FBN Holdings Plc (FBNH) released its unaudited results for 2023FY on Thursday, revealing a remarkable 128.3% y/y surge in EPS (2023FY: NGN8.56 vs 2022FY: NGN3.75). The substantial increase in the Holdco’s earnings is attributable to a significant 10.8x growth in net gains from investment securities, further supported by growth in interest earned on investment securities (+195.2% y/y) and loans and advances to customers (+48.9% y/y).
Interest income grew by 66.3% y/y to NGN917.71 billion, reflecting improved income from expanded loans and advances, and investment securities (due to the high yield environment). Specifically, the group’s income from loans and advances to customers (+48.9% y/y to NGN600.83 billion) and investment securities (+195.2% y/y to NGN271.20 billion) offset the decline in income from loans and advances to banks (-19.1% y/y to NGN45.67 billion). The notable rise in income from loans and advances to customers may be ascribed to a combination of revalued foreign-currency denominated assets and robust risk asset creation (+68.0% y/y to NGN6.36 trillion) in the period under review.
Similarly, interest expense surged by 105.5% y/y to NGN387.68 billion, fueled by higher cost on customer deposits (+126.0% y/y to NGN264.84 billion). The impact was exacerbated by a less favourable funding mix, with CASA settling lower at 76.2% in 2023FY, compared to 84.8% in 2022FY. Additionally, the Holdco faced higher interest payments on deposits from other banks, which rose by 196.8% y/y to NGN66.62 billion, propelled by a substantial 71.3% y/y expansion in deposits from financial institutions, totaling NGN1.81 trillion.
Notably, non-interest income (NII) expanded markedly by 149.6% y/y to NGN566.99 billion, primarily triggered by the increased gains from investment securities (+1082.8% y/y to NGN722.39 billion), which effectively offset the net foreign exchange revaluation losses (-401.9x y/y to NGN375.88 billion) in the period.
Further out, operating expenses settled higher by 46.8% y/y to NGN534.34 billion undermined by the higher personnel expenses (+48.1% y/y to NGN173.89 billion), as well as the costs incurred on maintenance (+76.8% y/y to NGN75.94 billion) and advert and corporate promotions (+162.2% y/y to NGN31.81 billion). Elsewhere, we highlight that AMCON levy (+26.0% y/y to NGN50.10 billion) and NDIC premium (+9.6% y/y to NGN29.34 billion) also advanced in the period. Nevertheless, the faster growth in operating income (+71.8% y/y) led to a moderation in the Holdco’s cost-to-income ratio (after accounting for LLEs), resulting in a lower ratio of 59.6% relative to the 69.7% recorded in 2022FY.
Overall, profitability in 2023FY was robust, with PBT expanding by a substantial 129.4% y/y to NGN362.24 billion and PAT settling 127.4% y/y higher at NGN310.01 billion, despite the increased income tax expense (+141.9% y/y to NGN52.23 billion).
Analysts at Cordros Capital say “The performance of the group for the year was quite remarkable, and supported by substantial income generated from both funded and non-funded income. Looking ahead, we anticipate that the growth in core income will persist, driven by our expectations of a heightened interest rate environment. This outlook is expected to bolster the group’s performance through 2024E.”
