• Both banks posted near-identical pre-tax profits in 2025, yet a 12-point tax rate gap cost GTCO $89 million more than its rival

• Zenith appears to be a lender, 33% of its assets in loans. GTCO in the other side is a treasury — 46% of interest income from government bills now squeezed by CBN rate cuts

• If Zenith's unusually low 17.6% tax rate normalises, its profits could take a direct hit. If GTCO's 29.7% holds, it must grow pre-tax earnings just to stay flat

Zenith Bank Plc and Guaranty Trust Holding Company Plc, Nigeria's two most closely watched banking groups, reported 2025 full-year after-tax profits that moved in opposite directions despite starting from almost the same pre-tax position, according to audited financial statements filed with the Nigerian Exchange in 2026.

Zenith, the first Nigerian lender to surpass $3.8 billion in market capitalisation, posted after-tax profit of $650 million — roughly unchanged from 2024. GTCO, the first West African financial institution to dual-list on both the Nigerian Exchange and the London Stock Exchange, saw after-tax profit fall 15% to $541 million from $636 million the year before. Both banks recorded pre-tax profit of just over $769 million, the filings showed. What separated them was the tax line.

"Our 2025 result underscores the resilience and depth of our earnings capacity," Segun Agbaje, group chief executive officer of GTCO, said in a statement accompanying the results. Agbaje, who has led the Lagos-based group since 2011 and oversaw its conversion to a holding company in 2021, said the outcome reflected "the quality of our franchise" despite a stronger naira and tighter regulatory parameters.

The two banks reported effective tax rates of 17.6% and 29.7%, respectively, for the same fiscal year under the same Nigerian tax code and supervision by the same central bank. The direct gap between their two tax bills was $89 million, measured from the 2025 accounts. A year-on-year reading — comparing each bank's 2025 charge against its 2024 charge — yields a larger figure: Zenith's bill fell by roughly $44 million, while GTCO's rose by $73 million, for a combined annual swing of $117 million. Both measurements are accurate and answer different questions. The direct gap describes the cross-bank divergence today; the annual swing describes the earnings impact relative to the prior year.

Tax divergence

Analysts covering Nigerian banking said the gap was the single most important unexplained number in the 2025 earnings season. Plausible mechanisms include differing treatments of deferred tax on foreign-exchange gains from the 2024 naira devaluation, divergent timing of windfall-profit tax recognition, and the effect of each group's geographic income mix across multiple jurisdictions. None has been publicly documented with enough detail to allow investors to assess or quantify these factors. Zenith's 17.6% rate sits below the statutory headline rate for a Nigerian bank of its size. GTCO's 29.7% sits close to the statutory ceiling. If Zenith's rate reverts to the sector norm in 2026, its after-tax profit will face a direct headwind. If GTCO's rate stays near 30%, its pre-tax earnings must improve to hold after-tax results flat.

The tax question sits atop a structural divide that was already reshaping the two banks' relative trajectories before a single naira of tax was collected. Zenith deployed 33% of its $19.7 billion asset base in loans and advances to Nigerian companies and households — three times the proportion at GTCO, which held just 18% of its $11.1 billion balance sheet in credit. GTCO instead concentrated 31% of its assets in Nigerian government securities, generating $474 million in Treasury bill income in 2025, equivalent to 46% of its total interest earnings, according to its financial statements. For Zenith, the Treasury-bill share was 31%, with loans contributing nearly $1.1 billion — half of total interest income — according to the bank's annual report.

That difference mattered less when the Central Bank of Nigeria's benchmark rate stood at 27.5%, and government paper yielded accordingly. It matters more now that the CBN started cutting rates in late 2025, reducing the benchmark toward 27%. Sovereign yields compress more quickly and more directly than loan yields, and GTCO has the greater sovereign exposure. How quickly GTCO can redeploy its balance sheet toward credit will determine whether its efficiency advantage survives the rate transition.

In terms of efficiency, GTCO still holds the edge. Its return on assets was roughly 5.3% in 2025, compared with Zenith's 3.4%, a gap that has persisted across multiple business cycles. That reflects GTCO's leaner cost base and lower provisioning requirements relative to its balance sheet size. Zenith's lower ratio reflects its sheer scale: $19.7 billion in assets against GTCO's $11.1 billion, a loan book three times larger, and deposits of $15.2 billion against GTCO's $7.8 billion. Both groups cleared the CBN's new minimum capital threshold of $313 million for internationally licensed banks ahead of the March 2026 deadline — Zenith by raising $219 million through rights issues and public offers, GTCO through a dual-tranche program that combined a domestic offer raising $131 million with a $105 million placement on the London Stock Exchange.

Despite a wider geographic footprint — ten African banking subsidiaries across Nigeria, Ghana, Kenya, Uganda, Rwanda, Tanzania, Côte d'Ivoire, Sierra Leone, Liberia, and The Gambia, plus a UK platform — GTCO generated less non-Nigerian profit than Zenith in 2025. Zenith's Ghana subsidiary alone contributed roughly $121 million in pre-tax profit, and its UK operation added another $62 million, bringing estimated non-Nigerian earnings to around $208 million, or 26% of group pre-tax profit. GTCO's estimated non-Nigerian contribution was closer to $125 million, or 16% of group pre-tax profit, based on non-controlling interest disclosures in the 2025 accounts.

Both groups will report first-half 2026 results by September. The key number to watch is not the pre-tax profit line, which is likely to stay close between the two banks, but the tax rate. A convergence toward 22–24% for both would roughly cancel the 2025 divergence. A persistence of the current gap would compound the after-tax performance difference for a second consecutive year — and make the question one that regulators, not just analysts, will want answered.

Idriss Linge