Six banks top human capital value-added in 2014

ATM-Naira-and-Dollar

Six Nigerian banks have been identified as having the highest positive human capital value-added for Financial Year 2014 down from eight that made it in 2013.  A research conducted by Thaddeus Investment Advisors & Research Ltd has shown that the six top value adding banks were among the top ten in the country. According to Thaddeus Investment Advisors & Research Ltd. the banks are UBA, GT Bank, Sterling Bank, Unity Bank, First Bank, FCMB, ETI, Zenith, Access and Diamond bank.

The research said that UBA emerged top to reclaim its position having been 1st in 2012, 2nd in 2013 and 1st in 2014.  The report said that the last time UBA came 1st; the bank’s stock had the best investment return for 2013 among banks returning 94 per cent. It said that this year may just be the same.

GT Bank was named second this year but was 1st last year. According to the report “Its value added declined by 7 though financial productivity dropped by only 6 per cent. “We see this as a sign of employee discontentment with certain realities within the company. Sterling Bank came third for the second time in a row in the analysis while spending the lowest amount on its employees on average for the third consecutive year in the Nigerian Banking industry.

The report said that Unity Bank moved up eight spots from 12th. This is a bank to add to your watch list. First Bank on the other hand moved down one spot from 4th to fifth as it Human capital value-added declined from +4 to +3 despite average human capital expense rising by 11 per cent in 2014.
FCMB it said moved up one spot from 7th to 8th. Its human capital value-added remains at +1 for the second year in a row while average human capital expense rose by 9 per cent in FY 2014.

According to Thaddeus Investment Advisors & Research Ltd ETI moved up one spot from 8th to 9th as its human capital value-added remained at zero for the second consecutive year.  This implies human capital is as efficient as they are remunerated.

The Nigeria cluster has started turning into an asset after being a liability since the Oceanic bank acquisition. Financial productivity of its human capital rose by a very impressive 131 per cent from FY 2013-2014. Ecobank did some staff rationalisation in 2013 and increased the headcount of its Nigerian cluster by 30.5 per cent in 2013.  In $ terms, average human capital expense declined by 2 per cent in 2014.  ETI finally appears to be getting a proper handle on its Nigerian cluster. This bodes well for the bank if sustained.

Zenith the report said moved down two spots from 6th to eight as the bank’s value-added declined from 2 to 0 despite a 21 per cent increase in its average human capital expense while its headcount remained flat from FY 2013-2014. Over the past two years, we keep seeing banks increasing their human capital expense and getting punished for it.

Access on its part moved up one spot from 10th to 9th as the bank reduced headcount by 19 per cent in 2013 and a further 20 per cent in 2014′ while average human capital expenses are rising 26 per cent increase in average human capital expense in FY 2014 either as a result of motivation for others to stay behind and/or there are less people doing more work who may now be better remunerated to carry on the expanded workload.

The bank’s employees improved their financial productivity by 14.6 per cent from FY 2013 – FY 2014 and are the second most financially aggressive in the industry after GT Bank. It said that “Diamond had 15 per cent increase in employee count in 2013 while average cost per employee stayed flat.  We keep having this itch that Diamond Bank has swallowed the “quest for size” pill. Its strategy going forward does raise concern. 2 steps forward and 3 steps backward is one step backward.  Its employees are now the 5th best paid in 2013 relative to 3rd in 2012. Meanwhile, its employees’ value added score improved from -3 to -1.”

In its assessment Thaddeus Investment Advisors & Research Ltd said that Stanbic IBTC Bank has taken up the challenge to get its human capital cranking properly. The bank’s employees are still generating negative value-added but have improved from -12 in 2012 to -7 in 2013 to -3 in FY 2014.  Financial productivity improved by 50 per cent from FY 2013 – 2014. The bank has for the third year in a row invested the most financially on average in compensating its human capital.

Stanbic achieved the best ROE in the industry in 2014 of 26.6 per cent.  There is a certain expense item that if reviewed upward  will likely give the honor to GT Bank with ROE of 26.2 per cent.  Q1 results show normalisation of the issue.  Stanbic had the best price performance in 2014 of 26.5 per cent.  GT Bank had the best human capital value added in the banking industry for FY 2013 which was released in 2014 as mentioned earlier.

Union Bank according to Thaddeus Investment Advisors & Research Ltd moved up three spots from 15th to 12th while Fidelity Bank moved down by two spots from 11th and human capital value-added worsened from -4 to -6. Wema Bank also moved down one spot from 13th to 14th as the financial productivity of its human capital improved by 41 per cent which is impressive.  Human capital value-added declined from -7 to -9.  Average human capital expense rose by 15 per cent from FY 2013 – 2014 and is now has the fifth most expensive human capital in the industry on average.