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Proshare Report Reinforces FUGAZE Concept, Names Top Tier 1 Banks

The Proshare Tier 1 Bank Third Edition Report has reinforced the FUGAZE concept, a classification coined by Afrinvest to group Nigeria’s top banks.
The report’s Proshare Bank Strength Index (PBSI) evaluated banks based on audited financial statements for 2023 and identified Access Corp, Zenith Bank, FBNH, ETI, UBA, and GTCO as Tier 1 Banks in 2024.
The FUGAZE acronym represents the six banks: FBN Holdings Plc, United Bank for Africa Plc, GTCO Holding Plc, Access Corp Holding Plc, Zenith Bank Plc, and Ecobank Transnational Incorporation.
According to the latest Proshare report, “Tier 1 banks tend to edge out their tier 11 counterparts for big-ticket public and private sector transactions. Hence, the evaluation metrics for bank classification need to be continuously revised, especially when big appears to be beautiful.”
At a presentation to financial stakeholders, Teslim Shita-Bay, Managing Editor of Proshare, shared insightful remarks from the report. “Banks are like bulls in a pen; they are stuck behind bars that are difficult to escape.
Banking, on the other hand, is free-spirited, agile, and capable of reinterpreting economic reality”
He pointed out that over the last two decades, the financial payment and settlement business has increasingly grown on the back of cloud-based blockchain technology, which may be destined to improve the efficiency of financial transactions and the quality of person-to-person (P2P) and business-to-business (B2B) relationships.
Noting that with an ongoing Central Bank of Nigeria inspired banking sector recapitalisation programme, investment in financial technology, customer service scalability, and digital asset engineering will take a fresh turn between 2024 and 2026.
Proshare analysts add, “With higher capital levels, banks must use the larger amounts of cash available to improve shareholder returns and customer service experiences. Many banks will get cut at the knees by lacking a deliberate strategy to transition from cash flow to value creation. Recalling the challenges faced by banks during the Charles Soludo-inspired in 2005, a few bank executives would have more money than business skills, resulting in a terrible waste of additional capital.”
As lenders expandin size and scale to meet the demand of a US$1trn economy, analysts call for attention to macro and microeconomic risks, as seen in the United States of America (US). Poor asset and liability management (ALM) was a major contributor to the failure of several US banks, such as Silicon Valley, First Republic,  and Signature Banks, in 2023.
Looking at the Nigerian economy and banking sector, the Proshare analysts noted that “Nigeria’s GDP in 2005 was N38.78trn and rose to 77.94trn, roughly two times in 2023, suggesting an average annual growth rate of 3.55% in the last two decades. However, between 2000 and 2005, bank equity sizes grew over ten times or by 1,150% from N2bn to N25bn. In other words, for a decade and a half, banks have used ten times more equity in their businesses than before 2005, yet the country’s GDP growth has been modest.”
The report further stated that raising Nigerian banks’ equity base is no guarantee for economic growth and development. “Transforming bank equity into drivers of economic growth requires more than money; it requires a coordinated public and private sector plan, with what Proshare analysts have repeatedly called a whole-of-government approach to policies, programmes, and processes.”