FBN Holdings on Thursday announced its audited results for the financial year ended 31 December 2020, where it recorded 21.28 percent increase in profit for the year and 11.2 percent rise in profit before tax, despite the impact of Covid-19 and other regulatory indicators.
During the year 2020, the group’s Profit before tax grew 11.2% y-o-y to N83.7 billion from N75.3 billion in the corresponding period of 2019.
The group’s non-interest income recorded a growth of 26.7% y-o-y to N174.7 billion in 2020 compared to N137.9 billion in 2019. These results were despite the challenging rate environment evidenced by the decline in fixed income rates and higher cash reserving requirements leading to a 10.9% y-o-y decline in interest income to N384.8 billion from N431.9 billion in the previous year. However, “we mitigated the impact on net interest income by containing interest expense through reducing the cost of deposit and driving low-cost deposits,” said U.K Eke, Group Managing Director.
The group’s gross earnings were down 1.9% y-o-y to N579.4 billion (Dec 2019: N590.4 billion). This was driven by a 10.9% y-o-y decline in interest income to N384.8 billion (Dec 2019: N431.9 billion) largely on the back of Government securities which declined on the short and long end of the yield curve.
Although interest expense declined 12.6% y-o-y to N133.2 billion (Dec 2019: N152.3 billion), net interest income declined 10.0% y-o-y to N251.6 billion (Dec 2019: N279.6 billion) due to depressed yields and higher cash reserve requirements.
On the other hand, non-interest revenue increased 26.7% y-o-y to N174.7 billion (Dec 2019: N137.9 billion) on the back of increased fees and commission income and other non-interest income.
Looking ahead, the group will continue to drive revenue through non-funded and grow interest income with a focus on deliberate increased lending opportunities.
Commenting on the financial result, Eke said, “FBNHoldings is pleased to close the year in a healthy financial position despite the difficult operating environment that has been characterized by unprecedented events as a result of the pandemic and challenging economic environment. As part of our strategic planning cycle, which is in the second year, we exited the insurance underwriting business through the sale of our interest in FBNInsurance to our long-term partner, the Sanlam Group.
“This decision is consistent with our portfolio optimisation strategy, underscored by the renewed focus on deepening our foothold in the banking sector through increased investment in digitalisation, innovation, and expansion in financial services for the benefit of our existing and new customers. The proceeds from the sale have been injected in First Bank of Nigeria to strengthen the core business of the Group and drive further market growth.
“Five years ago, we outlined our strategy to diversify our income stream by boosting non-interest income through a transaction-led banking model. We believe this decision reduced the burden on our customers during the lockdown by providing seamless access to banking service, as well as, support the effort of the Government and other donor agencies to reach Nigerians with the COVID-19 support programs.
“We remain focused on driving operating expenses down and improving cost to income ratio. In 2020, operating expense was up marginally by 0.5% y-o-y growing significantly slower than inflation. Notwithstanding, our strategy is to continue to deploy the two-pronged approach of driving revenue through the transaction-led banking model, whilst implementing initiatives geared towards containing operating cost, to help reduce the cost to income ratio.
“I am also delighted with the improved risk management processes and architecture which continues to yield positive results. Consistent with our commitment to a single-digit NPL to the market, we further reduced the ratio to 7.7% (Dec 2019: 9.9%).
“Overall, whilst these developments represent significant progress in our journey to reposition the Group, over the planning cycle, we will be increasing the pace of implementation of our mid-range initiatives including the optimisation of our portfolio to extract increased value from existing assets, and evaluating options to support our vision of remaining dominant in the financial services industry in Africa,” Eke said.
