Tuesday <strong>21</strong> <strong>Aug</strong>ust <strong>2018</strong> 28 BUSINESS DAY C002D5556 BD Markets + Finance ‘Providing proprietary research, commentary, analysis and financial news coverage unmatched in today’s market. Published weekly, Markets & Finance provides all the key intelligence you need.’ 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 <strong>2018</strong> 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 <strong>2018</strong>, gross earnings grew by 1.60 percent to N293 billion from N288.8 billion as at June 2017; driven by a <strong>21</strong>.40 percent growth in non interest income. On the other hand, interest income declined by 3 percent to N225.40 billion in June <strong>2018</strong> 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 <strong>21</strong>.4 percent year on year (y-o-y) to close at N61.3 billion as at June <strong>2018</strong>. 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 <strong>2018</strong> 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 <strong>2018</strong> 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 <strong>2018</strong>, 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 <strong>2018</strong> from 9.90 percent the previous year. Similarly, return on average assets moved to 1.30 percent to N1.30 billion in June <strong>2018</strong> 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 <strong>2018</strong> from 22.0 percent as at June 2017, thanks to strong recovery and mediation. Nonperforming loans fell to N455.80 billion in June <strong>2018</strong> 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 <strong>2018</strong> as against N62.40 billion the previous year. Cost of risk declined to 4.7 percent in June <strong>2018</strong> from 5.5 percent June 2017. Net gross loans and advances declined by 7.10 percent to N1.85 trillion in June <strong>2018</strong> 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)
Tuesday <strong>21</strong> <strong>Aug</strong>ust <strong>2018</strong> C002D5556 BUSINESS DAY 29