s revenue for the third quarter of 2017 grew by 13.96 percent to N1.72 billion, compared with the N1.51 billion revenue it generated in the third quarter of 2016.
Jaiz bank’s balance sheet has been growing at an average of about 30 per cent since 2012. This growth is sustained in the period under review, as the Bank’s total assets increased by 30.90 percent to N82.09 billion in September 2017, compared to N62.72 billion assets in the corresponding period of 2016.
This performance can only be described as stellar, considering the tough operating environment that the Bank waded through.

The Bank’s financial statement also shows improved margins while utilising the resources of its owners to generate increasing profit. For instance, the operating margin for the nine months ended September 2017 was 81.02 percent; this compares with the profit margin of 79.71 percent it generated in the previous year. Similarly, the Bank recorded an impressive net profit margin of 15.70 percent for the first 9 months of 2017 as against 2.63 percent margin it recorded in the corresponding period of 2016.
The Bank’s gross profit for the period under review spiked by 43.26 percent to N4.80 billion as operating profit surged by 23.97 percent to N4.02 billion from N2.35 billion in 2016. Net profit rose 27.55 percent from N107.17 million in 2016 to N779.70 million in 2017.

While the Bank’s Management focuses on the vision of building a culture of ethics that aligns with clients’ expectations, it also keeps in mind the objective of utilising resources efficiently to generate expected returns for shareholders.
This desire is evident from the financial statements, which showed that return on equity for the period under review rose to 5.04 percent as against 0.74 percent it recorded in the equivalent period of 2016. This shows a better utilization of its shareholders’ fund.
Likewise, the return on capital employed (ROCE) during the period climbed to 3.43 percent as against 0.53 percent achieved in 2016. Again, this shows the Bank’s Management made a better utilization of its capital in the pursuit of rewards for the providers of capital.

A review of the financial statement shows that the solvency ratio, (which measures the financial leverage of the bank by calculating the percentage of its capital that came from borrowing), reveals that it is exploiting the availability of credits to drive its operations.
The total debt to equity ratio (TD/E) of the bank for the period stood at 231.07; it was 153.49 in 2016. Similarly, the total debt as a proportion of total capital employed for the period stood at 139.44, compared to the 109.15 in 2016. The increasing profitability of the bank signals its rising capacity to meet its long term obligations.

With the impressive performance of Jaiz Bank Plc as shown in the foregoing analysis, stakeholders can expect that the Bank is poised to continue to fulfil their expectations. Importantly, it shows that the Bank will gain additional capacity to continue with its involvement in financing businesses relevant to the development of the real sector.

Bashir Ibrahim Hassan is a Public Affairs Analyst.

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