BusinessDay 21 Aug 2018

Tuesday 21 August 2018
28 BUSINESS DAY
C002D5556
BD
Markets + Finance
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FBN Holdings Plc: Profit growth driven by
increase in non-interest income
BALA AUGIE
First Bank Nigeria
(FBN) Holdings
Plc just released
its half year ended
June 30th 2018 financial
results that showed
improvement in key ratio
as the lender is gradually
surmounting the headwinds
caused by an economic
downturn of 2016.
For example, there have
been remarkable improvements
in asset quality as non
performing loans (NPLs)
and impairment on financial
assets dropped, thanks to an
excellent risk management
strategy.
Electronic banking was
also a major driver of revenue
growth as FirstBank opened a
digital laboratory as part of its
strategy to drive innovation
in the digital banking space.
The stellar performance
means shareholders will
drink from wine poured from
a flagon into a golden goblet
as the company’s consistent
earnings growth in 2918 will
result in share appreciation,
hence magnifying earnings.
Growth in non interest
income underpins revenue
For the first six months
through June 2018, gross
earnings grew by 1.60 percent
to N293 billion from N288.8
billion as at June 2017; driven
by a 21.40 percent growth in
non interest income.
On the other hand, interest
income declined by 3 percent
to N225.40 billion in June
2018 from N232.37 billion the
previous year. The drop was
due to declining yields on
investment securities as short
term government securities
have fallen to around 11 percent
and 13 percent from an
all time high of between 18
percent and 22 peecent in the
most part of 2017.
Noninterest income (NII)
rose by 21.4 percent year on
year (y-o-y) to close at N61.3
billion as at June 2018.
Adesola Kazeem Adeduntan, managing director,
CEO, FBN Holdings Plc
The primary drivers were
improved revenue from electronic
banking fees (+40.8
percent), accounts maintenance
(+40.7 percent), net
insurance premium (+9.8
percent) as well as foreign
exchange income (+158.5
percent).
Fees and commission income
(F&C) grew by 13.3
percent y-o-y to N41.7 billion
in June 2018 from N36.80 billion
the previous year.
Excluding FX revaluation
gain, non interest income
was up by 15 percent y-o-y
indicating the underlying
revenue generating capacity
and reflecting the results of
the ongoing digital banking
initiatives.
Fx gains, growth in E
banking underpins profit
Profit before tax increased
by 14 percent to N38.90 billion
in June 2018 from N35.60
billion as at June 2017. Profit
after tax increased by 22.70
percent to N33.50 billion in
June 2o18 as against N29.50
billion as at June 2017.
The growth in profit was
largely driven by a reduction
impairment charge and
gains from foreign exchange
transaction.
Total operating expenses
increased by 2.30 percent
to N119.30 billion as at June
2018, which is lower than
the headline inflation rate of
11.20 percent.
Net interest margins decreased
to 7.10 percent in
the period under review from
8.50 percent as June 2017 on
the back of drop in short term
government securities.
Improvement in key
profitability ratio
FBN Holdings Plc has utilized
the resources of shareholders
in generating higher
profit as return on average
equity (ROE) increased to
10.0 percent in June 2018
from 9.90 percent the previous
year.
Similarly, return on average
assets moved to 1.30 percent
to N1.30 billion in June
2018 as against 1.2 percent as
at June 2017.
Excellent risk management
strategy pays off as
asset quality improves
The lenders, nonperforming
loans (NPLs) to gross
loans reduced to 20.80 percent
in June 2018 from 22.0
percent as at June 2017,
thanks to strong recovery
and mediation.
Nonperforming loans fell
to N455.80 billion in June
2018 from N520.0 billion in
the previous year.
There has been improvement
in loan book as impairment
charges on financial
charges reduced by 52.80
percent to N52.80 billion in
June 2018 as against N62.40
billion the previous year.
Cost of risk declined to 4.7
percent in June 2018 from 5.5
percent June 2017.
Net gross loans and advances
declined by 7.10 percent
to N1.85 trillion in June
2018 from N2.0 trillion as at
June 2017;
The reduction in loans was
due to moderated risk asset
creation and pay down on
existing facilities •
98 percent of the Group
loans and advances is accounted
for by the Commercial
Banking business, while
the balance of 2% is from the
Merchant Banking and Asset
Management business •
Deposits from customers
were up 4.10 percent to N3.20
trillion in the period under
review from N3.10 trillion as
at June 2017.
“The Commercial Banking
Group reported a relatively
strong set of results
and I am pleased to report
consistent improvement towards
our strategic objectives.
This is reflected in a strong
28.5% y-o-y increase in noninterest
income, 15.5% y-o-y
reduction in the impairment
charge and a marginal increase
of 0.9% y-o-y in operating
expenses, despite the high
inflationary environment. It
is clear that our efforts to enhance
our revenue generating
capabilities, strengthen the
risk management and control
environment as well as to
optimise efficiencies within
our business are paying off,”
said Adesola Adeduntan, the
MD/CEO of FirstBank and its
Subsidiaries.
“We remain focused on
maximizing the potential of
our business, innovating to
expand access to new markets
and increasing the contribution
of our international subsidiaries,
using technology
as a key enabler. We expect
further improvements in the
coming periods, from growth
in the quality and yields of
the loan book to enhanced
remediation efforts, service
delivery excellence and the
risk and control environment.
I am confident in the capacity
of our business to deliver the
expected results,” summed
Adeduntan.
BD MARKETS + FINANCE (Business Team lead: PATRICK ATUANYA - Analysts: BALA AUGIE and LOLADE AKINMURELE)