Nigeria Banking Sector Coverage - December 2011 'Bad ... - Imara

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Financial Summary Income Statement Summary 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Net Interest Income Before Loss Provision 1 732 2 763 9 576 20 954 24 478 21 934 31 116 39 575 Y-o-Y Growth 59.6% 246.5% 118.8% 16.8% (10.4%) 41.9% 27.2% Non Interest Income 2 761 5 635 10 338 22 624 11 344 18 080 19 404 23 553 Y-o-Y Growth 104.1% 83.5% 118.8% (49.9%) 59.4% 7.3% 21.4% Total Operating Income (incl Prov) 3 721 8 376 18 402 40 418 31 860 40 454 45 968 59 304 Y-o-Y Growth 125.1% 119.7% 119.6% (21.2%) 27.0% 13.6% 29.0% Operating Expense (2 628) (4 735) (10 833) (19 900) (30 575) (31 479) (31 225) (36 110) Y-o-Y Growth 80.2% 128.8% 83.7% 53.6% 3.0% (0.8%) 15.6% Profit Before Tax 1 093 3 641 7 569 20 517 1 285 9 026 14 799 23 256 Y-o-Y Growth 233.1% 107.9% 171.1% (93.7%) 602.4% 64.0% 57.1% Attributable Net Income/Profit After Tax 798 2 833 5 949 15 091 847 7 935 11 099 17 442 Y-o-Y Growth 255.1% 110.0% 153.7% (94.4%) 837.4% 39.9% 57.1% Balance Sheet Summary 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Cash & Short term Funds 26 768 65 744 116 486 203 221 130 797 70 719 35 913 39 851 Y-o-Y Growth 145.6% 77.2% 74.5% (35.6%) (45.9%) (49.2%) 11.0% Financial Assets held for Trading - 5 735 1 855 - 20 088 23 704 28 919 Y-o-Y Growth NA NA (67.6%) (100.0%) NA 18.0% 22.0% Loans & Advances,Net 11 818 19 975 84 129 188 931 239 898 330 421 367 156 409 402 Y-o-Y Growth 69.0% 321.2% 124.6% 27.0% 37.7% 11.1% 11.5% Deposits 27 123 72 093 203 308 277 454 279 694 335 402 392 351 451 154 Y-o-Y Growth 165.8% 182.0% 36.5% 0.8% 19.9% 17.0% 15.0% Borrowings 250 - 13 144 24 539 30 179 25 116 28 884 33 216 Y-o-Y Growth (100.0%) NA 86.7% 23.0% (16.8%) 15.0% 15.0% Shareholder's Equity 7 216 25 155 31 104 133 651 129 593 134 771 141 689 154 211 Y-o-Y Growth 248.6% 23.6% 329.7% (3.0%) 4.0% 5.1% 8.8% Per Share Data 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Earning per Share (kobo) 25.2 35.9 62.6 135.0 5.2 48.8 68.2 107.2 Y-o-Y Growth 42.8% 74.3% 115.6% (96.1%) 837.4% 39.9% 57.1% Dividend Per Share (kobo) 7.50 13.00 35.00 50.00 5.00 35.00 40.93 64.32 Y-o-Y Growth 73.3% 169.2% 42.9% (90.0%) 600.0% 16.9% 57.1% Book Value Per Share (kobo) 227.5 318.8 327.3 1 193.9 796.5 828.3 870.8 947.8 Y-o-Y Growth 40.1% 2.7% 264.7% (33.3%) 4.0% 5.1% 8.8% Tangible Book Value per share (kobo) 227.5 318.8 327.3 1 193.9 759.1 790.9 833.5 910.4 Y-o-Y Growth 40.1% 2.7% 264.7% (36.4%) 4.2% 5.4% 9.2% Key Ratios 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Gross Loan to Deposit Ratio 47.7% 37.7% 43.0% 70.5% 92.5% 104.3% 98.9% 96.7% Gross Loan to Fund Ratio 47.3% 37.7% 40.4% 64.8% 83.5% 97.0% 92.1% 90.1% Net Interest Income to total income 46.5% 33.0% 52.0% 51.8% 76.8% 54.2% 67.7% 66.7% Cost to Income Ratio 58.5% 56.4% 54.4% 45.7% 85.4% 78.7% 61.8% 57.2% Interest Income to average interest earning assets 8.0% 7.7% 8.7% 9.1% 9.6% 9.1% 10.1% 10.4% Interest expense to average interest bearing liabilities 6.0% 5.6% 3.5% 3.6% 5.6% 6.5% 6.9% 6.9% Net Interest Spread 2.1% 2.1% 5.2% 5.6% 4.0% 2.6% 3.2% 3.5% Net Income Margin 21.4% 33.8% 32.3% 37.3% 2.7% 19.6% 24.1% 29.4% Accumulated Provision as a % of loans & Advances 8.6% 22.6% 4.8% 3.4% 9.2% 4.2% 5.4% 6.2% Return on Equity (average) 11.1% 17.5% 21.1% 18.3% 0.6% 6.0% 8.0% 11.8% Return on Assets (average) 1.6% 3.6% 3.2% 4.1% 0.2% 1.6% 1.9% 2.5% Non-interest income to total income 74.2% 67.3% 56.2% 56.0% 35.6% 44.7% 42.2% 39.7% Provision expense as a % of advances 4.5% 0.9% 1.9% 1.6% 0.8% (0.2%) 1.2% 1.0% Advances to equity 163.8% 79.4% 270.5% 141.4% 185.1% 245.2% 259.1% 265.5% 16
EQUITY RESEARCH NIGERIA DECEMBER 2011 BANKING Founded in 1894, First Bank of Nigeria Plc (FBN) is one of the largest banks in Nigeria and indeed in West Africa. With over 685 branches as at Q3 11, the group has one of the largest branch networks in Nigeria. In 2002, FBN established a wholly owned banking subsidiary in the United Kingdom, FBN Bank (UK) Limited. In 2007, FBN Bank (UK) set up its Paris office to serve as a marketing base to service francophone West Africa. FBN also has a representative office in South Africa and has obtained a licence to open a representative office in China. The group comprises 10 subsidiaries, spanning asset management, investment banking, capital markets, insurance, microfinance, private equity, mortgage and pension fund custodian services. • One of Nigeria’s original ‘top tier’ banks, FBN came through the CBN’s audits unscathed in 2009, but suffered with the rest of the sector as the central bank issued new prudential guidelines. • After a drop in earnings in FY 09 to NGN 4.9bn, 2010 saw a recovery in performance, with attributable earnings closing at NGN 33.4bn. • The recovery has continued in 2011, with 9M earnings increasing by 31.79% to NGN 42.9bn. • By year end, we should have seen the conclusion of AMCON’s NPL purchases from the market, which will also include FBN’s exposure to Sea Wolf of cNGN 99bn. The group NPL ratio should thus continue to trend downwards going forward. • The group announced the acquisition of 75% of Banque International de Credit, a bank in the DRC, as part of its SSA expansion strategy. • Using a DCF valuation, we arrive at a target price for FBN of NGN 13.43, representing 49.0% upside on its current share price of NGN 9.01. As one of Nigeria’s traditional ‘top tier’ banks, we expect FBN to remain a major player in the sector. BUY. First Bank vs NSE ASI (Rebased) Recommendation BUY Bloomberg Code FIRSTBAN:NL Current Price (NGN) 9.0 Current Price (USc) 5.6 Target Price (NGN) 13.4 Target Price (USc) 8.3 Upside (%) 49.0 Liquidity Market Cap (NGN m) 294 015 Shares (m) 32 632 Free Float (est. %) 79.6 Ave. daily vol ('000) - 1 yr. 20 840 Price Performance Price, 12 months ago (NGN) 12.9 Change (%) (30.4) Price, 6 months ago (NGN) 13.5 Change (%) (33.3) Financials (NGN m) 31 Dec F2010 2011F 2012F Loans & Advances 1 151 195 1 277 967 1 516 099 Net Interest Income (excl. Provisions) 121 462 156 455 207 801 Non-Interest Income 56 461 71 836 86 147 Attributable Earnings 33 411 55 944 72 715 EPS (kobo) 102.4 153.4 177.2 DPS (kobo) 60.0 84.4 97.5 NAV/Share (kobo) 1 043.8 1 028.9 1 018.0 Valuation Ratios Current 2011F 2012F Earnings Yield* (%) 14.9 17.0 19.7 Dividend Yield (%) 6.7 9.4 10.8 PE* (x) 6.7 5.3 4.0 PBV (x) 0.91 0.78 0.70 RoaA (%) 1.5 2.1 2.2 RoaE (%) 10.3 15.6 18.2 Net Interest Margin (%) 6.3 6.9 7.3 Cost to Income Ratio (%) 65.5 61.0 60.4 * - trailing 1.5 1.4 1.3 1.2 Strengths Top tier bank Large branch network Weaknesses Poor asset optimisation Relatively low RoE vs some peers 1.1 Strong brand Sea Wolf loan concentration 1 0.9 0.8 0.7 0.6 0.5 Low cost deposit base Opportunities Relatively low LDR means room to grow risk assets SSA expansion (AMCON should resolve) Threats Nimbler, smaller players targeting its market share DRC acquisition high risk 17-Nov-10 17-Dec-10 17-Jan-11 17-Feb-11 17-Mar-11 17-Apr-11 17-May-11 17-Jun-11 17-Jul-11 17-Aug-11 17-Sep-11 17-Oct-11 17-Nov-11 Centralised processing centre Behind its peers in terms of SSA expansion rollout ongoing will see it playing catch up First Bank NSE ASI 17
Page 1 and 2: Nigeria Banking Sector Coverage - D
Page 3 and 4: Nigeria Banking Sector Overview Hav
Page 5 and 6: The breakdown, on a month-on-month
Page 7 and 8: EQUITY RESEARCH NIGERIA DECEMBER 20
Page 9 and 10: In its 9M 11 results to September,
Page 11 and 12: EQUITY RESEARCH PAN-AFRICAN DECEMBE
Page 13 and 14: In its 9M 11 results to September,
Page 17: FCMB’s 9M 11 results to September
Page 21 and 22: The 9M results to 30 September 2011
Page 25 and 26: The 9M results to 30 September 2011
Page 29 and 30: StanbicIBTC’s 9M 11 results to 30
Page 33 and 34: Interest income remained under pres
Page 37 and 38: For the 9M results to 30 September
Page 39: Imara Africa Securities (A division

Nigeria Banking Sector Coverage - December 2011 'Bad ... - Imara

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