FBN Holdings Plc reports growth in its EPS (+234.8% y/y) to NGN5.19/s
FBN Holdings Plc (FBNH) published its unaudited H1-23 financial statements after the close of business yesterday, reporting a remarkable growth in its EPS (+234.8% y/y) to NGN5.19/s (vs NGN1.55/s in H1-22). The group’s earnings growth in the period was supported by the increase across the funded (+69.3% y/y) and non-funded (+114.0% y/y) income lines.
Facts from the Cordros Research Group show that interest income rose markedly by 69.3% y/y to NGN383.29 billion, partly reflecting the elevated yield environment as the group’s earnings yield settled at 9.4% (relative to 7.5% in H1-22). Specifically, the group recorded higher income from investment securities (+127.5% y/y), loans & advances to banks (+53.8% y/y) and customers (+53.3% y/y). Away from the elevated yield environment, we attribute the higher funded income to the increase in FBNH’s interest earning assets – loans & advances to customers (+38.9% YTD to NGN5.26 trillion) and investments securities (+39.8% YTD to NGN3.64 trillion) – as of H1-23.
Similarly, interest expense grew by 98.7% y/y to NGN145.96 billion, triggered primarily by the 109.7% y/y surge in the cost incurred on customers’ deposits. Despite the slight improvement in the group’s CASA mix (H1-23: 81.5% vs H1-22: 80.2%), we highlight that the higher interest rate in the environment and the growth in deposits from customers (+26.9% YTD to NGN9.04 trillion) spurred the higher costs on deposits. Aside from the erstwhile, higher costs were incurred on the deposit from banks (+122.4% y/y) and borrowings (+24.3% y/y). Subsequent to the faster growth in interest income than expenses, net interest income grew stronger by 55.2% y/y to NGN237.33 billion.
Impressively, the Holdco’s non-interest income (NII) rose by 114.0% y/y to NGN258.12 billion, driven by the spike in net gains on financial instruments (+1938.4ppts y/y to NGN229.74 billion) reflecting the substantial FX gains induced by the recent FX market liberalisation. Additionally, FBNH recorded higher gains from fees and commissions (+1.7% y/y to NGN58.37 billion) and net gains on investment securities (+4.6% y/y to NGN22.4 billion). The growth in the funded income supported by the significant growth in NII drove the increase in operating income (+73.9% y/y to NGN437.82 billion).
Further down, operating expenses rose by 24.5% y/y following the increase in regulatory costs – AMCON levy (+18.4% y/y to NGN62.12 billion) and NDIC (+6.0% y/y to NGN7.26 billion) – and personnel expenses (+17.9% y/y to NGN65.22 billion). Given the operating income growing faster than operating expenses, the Holdco’s cost-to-income ratio (after accounting for LLEs) improved to 52.9% (vs H1-22: 73.8%).
The HoldCo’s profit before tax grew by 213.1% y/y to NGN206.26 billion. FBNH’s ROAE and ROAA ultimately settled at 31.5% (vs H1-22: 12.8%) and 3.0% (vs H1-22: 1.2%), respectively.
Comment: The bank’s performance was remarkable during the period and aligned with our expectations. For 2023FY, we believe the group will sustain this profitability growth momentum driven by (1) the high interest rate environment and (2) FX revaluation gains.
