Published On: Sun, May 13th, 2018

Investment securities, lower impairment charges lift FBNH profit 179%


Strategies adopted by First Bank of Nigeria Holding Company (FBNH) to bring down non-performing loans (NPLs) in its core commercial banking operations are gradually yielding fruit. Containment of loan losses and growth in income from investment securities combined to give the bank a massive jump in its net earnings.

FBNH’s profit-after-tax for 2017 went up 178.8 percent to N47.8 billion, the highest leap the holding company has achieved in over five years. Company press releases suggest that shareholders will receive a 25 kobo dividend or 17 percent lower than the 30 kobo it paid in 2016.

The group, which resolved last year to bridle its risk appetite and pegged credit to a single obligor to N30 million, reduced its impairment charges on loan loss by 33.5 percent to N150.42 billion. And its NPL ratio (delinquent loans to total loans ratio) dropped from 24.4 percent in 2016 to 22.8 percent at the end of last year, though this is still the highest among the eight-tier one banks in Nigeria, analysts believe its downward direction is impressive. Non-performing loans were pruned down by 11 percent to N520 billion as FBNH religiously implements reforms to reduce the size of its toxic assets.

“Although high NPLs still pose a major challenge to FBN Holdings, it has made significant progress in reducing bad loans,” said Kayode Tinuoye, a financial analyst at United Capital Plc.

The Holdco’s group managing director, Mr U.K. Eke, noted in remarks on the recently released accounts, “We recognise the need for accelerated resolution of our legacy assets to demonstrate sustained improvement in asset quality as the progress we made during the year was moderated by developments in Q4 which kept our performance below guidance. This was largely as a result of the impairment of 9mobile, which was across the industry, as well as the foreign currency translation impact on our existing portfolio. These are one-off events and we assure that appreciable progress would be made on NPL in 2018 in line with our 3-year strategic plan,” he explained.

As part of efforts to strengthen FBN’s risk management, the Holdco appointed a new chief risk officer, Mr Olusegun Alebiosu, to get a firm handle over assets and steer asset quality to the top of the first league. The impact of this moved showed up in the group’s cost of risk (credit impairment charges divided by the average opening and closing gross loan balances) declining to 6.4 percent in 2017 from 10.4 percent in the previous year.

FBNH NPLs started ballooning in 2014 when oil prices began to slide, falling below $27 per barrel in February 2017, which adversely affected the banks’ oil and gas customers, which the bank had been heavily exposed to in the last decade.

The group’s gross revenue improved 2.8 percent to N595.4 billion relative to N581.8 billion in 2016, largely on the back of a 15.9 percent growth in interest income, which was bolstered by enhanced yields and volume growth in investment securities. A 31.5 percent decline recorded in non-interest income, due to -76.36 percent dip in net gains on foreign exchange, slowed the Holdco’s revenue drive.

Foreign exchange income plunged 76.1 percent  as a result of greater stability in the country’s forex market in the better part of last year after the Central Bank introduced the Nigerian Autonomous Foreign Exchange (NAFEX) window on April 24, 2017, dragged non-interest income down by 31.3 percent to N113.7 billion from N165.5 billion in the prior period.

Fees and commission (F&C) income, representing 65.5 percent (Dec 2016: 43.1 percent) of total non-interest income, increased by 4.3 percent to N74.5 billion. The growth in F&C was driven by the 14.4 percent rise in electronic banking fees to N25.0 billion (Dec 2016: N21.8 billion).

Interest income and non-interest income contributed 78.9 percent and 19 percent respectively to gross earnings. And First Bank contributed 90.95 percent of the total revenue FBN Holdings generated in 2017.

Operating expenses climbed 7.7 percent to N238 billion, pushed up by 45.88 percent rise in directors’ emoluments and legal and other professional fees, which increased 42 percent in 2017. And despite 4 percent decline in salaries and wages as a result of First Bank laying off staff and closing some of its unviable branches, personnel costs rose 2.23 percent to N85.68 billion, majorly driven by termination benefits, which increased 364.46 percent. The group spent more to earn revenue last year as cost-to-income moved up to 53.5 percent from 47 percent in 2016, but this was within FBNH’s 55 percent guidance.

Total assets grew 10.5 percent to N5.2 trillion, propelled by a 16.9 percent increase in interest-earning investment securities to N1.4 trillion (Dec 2016: N1.2 trillion). “Despite the weak lending environment, earning assets have been further optimised with total interest-earning assets growing by 11.1 percent y-o-y to N4.2 trillion from N3.74 trillion in December 2016, representing 79.4 percent of total assets (Dec 2016: 79.0 percent),” the group claimed it a release.

The need to keep rising NPL in check, which has made FirstBank to develop a low-risk appetite, caused total loans and advances to customers to slide 4 percent to N2.0 trillion from N2.1 trillion in 2016. But FBNH attributed the drop to the weak lending environment from the persisting macroeconomic challenges which constrained business and consumer activities.

Total customer deposits were up 1.3 percent from N3.10 trillion in 2016to N3.14 trillion last year, taking advantage of growing cheap deposits.

Improvement in AFS by 183.5 percent, statutory credit reserves81.1 percent and foreign currency translation reserves, which increased 38.4 percent, buoyed shareholders’ funds 16.4 per cent to N678.2 billion in 2017.

First Bank of Nigeria’s capital adequacy ratio dipped marginally to 17.7 percent (Dec 2016: 17.8 percent), but it was 270basis points above the regulatory minimum of 15 percent, while the Capital adequacy ratio for FBNQuest Merchant Bank closed at 15.7 percent (Dec 2016: 22.6 percent) above the 10% required by regulation for Merchant Banks.

Liquidity ratio of First Bank of Nigeria, which stood at 51.1 percent (Q4 2016: 52.7 percent), is above the 30 percent regulatory benchmark.

With the better performance of the Holdco last year, its earnings per share rose 206.4 percent to N1.21 from N0.39 in 2016. And earning yields (Interest income divided by the average opening and closing balances of interest-earning assets)rose 1.71 percent to 11.9 percent.

While post-tax return on average equity (profit after tax attributable to shareholders divided by the average opening and closing balances attributable to equity holders) jumped to 7.6 percent from 3 percent in the preceding year, post-tax return on average assets (profit after tax divided by the average opening and closing balances of its total assets) also went up to 1 percent from 0.4 percent in 2016.

Also, FBNH leverage (total assets divided by shareholders’ equity) fell to 7.7 percent from 8.1 percent in 2016, while Book Value Per Share (BVPS) (total equity divided by the number of outstanding shares) was up to 18.9 percent from 16.2 percent.

“We recognise the need for accelerated resolution of our legacy assets to demonstrate sustainable improvement in asset quality as the progress we made during the year was moderated by developments in Q4 which kept our performance below guidance. This was largely as a result of the impairment of 9mobile, which was across the industry, as well as the foreign currency translation impact on our existing portfolio. These are one-off events and we assure that appreciable progress would be made on NPL in 2018 in line with our 3 years strategic plan.

In summary, we are delighted to say that we have made good progress towards achieving our 2019 strategic goals and are confident that 2018 will be another year full of successes for the Group,” Dr. Adesola Adeduntan, managing director, First Bank of Nigeria noted while commenting on the performance of the group in 2017.

If the Nigerian economy consolidates on the recovery recorded last year and oil price maintains the current trend, FBN Holdings is expected to further build on the successes it gained last year.

© 2018, Hallmarknews. All rights reserved. Reference and link to this site is required if you wish to reuse any article.

Reactions from Facebook

comments and opinions

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • China offshore oil coy to invest $3bn in Nigeria

    The China National Offshore Oil Corporation (CNOOC) is to invest an additional three billion dollars in its existing stakes in offshore oil and gas operations in Nigeria. Mr Ndu Ughamadu, the Nigeria National Petroleum Corporation (NNPC) spokesman said this in a statement on Sunday in Abuja. Ughamadu said Mr Yuan Guangyu, the Chief Executive Officer […]

  • Ecobank risk assets deteriorate as Kie bows out

    By FELIX OLOYEDE The exit of Ecobank Nigeria’s erstwhile Managing Director, Charles Kie, has raised a groundswell of speculation in the financial community as sector analysts believe that his exit was abrupt, untimely and suspicious. Over a period of two years, Kie had succeeded in reversing the banks bedraggled balance sheet and profit and loss […]

  • Blood, blood everywhere: Herdsmen, rustlers on the rampage

    –  Violence, a well-articulated plot to grab land – Expert  By AYOOLA OLAOLUWA Nigeria is gradually descending into a Hobbesian state with the growing killings in the Middle Belt, in addition to the destruction of lives and properties in the North West and Boko Haram insurgency in the North East. Defenseless citizens are being killed like […]

  • 2018 budget in jeopardy

    . Delay alone has reduced performance by 13% – Experts By UCHE CHRIS In all likelihood the 2018 budget will end like the three previous budgets of the President Buhari administration: a failure. Having been passed seven months after its presentation and half year gone; and with all the controversies surrounding its passage by the […]

  • MTN to miss market listing target

    By OKEY ONYENWEAKU A weak domestic economy in Nigeria may force telecommunications giant MTN to shift its earlier proposed August 2018 date for a local listing on the Nigerian Stock Exchange (NSE). Analysts believe that the date shift will allow the parties to the Offer plan a more successful listing arrangement that would guaranty full […]

  • APC crises deepens: Amaechi battles for relevance, Modu-Sheriff is new strongman

    By OBINNA EZUGWU Key actors in the ruling All Progressives Congress (APC) managed to keep up appearance to allow for a smooth transition at the party’s recently held national convention. Except for the exchange of blows among Imo and Delta States delegates, the convention was largely a success. But beneath the facade of orderliness, tensions […]

  • INEC declares Fayemi governor-elect in Ekiti

    The Independent National Electoral Commission (INEC) has declared Kayode Fayemi of the All Progressive Congress (APC) winner of the Ekiti Governorship Election held on Saturday. INEC’s Chief Returning Officer for the election, Professor Idowu Olayinka declared the result on Sunday. According to the Returning Officer, Kayode got 197,459 votes to defeat the Deputy Governor of […]

  • President Muhammadu Buhari said on Wednesday that Nigeria will soon sign up to a $3 trillion African free-trade agreement. Nigeria is one of Africa’s two largest economies, the other being South Africa. Buhari’s government had refused to join a continental free-trade zone established in March, on the grounds that it wishes to defend its own […]

  • PDP meets Obasanjo for advice on how to beat Buhari in 2019 polls

    The National Working Committee (NWC) of the Peoples Democratic Party(PDP) will meet with former President Olusegun Obasanjo in Abeokuta on Saturday to seek advice on how to achieve victory in the 2019 polls and beat incumbent Muhammadu Buhari. The National Chairman of PDP, Uche Secondus, made this known in Abeokuta while addressing journalists after a […]

  • GTBank Launches Social Impact Challenge, Aims to Fund Community Development Projects Nationwide

    Following more than two decades of consistent investment in community development, Guaranty Trust Bank plc is taking its Corporate Social Responsibility (CSR) another step further by launching a Social Impact Challenge that will fund dozens of innovative ideas designed and executed by members of the general public. Tagged #SimpleChangeBigImpact, the Social Impact Challenge invites individuals […]

  • Akpobome gives indigent girls educational lifeline

    Akpobome gives indigent girl The hope of indigent girls who have been struggling with their education has been rekindled as Mrs. Mary Akpobome, former executive director, Heritage Bank and her husband,  Mr. Atunyota Akpobome, fondly called Alli-Baba have jointly floated The Purple Girl Foundation with the purpose  of helping them live their dreams. Giving reasons […]

  • Buhari’s NLNG signature project back on track

    President Muhammadu Buhari has congratulated the board, management, staff and shareholders of the Nigerian Liquefied Natural Gas company (NLNG), the NNPC and other Joint Venture partners, Shell, Total and AGIP on the signing of the contracts for the Front End Engineering Design (FFED) of Train 7 of the Nigeria Liquefied Natural Gas Project. The President […]

  • Buhari creates unit to snoop on illegal money transfers

    President Muhammadu Buhari has signed the Nigerian Financial Intelligence Unit bill (NFIU) 2018 into law, creating a body that will henceforth monitor illegal money transfers and money laundering. The Senior Special Assistant to the President on National Assembly Matters (Senate), Sen. Ita Enang, confirmed this development while briefing State House correspondents in Abuja on Wednesday. […]

  • NCC wades into MTN’s labour issues

    The Nigerian Communications Commission (NCC) on Monday said the organisation has opened talks with critical stakeholders on MTN’s labour issues. Mr Tony Ojobo, NCC’s Director of Public Affairs, made this known in a statement by in Abuja. “NCC under the leadership of Prof. Umar Danbatta has opened talks with other critical stakeholders  through the office of […]

  • Weak purchasing power responsible for slowing inflation rate, says Chukwu

    FELIX OLOYEDE The continuous decelerating inflation rate in the country was largely due to weak purchasing power amongst Nigerians, said Johnson Chukwu, Managing Director, Cowry Asset Management Ltd. Speaking on the theme: “Economy: H1 2018 review and prospect for year end” at the second edition of the Bloomberg Media Initiative Africa (BMIA) Cohort 4 quarterly […]

  • Global outrage grows over incessant herdsmen killings

    …there is anarchy in the land – Utomi   By OBINNA EZUGWU The incessant killings in Nigeria by Fulani herdsmen seem to attracting more global attention as U.S. and U.K. have taken the government to task to stop it. During his recent visit to the U.S. by President Buhari, American President Donald had expressed concern […]