Nigeria’s banking sector recorded a significant increase in profitability in the first half of 2026, with seven major listed banks posting a combined 19.3 per cent rise in profit before tax. However, much of the growth was driven by First HoldCo Plc, highlighting the uneven performance of lenders across the industry.
According to a report by Lagos-based investment firm Chapel Hill Denham Securities, the seven banks recorded stronger earnings in the six months ended June 30, 2026, supported by improved lending performance, higher non-interest income and lower credit impairment charges at some institutions.
The banks covered in the report are First HoldCo Plc, Zenith Bank Plc, Guaranty Trust Holding Company Plc (GTCO), Ecobank Transnational Incorporated (ETI), Stanbic IBTC Holdings Plc, Wema Bank Plc and FCMB Group Plc.
Despite the sector-wide improvement, the report showed that excluding First HoldCo, profit before tax growth among the remaining six banks would have been approximately nine per cent. Growth in their combined after-tax profits would have been around one per cent, underscoring the extent to which First HoldCo influenced the overall performance.
First HoldCo Drives Banking Sector Earnings Growth
First HoldCo emerged as a major contributor to the banking sector’s earnings expansion after reporting a sharp increase in profitability during the review period.
The financial services group, which owns FirstBank of Nigeria, recorded profit before tax of ₦653.54 billion in the first half of 2026, representing an 83.5 per cent increase from ₦356.15 billion reported in the corresponding period of 2025.
Its profit after tax also rose by 81.6 per cent to ₦526.13 billion, compared with ₦289.77 billion a year earlier.
The strong performance was supported by a significant reduction in impairment charges, improved fee income and higher gains from financial instruments and other non-interest revenue streams.
According to the Chapel Hill Denham report, First HoldCo’s impairment charges declined by 37.4 per cent, supported partly by ₦91.9 billion recovered from previously impaired loans.
Non-interest income also increased substantially, rising by 162.5 per cent during the period.
However, the group’s net interest income declined by 2.8 per cent, while its non-performing loan ratio increased to 13.9 per cent from 12 per cent at the end of 2025.
These figures indicate that although First HoldCo recorded substantial earnings growth, lower credit losses and stronger non-interest income played important roles in supporting its results.
Wema Bank, Stanbic IBTC and FCMB Record Strong Growth
While First HoldCo accounted for a significant portion of the sector’s earnings improvement, other lenders also recorded notable increases in profitability.
Wema Bank Plc reported a 54 per cent increase in profit before tax, supported by a 21 per cent expansion in its loan book during the first half of the year.
Stanbic IBTC Holdings Plc recorded a 40 per cent increase in profit before tax, while its loans grew by nine per cent over the same period.
FCMB Group Plc also delivered strong earnings growth, with profit before tax nearly doubling as its net interest margin widened to 11.2 per cent.
The results suggest that lenders able to expand their lending activities, improve their margins or increase income from other banking services were better positioned to grow profits during the period.
However, differences in loan growth, funding costs, credit quality and revenue composition continued to influence individual banks’ performance.
Zenith Bank and GTCO Face Pressure on Earnings
Zenith Bank Plc and Guaranty Trust Holding Company Plc recorded comparatively modest profit growth despite their strong positions in Nigeria’s banking industry.
Zenith Bank’s loan book expanded by 14 per cent, while its net interest margin widened to 12.4 per cent, the highest among the seven banks examined in the report.
Nevertheless, the bank’s profit before tax increased by only two per cent.
The relatively modest growth indicates that higher lending activity and improved interest margins did not translate into a proportionate increase in overall earnings.
GTCO, meanwhile, recorded little change in profit before tax as its loan book remained broadly flat and its net interest margin narrowed.
Ecobank Transnational Incorporated experienced a more challenging period, with its loan book declining by six per cent. Both its profit before tax and after-tax earnings also fell.
The report attributed part of Ecobank’s performance to currency movements, which reduced the value of its dollar-denominated earnings when converted into naira.
These differences highlight the varying challenges facing Nigerian banks, even as the industry continues to benefit from improved financial performance in some areas.
Falling Interest Margins Create New Challenges
Despite the increase in overall profitability, pressure on interest margins remained a concern for the banking sector.
Chapel Hill Denham reported that five of the seven banks recorded narrower net interest margins during the first half of 2026.
Net interest margin measures the difference between the interest income a bank earns on its assets and the interest it pays on deposits and other funding, relative to its interest-earning assets.
A declining margin can reduce the amount a bank earns from its core lending activities, particularly when funding costs remain elevated or lending yields begin to fall.
The report also noted that the Central Bank of Nigeria reduced its benchmark interest rate by 350 basis points to 23 per cent in September 2026.
Although lower interest rates can eventually support borrowing and economic activity, they may also place pressure on banks’ earnings if lending yields fall faster than funding costs.
Even so, the margins recorded by the banks remained above the levels observed during the previous monetary easing cycle, according to the investment firm.
The development suggests that lenders may need to focus increasingly on efficient operations, quality lending and diversified revenue sources to sustain earnings growth.
Core Banking Income Becomes More Important
The composition of Nigerian banks’ earnings has also changed in recent years.
According to Chapel Hill Denham, foreign exchange and trading-related income accounted for approximately 14 per cent of sector operating income in 2025, down from 38 per cent in 2023.
Over the same period, net interest income increased to 69 per cent of operating income, its highest share in a decade.
The shift indicates that banks have become more reliant on income generated from their core banking operations rather than the foreign exchange and trading gains that supported earnings during earlier periods of currency volatility.
While diversified revenue streams remain important, the growing contribution of net interest income places greater emphasis on effective credit management, lending growth and the ability to maintain healthy margins.
For investors, the sustainability of earnings growth will depend partly on whether banks can continue generating income from their core operations while managing credit risks and operating costs.
Banking Sector Valuations Rise as Investors Anticipate Growth
The improvement in earnings has coincided with a substantial increase in the market valuations of Nigerian banks.
Chapel Hill Denham reported that the market-weighted average price-to-book ratio of the 10 banks tracked by the firm rose to approximately 1.21 times, a decade high, from 0.73 times at the end of 2025.
The price-to-book ratio compares a company’s market value with the value of its net assets as recorded on its balance sheet.
The firm also reported that return on equity had moved into the mid-20 per cent range across the sector.
However, excluding First HoldCo, which traded at approximately 1.64 times its book value in the report’s analysis, the sector’s price-to-book multiple stood at 1.08 times.
The figures suggest that investors have already responded to the improvement in banking sector earnings, potentially raising expectations for future financial performance.
Chapel Hill Denham noted that consensus market forecasts anticipated a substantially stronger second half of 2026, with analysts expecting sector earnings per share to more than double between 2025 and 2027.
The investment firm’s own forecast was more conservative, projecting growth of approximately 59 per cent over the same period.
Outlook for Nigerian Banks in the Second Half of 2026
The first-half results point to an improving but uneven earnings outlook for Nigeria’s banking industry.
Although combined profit before tax rose by 19.3 per cent, the weaker underlying growth among banks excluding First HoldCo raises questions about how broadly the improvement is being shared across the sector.
The performance of individual lenders is likely to depend on their ability to expand quality lending, protect interest margins, control impairment charges and increase fee-based income.
Banks may also face pressure from changing interest rates, rising operating costs and the need to maintain adequate capital and liquidity buffers.
For investors, the distinction between headline profit growth and the underlying sources of earnings will remain important when assessing the sustainability of banks’ financial performance.
As the industry moves into the second half of 2026, the key question is whether more lenders can translate improved operating conditions into stronger and more consistent after-tax profits, rather than relying on exceptional gains or reductions in credit losses.
The latest figures show that Nigerian banks remain profitable, but the extent to which earnings growth broadens beyond First HoldCo will be an important indicator of the sector’s financial strength in the coming quarters.
