Nigeria’s banking index has rallied 67 percent this year outperforming the wider all share index.
It may have further to run as bulls cheer positive earnings from FBN Holdings one of the biggest banks in Africa’s largest economy.
FBN Holdings yesterday released results for the nine month period to September 2017, showing revenues up 5 percent and net income up 7.8 percent to N45.84 billion.
Commenting on the results, UK Eke, the Group Managing Director said: “FBN Holdings has again demonstrated its resilience in revenue generation with a 5.2 percent y-o-y growth in gross earnings to N439.2 billion following a y-o-y increase of 25.2 percent in net interest income to N254.3 billion. The Group is progressing in building the right structures for sustainable growth through an improved credit culture and risk management; increased technologically driven operational efficiencies; and the introduction of revenue enhancing platforms.”
Bank earnings are recovering in Nigeria following a prelonged recession and spike in bad loans which hit profitability.
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FBN Holdings expenses on impairment charges on credit losses for the period was down 15 percent to N97.5 billion from N114.7 billion, a sign that the worst of the credit crises is over.
Gross earnings was driven largely by a 27.8 percent y-o-y growth in interest income. This was partly offset by a 43.5 percent y-o-y decline in non-interest income.
Interest income and non-interest income contributed 81.3 percent and 18.7 percent respectively. The growth in interest income to gross earnings was driven by increased investment in securities.
Net-interest income improved by 25.3 percent y-o-y to N254.3 billion (Sept 2016: N202.9 billion), driven by a 27.8 percent y-o-y increase in interest income to N356.1 billion (Sept 2016: N278.6 billion), and by improved yields on interest earning assets and continuous optimisation of the loan book.
Cost of funds increased to 3.5 percent (Sept 2016: 2.7%), mainly on the back of the high interest rate environment and the impact of the monetary policy rate (MPR) -indexed pricing on savings deposits.
However, the Group continued to optimise its balance sheet and achieved stronger blended yield on interest earning assets of 12.3 percent (Sept 2015: 10.2%). Consequently, net-interest margin increased to 8.8 percent from 7.5 percent in the prior period.
Fees and commission (F&C) income, representing 73.3 percent (Sept 2016: 40.2%) of total non-interest income, increased by 3.0 percent y-o-y to N54.3 billion (Sept 2016: N52.7 billion).
This improvement was driven primarily by: a 1.2 percent y-o-y increase in electronic banking fees to N15.7 billion (Sept 2016: N15.5 billion); 25.5 percent y-o-y growth in custodian fees to N4.3 billion (Sept 2016: N3.5 billion); 50.2 percent y-o-y growth in other fees and commission to N9.2 billion (Sept 2016: N6.1 billion); 45.2 percent y-o-y growth in credit related fees to N3.9 billion (Sept 2016: N2.7 billion); (Sept 2016: N2.7 billion); a 99.1 percent y-o-y rise in letter of credit commission and fees to N3.0 billion (Sept 2016: N1.5 billion); as well as a 5.5 percent y-o-y increase in fund transfer and intermediation fees to N3.2 billion (Sept 2016: N3.0 billion).
The Insurance group also sustained its strong performance with Gross Premium Written increasing by 60.4 percent to close at N17.2 billion (Sept 2016: N10.7 billion).
Total revenue for the Insurance segment increased by 28.9 percent y-o-y to N12.5 billion (Sept 2016: N9.7 billion), while profit before tax rose to N3.5 billion, up 54.9 percent y-o-y (Sept 2016: N2.3 billion). The business group’s total assets increased by 41.0 percent y-t-d to N45.5 billion (Dec 2016: N32.3 billion).
FBN Holdings total assets increased by 2.7 percent y-t-d to N4.9 trillion (Dec 2016: N4.7 trillion); this was largely driven by a 7.1 percent y-t-d increase in investment securities to N1.34 trillion (Dec 2016: N1.25 trillion); and a 41.9% y-t-d increase in loans to banks to N631.5 billion (Dec 2016: N444.9 billion).
Total customer deposits declined by 5.3 percent y-t-d to N2.9 trillion (Dec 2016: N3.1 trillion) as the bank focused on growing inexpensive deposit at the right mix and total loans & advances to customers (net) declined by 1.9 percent y-t-d to N2.0 trillion (Dec 2016: N2.1 trillion) primarily following repayments and write-off of assets that had been fully impaired.
Shareholders’ funds closed at N631.1 billion, up 8.3 percent y-t-d (Dec 2016: N582.6 billion), benefitting largely from an increase in: retained earnings (up 21.4% y-t-d to N196.2 billion (Dec 2016: N161.6 billion)); AFS (up 23.2% y-t-d to N33.9 billion (Dec 2016: N27.5 billion)); foreign currency translation reserves (up 13.3% y-t-d to N39.4 billion (Dec 2016: N34.8 billion)); as well as, SSIS reserve (up 41.4% y-t-d to N8.6 billion (Dec 2016: N6.1 billion)).
Capital adequacy ratio for First Bank (Nigeria) closed at 17.2 percent (Dec 2016: 17.8%) 220bps above the regulatory minimum of 15 percent, while the Capital adequacy ratio for FBN Merchant Bank closed at 23.1 percent (Dec 2016: 22.6%) above the 10 percent required by regulation for Merchant Banks.
PATRICK ATUANYA
