FBN Holdings (FBNH), the parent company of First Bank of Nigeria Limited has been applauded by Moody’s Investors Service, an American credit rating agency, for driving down its Non-performing Loan ratio to 14.5 percent.
“The decline is credit positive because it shows the bank is making progress cleaning up its balance sheet, which will support its solvency,” Moody’s said in its financial institution report on July 30th 2019.
According to the second quarter report of FBN Holdings as analysed by BusinessDay, its NPL ratio, mainly from First Bank, declined to by 10.8 percentage points from 25.3 percent in the first quarter 2019 to 14.5 percent, which is also 11.4 percentage points lower than the 25.9 percent at reported in 2018.
Although still high, FBNH’s problem loans has dropped by 49percent since the end of 2018 to about N273 billion after the bank wrote off N127 billion worth of loans that were fully provisioned coupled with some NPLs that were recovered.
“First Bank’s NPLs are concentrated among a few borrowers, with the top five defaulters accounting for about 35percent of the total, after writing off some of the large bad loans. As a result, reaching workout agreements with just a few defaulters can significantly reduce the ratio,” Moody’s recommended.
FBN Holdings is targeting an NPL ratio of lower than 10percent by the end of 2019. The bank’s asset quality deteriorated sharply after the oil price collapse in 2015 and recession in Nigeria in 2016. In the period, the bank reported NPLs of 18.1percent at the end of 2015 from 3.9 percent in the first quarter of that year.
Since then, the bank has struggled to reduce its NPLs and FBNH’s quarterly NPLs averaged 19.3percent of gross loans between the first quarter of 2015 and the first quarter of 2019.
At the end of the first half of 2019, FirstBank Holdings of Nigeria reported a profit before tax of N39.9 billion. This was an increase of 2.6 percent over N38.9 billion made a year ago.
In the six month period ended June 30, 2019, gross earnings of FBHN stood at N294.2 billion, up 0.3 percent year-on-year from N293.3 billion in the corresponding period of 2018.
Net-interest income slowed by 2 percent to N146.7 billion year-on-year, however, FBHN was able to improve its non-interest income by 3.6 percent from last year. The lender recorded 63.6 billion non-interest income, up from N61.3 billion in H1 2018.
Net interest margin, a measure of the difference between interest income banks make and the interest paid on depositor funds, rose to 7.7 percent in H1 2019, as against 7.1 percent in the same period last year.
In H1 2019, FBHN noted an impairment charge for credit losses of N22.1 billion, down 58.1 percent y-o-y from N52.8 billion.
Post-tax return on average equity, a gauge of how well shareholders fund is utilised in creating net income, improved to 11.6 percent compared to 10 percent in H1 2018. However post-tax return on average assets of declined to 1.1 percent.
Liquidity ratio for H1 2019 was 40.3 percent for FirstBank (Nigeria) , down from 45.2 percent in December 2018, while its Capital Adequacy Ratio stood at 15.6 percent.
For FBNQuest Merchant Bank, the unified brand name for the Merchant Banking and Asset Management businesses of FBN Holdings, CAR improved to 13.4 percent from 12.2 percent in December 2018.
In the period under review, total assets of the bank rose 1.8 percent to N5.7 trillion, from N5.6 trillion in December. Customer deposits increased by 2.8 percent to N3.6 trillion while customer loans and advances (net) also rose 3.5 percent to N1.74 trillion from N1.68 trillion in December last year.
