FBN Holdings’ full year financial result shows Gross Earnings, grow by 2.27% to close at N595.02bn

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The management of First Bank of Nigeria (FBN) Holdings Plc has released its FY-17 financial result yesterday through the Nigerian Stock Exchange (The NSE), showing Gross earnings (+2.27%) grew during the period to N595.02 billion.

The Profit Before Tax  (PBT) recorded upturns of 147.63% to N56.83 billion and while Profit After Tax (PAT) recorded growth of 178.78% to close at N47.79 billion respectively, were falling short of analyst expectation by 13.80% and 11.27% and Bloomberg’s polled estimates by 17.20% and 14.96% respectively.

The further analysis of the results revealed that uptick in Gross earnings was buoyed by 15.87% growth in interest income to close at N469.59 billion, while fee and commission income increase by 4.33% to anchored on N74.45 billion which both constituted 91% of Gross earnings. Notably, net insurance premium also grew by 1.72% to N10.23 billion. The rise in interest income was driven by improvement in interest earnings on investment securities by 50.22% growth to N173.29 billion and loans and advances to customers shown growth of 6.25% to N288.59 billion which muted the 57.92% decline in interest on N7.71 billion loans to banks. Interestingly, total customers loan book decreased by 3.97% to N2 trillion, while loans to banks surged 67% to N742.93 billion.

“Also, interest expense increased by 36.92% to N138.06 billion in the year — much faster than the 10.23% rise in interest bearing liabilities (IBL) to N4.23 trillion – indicative of a more expensive mix in the IBLs. This can be largely attributable to the 32.87% increase in expensive borrowings, as against the slower rise in total deposits by 8.19%. As a result, the cost of fund increased by 63 bps to 3.42%.

“Expansion in our computed yield on asset for the period by 25 bps to 12.03%, together with the 63 bps increase in cost of fund, translated in the 30 bps dip in NIM to 8.40%.

Meanwhile, significant decline in forex gains by 76.36% to N21.06 billion – owing to the 83.16% drop in revaluation gains on the Group’s long forex position – offset the growth by 3.40% in net fee and commission, and the significant upturn in profit on financial instruments at fair value through profit or loss; causing a 34.36% decline in NIR to N103.08 billion.

“Provision for loan losses recorded its first y/y decline since 2012, contracting by 33.45% to N150.42 billion. Accordingly, the cost of risk dropped 272 bps to 8.13%. The growth in total loans and advances by 8.52% N2.74 trillion and a slower pace of increase in deposits by 8.19% N3.81 trillion, translated to the 22 bps increase in the loan-to-deposit ratio to 72.05%.

“The Group’s total opex grew by 7.73% to N238.02 billion, following a 10.39% and 84.52% rise in other operating expenses and insurance claims respectively.

“Accordingly, the higher opex, coupled with the N444.84 billion decline representing 5.34% in operating income drove the rise in cost-to-income ratio by 649 bps to 53.51%.

“The impressive pre and post-tax profits reported benefitted from the low bases of 2015 and 2016 which were dragged by high impairment charges. The lower effective tax rate of 15.91% also aided growth in the bottom line.

“Performance in Q4 2017 was also broadly positive, compared to the same period last year, as Gross earnings, PBT and PAT grew by 29.23%, 110.57%, and 142.22% to N156.09 billion, N1.39 billion, and N1.95 billion respectively. While quarter-on-quarter, shown PBT and PAT dropped by 92.97% and 88.10% respectively.

“Net interest income recorded positive growth, with both interest income and interest expense posting upticks. Growth in net gain on investment securities and forex income supported the positive performance in NIR.

“Loan impairment charges and total opex in the quarter rose to N52.84 billion representing 5.76% higher than analyst estimate and N62.67 billion represents 7.97% higher than analyst expected respectively.

Commenting on overall result, analyst at Cordros Capital Ltd does not expect significant reaction to the result, though FBNH’s performance was fair, as key line items recorded positive growth in the full year. The stock has accumulated 52.27% YtD, and currently trade at 81.6% premium to analyst last reviewed TP of N7.38.



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