News hotlines: 08111813019, 08025868561
Email: email@example.com, firstname.lastname@example.org
FBN Holdings Plc released its 2021FY audited financial statement on25th of May, showing that the bank recorded robust expansion in PAT (+99.9% y/y), albeit it was largely supported by recoveries totalling NGN141.03 billion (vs NGN11.23 billion in 2020FY), a fallout of recovery efforts by the bank on the age-long Atlantic energy loan which was previously written off. Consequently, the Holdco recorded an EPS from continuing operations of NGN4.17 (+102.4% y/y vs 2020FY: NGN2.06) and proposed a final dividend of NGN0.35/s (2020FY: NGN0.45), translating to a dividend yield of 3.3% based on the last closing price of NGN10.55 (25th of May 2022).
Interest income declined by 4.1% y/y to NGN369.05 billion, driven by the lower income from investment securities (-36.1% y/y) and loans and advances to banks (-11.1% y/y). The declines across these lines overshadowed the higher interest income from loans and advances to customers (+12.4% y/y), which was supported by increased risk assets creation (+30.0% y/y to NGN2.88 trillion).
Interest expense inched higher by 5.7% y/y to NGN140.81 billion, reflective of the growth in deposits from customers (+19.5% y/y to NGN5.85 trillion). Notably, the bank recorded an increase in CASA (low-cost deposits: current and savings accounts) mix to 82.8% (2020FY: 80.8%). Meanwhile, the expense on interest-bearing borrowings increased significantly (+102.2% y/y to NGN31.37 billion) in line with the expansion in the interest-bearing liabilities (+6.8% to NGN405.30 billion).
Non-interest income (NII) grew significantly by 95.4% y/y to NGN364.31 billion, underpinned by the surge in Other operating income (+705.4% y/y to 155.68 billion) which was predominantly driven by loan recoveries of NGN149.42 billion compared to NGN11.23 billion in 2020FY. Nonetheless, we observed expansions across other major lines, including FX revaluation (+382.5% y/y to NGN7.04 billion), FX trading (+125.7% y/y to NGN53.66 billion), and net fees and commission income (+24.4% y/y to NGN116.64 billion). The growth across these income lines were enough to offset the decline in gains from investment securities (-34.9% y/y to NGN31.30 billion).
Operating expenses expanded by 14.2% y/y to NGN334.18 billion, with the most pressure exerted by NDIC insurance premium (+40.0% y/y to NGN3.18 billion) and personnel expenses (+28.0% y/y to NGN128.77 billion). However, given the higher increase in operating income (+35.5% y/y), the cost-to-income ratio (after accounting for LLEs) settled lower at 66.7% (relative to 77.8% in 2020FY). Overall, profitability was impressive, with profit-before-tax surging by 99.1% year-on-year. Despite the higher income tax expense (+91.3% y/y NGN15.52 billion), profit-after-tax rose by 99.9% y/y.
Although the strong growth in after tax earnings is impressive, analysts at Cordros Capital note that the restructuring of the previously written-off loan is primarily responsible for the performance – normalizing for that, profit expansion would have settled at 80.4% lower year-on-year.
However, they think the weakness in core-income should improve as the bank expands risk asset creation at higher yields (given the recent hike of 1.5% in the MPR). Considering that the magnitude of recoveries in 2021FY is unlikely to reoccur this year, we envisage materially lower earnings growth over 2022FY. Our estimates are under review.
Business Hilights is an online news channel conceptualized and structured to report and track on a daily basis; latest developments in critical business sectors to serve as a one stop news gateway for governments, foreign and indigenous investors.