UK Eke, Group Managing Director, FBN Holdings

By FELIX OLOYEDE

The shocks arising from the Coronavirus pandemic have continued to have a far-reaching impact on most sectors of the Nigerian economy and the banking sector is not excluded.
This is however consistent with forecasts from analysts and agencies within and outside the country with the International Monetary Fund (IMF) for example forecasting that the national economy would contract by about five per cent at the end of 2020.
Accordingly then, the banking sector is one of the sectors that has taken a hit since March when the Coronavirus pandemic forced the government to shut down the economy for five weeks.
This has presently reflected negatively in the performance of some of the lenders whose performance have either been poor or they have only recorded a marginal improvement in their bottom-lines. Significantly also, some of them surpassed analysts’ expectations and posted more upbeat results. Business Hallmark has consequently carried out a brief review of some of the banks’ financial statements that have been released this far.

FBN Holdings performance beats analysts’ expectation in H1 2020
FBN Holdings posted a better-than-expected financial performance in the first six months of 2020, growing post-tax profit by more than half.
The Group’s profit-after-tax increased 56.3 per cent to ₦49.5 billion, compared to ₦31.6 billion in the corresponding period last year and Profit before tax grew 14.3 per cent to ₦41.4 billion, its financial statement released on Wednesday showed.
The financial Group grew gross earnings by 5.8 per cent to ₦296.4 billion (Jun 2019: ₦280.3 billion ), buoyed by 46.8 per cent rise in non-interest income to ₦80.1 billion, though net-interest income dipped 7.4 per cent to ₦131.3 billion in H1 2020.
Also, operating income by 7.7 per cent to ₦211.4 billion with impairment charge for credit losses went up 38.6 per cent to ₦30.7 billion, compared to ₦22.1 billion in H1 2019. Meanwhile, Operating expenses only appreciated by 0.9 per cent to ₦139.2 billion during the period under review, instead of ₦137.9 billion in the prior period last year.
Its total assets improved by 14.9 per cent to ₦7.1 trillion (Dec 2019: ₦6.2 trillion), customers’ deposits increased 8.8 per cent to ₦4.4 trillion and customer loans and advances was higher by 7.7 per cent to ₦2.0 trillion in the first six months of this year.
While post-tax return on average equity stood compared to 11.6 per cent in June 2019, post-tax return on average assets was 1.5 per cent in H1 2020 and net-interest margin lowered to 6.8 per cent. FBNH improved cost to income ratio which declined to 65.8 per cent instead of 70.3 per cent in June 2019 and non-performing ratio also improved to 8.8 per cent, compared 9.9 per cent of December 2019.
First Bank Nigeria Basel 2 Capital Adequacy Ratio increased to 16.5 per cent (Dec 2019: 15.5%), while FBNQuest Merchant Bank Basel 2 CAR stood at 17.2 per cent (Dec 2019: 17.1 per cent).
Mr U.K. Eke, Group Managing Director of FBN Holdings explained that: “The H1 2020 financial results are impressive and reconfirm our consistent focus on enhanced shareholder value. Despite the difficult operating environment, the H1 results demonstrate our resilience and capacity to deliver on long-term ambitions.
“The 56.3% y-o-y growth in profit after tax for the period is a testament to the strength of our organisation to continually deliver exceptional services to our customers in these unprecedented times. We have been able to achieve this feat by leveraging our agent banking network, innovative e-banking capabilities, and operational efficiency utilizing technology.
“During the quarter, we successfully divested from the underwriting (insurance) businesses to focus on our banking operations. We are confident this will enhance greater value to our stakeholders and strengthen the Group’s resolve to consolidate its leadership of the banking sector.
“Following the divestment, FBN Holdings injected Tier 1 capital into First Bank, effectively increasing its CAR to 16.5%. This provides a comfortable buffer against regulatory requirements with the potential to support any emerging business opportunities.
“Looking ahead, we remain cautious, but we are confident that our business is fundamentally strong to withstand any future challenge towards enhanced performance.”
Commenting on the results Dr Adesola Adeduntan, the Chief Executive Officer of First Bank and its subsidiaries said:
“Over the period, the commercial banking group increased its y-o-y growth in gross earnings and profit before tax by 6.1% and 9.2% respectively, despite the economic shutdown during the quarter and varying degrees of challenges in the operating environment. Notwithstanding, we have continued to provide services to our customers with minimal disruption in a safe environment, supported by seamless transactions through our increasing agent banking network and digital platforms (FirstMobile and USSD).
“Furthermore, continuous focus on operational efficiency remains a priority, as improvement in non-performing loan ratio has further been sustained. As the economy reopens gradually, in Nigeria and other key markets as in the rest of the world, we are adopting a pragmatic approach with optimism on propelling our performance for enhanced profitability through customer-led innovation and disciplined execution.”

Union Bank grows revenue by 10% in H1 2020

Despite the economic challenges confronting Nigeria, Union Bank improved gross earnings which were better by 10 per cent to ₦79.9bn, driven by an increase in earning assets as Interest income grew 6 per cent to ₦57.2bn, but the net fee and commission income were lower by 20.90 per cent to N5.06 billion.
Also, non-interest income increased by 22 per cent to ₦22.7billion (₦18.6bn in H1 2019); driven by growth in e-business and revaluation gains, while net operating income was flat at ₦46.5billion. Operating expenses were flat at ₦35.4bn (₦35.5bn in H1 2019) despite the inflationary pressures and COVID-19-related costs.
The bank post-tax profit declined -9.22 per cent N10.76 billion from N11.85 billion last year and pretax ticked up marginally to ₦11.3 billion compared to ₦11.2bn in H1 2019. The lender made a provision of N4.24 billion for credit losses instead of N4.49 billion gain it made in that line item.
While gross loans ticked up by 6 per cent to ₦630.5bn (₦595.3bn Dec 2019); reflecting the opportunities for risk asset creation given economic realities, customer deposits: up 12% to ₦995.2bn (₦886.3bn Dec 2019).
Commenting on the results, Mr Emeka Emuwa, CEO said: “The impact of COVID-19 and associated movement restrictions on the Bank and the wider economy have been broad. The total lockdown of major commercial centres Lagos, Abuja and Ogun and partial lockdowns across the country, slowed business operations in Q2 2020.
“Notwithstanding these significant headwinds, the Bank delivered a 10% increase in its top-line revenue of ₦79.9bn for H1 2020. Also, net interest income before impairments is up 21% to N28.0bn and non-interest income up 22% to ₦22.7bn.
“The slowdown limited growth in key income lines including fees and commissions and cash recoveries. However, we continue to reinforce the use of our digital channels with 90% of transactions completed digitally in H1 2020 (vs. 57% in H1 2019), which translated to a 42% growth in e-business fees from ₦2.5bn in H1 2019 to ₦3.6bn in H1 2020.
“We deliberately grew our loan portfolio both in the retail and commercial/corporate banking space resulting in a 6% growth in interest income.
“Given the constrained operating environment, we continue to proactively monitor our loan portfolio and support our customers in line with the Central Bank’s guidance on forbearances. Nevertheless, growing our loan book remains a strategic focus area for us for the rest of the year as we continue to identify new opportunities emerging in the face of the pandemic.
“I am pleased that the Bank has been able to support our employees, customers and the wider community through the ongoing COVID-19 crisis. In particular, the UnionRiseChallenge which we launched in June recognised and rewarded customers who despite the Covid-19 pandemic are rising to support their communities. The Bank awarded ₦15 million to 90 recipients over 4 weeks and helped amplify the great work of over 1500 community initiatives that were submitted through the campaign.
“As we navigate the realities of the pandemic for the remainder of the year, we will continue to focus on increasing transaction volumes on our electronic channels, managing cost, and strategic targeting of key customer segments to ensure we end the year well.
“We will also continue to prioritise the health and safety of our employees and customers while finding innovative ways to meet and exceed our customer expectations.”
Speaking on the H1 2020 numbers, Chief Financial Officer, Joe Mbulu said: “Our H1-2020 Bank numbers reflect the performance of our continuing operations for the period.
“Notwithstanding increasing inflation and unexpected costs related to the changes to our operating structures during COVID-19 lockdown, we have been able to keep operating expenses under control during H1 2020. This is indicative of the strength of our Long-Term Efficiency Acceleration Programme (LEAP) which continues to optimise key cost lines.
“The continued expansion in the loan book led to enhanced interest income while lower Union Bank announced the sale of its UK Subsidiary Union Bank UK Plc in 2019 and as such UBUK has been classified as a discontinued operation.”

Unity Bank grows revenue by 11% in H1 2020
Unity Bank Plc has recorded 10.95 per cent growth in its earnings to N22.8 billion in the first six months of 2020 (H1′ 2020) from N20.55 billion in the corresponding period of 2019.
The bank disclosed this in its unaudited financials submitted to the Nigeria Stock Exchange, which also showed that Profit-before-tax grew by 6.67 per cent to N1.12 billion in H1′ 2020 from N1.05 billion in H1′ 2019. This is even as the Profit after Tax, PAT, equally rose by 7 per cent to N1.03 billion from N967.51 million in the corresponding period of 2019.
The half-year results showed that the lender recorded gross earnings of N11.01 billion, a 5 per cent growth from the N10.50 billion recorded for the same period in 2019.
Similarly, the lender’s interest earnings recorded a 15 per cent increase to N19.79 billion within the period, from N17.27 billion in the corresponding period in 2019, while its total operating income also grew by 14 per cent to N12.14 billion from N10.69 billion in the same period in 2019. Earnings per Share stood at 17.64 Kobo for the period ending 30 June 2020.
The Bank’s half-year report also showed a huge boost in the asset, which saw a 48 per cent growth to N445.95 billion from N293.05 billion in the same period in 2019. This followed the growth of the Bank’s loan book which rose by 53.7 per cent to N131.48 billion from N70.62 billion in Q2, 2019.
A further review of the H1 financial statement showed that the agribusiness-focused lender grew its deposit by 19 per cent to N306.47 billion from N257.69 billion as of December 2019.
Managing Director/CEO, Unity Bank Plc, Mrs Tomi Somefun said: “Despite the inclement economic conditions occasioned by the global pandemic which almost paused or at best put activities at a slower pace in virtually all sectors of the economy, the Bank has been able to ride the waves to maintain its growth trajectory looking at the key performance indicators. The assessment, therefore, is that the repositioning efforts which have taken root before the headwinds are equally able to withstand shocks.”
She further stated that the growing health and strength of the Bank’s balance sheet is attributable to the fact that while the Bank remained focused on its niche market, which is Agribusiness, it has also continued to grow its brand franchise in many areas of the retail market by promoting and leveraging its Agriculture value chain businesses as an offshoot.
The views of analysts continue to reinforce the gains of the repositioning drive anchored on the agribusiness as the backbone for the steady growth and performance in the half-year 2020. They share optimism for an even more positive outlook in the future, as market confidence continues to improve.

FCMB posts strong double profit growth
First City Monument Bank (FCMB) is one of the outliers in the financial sector in terms of performance in the first six months of 2020 as it defied the impact of the Coronavirus pandemic on the Nigerian economy to grow its post-profit in double figures during this period.
The bank’s profit after tax was up by 28.83n per cent to N9.7 billion in the first half of 2020 from N7.53 billion achieved in the same period last year. It improved gross revenue by 9.35 per cent to N98.18 billion, driven by interest income which ticked up 8.20 per cent to N76.15billion and fee and commission income that grow marginally by 0.53 per cent to N14.23 billion.
The financial group also grew net trading earnings by 10.93 per cent to N3.93 billion, but other income dipped marginally by 1.08 per cent to N224.01 billion in H1 2020. The bank made a higher provision for its toxic assets by 40.80 per cent to N7.74 billion, due to the impact of COVID-19, which made it challenging for many customers to fulfil their obligations to the bank.
FCMB succeeded in cutting personnel cost by 0.33 per cent to N6.88 billion and general administrative expenses declined -5.72 per cent to N7.41 billion, though other operating expenses went up 63.80 per cent to N5.44 billion.
Earnings per share grew to 49 kobos from 38 kobo, which translates to 28.83% growth year on year. Relative to the share price of N1.95, P.E ratio of FCMB is calculated as 3.98x with the earnings yield of 25.12.

Wema Bank post-tax profit dips 33.53%

Wema Bank was badly hit in the first half of the year, leaving investors licking their wounds as it had a below-expectation performance during this period. The bank profit-after-tax tumbled 33.53 per cent to N1.49 billion, compared to N2.25 billion it made in H1’19, while pretax profit was down 33.75 per cent to N1.73 billion during this period.
The lender revenue took a dip of 6.57 per cent to N38.15 billion Instead of the N40.84 billion it generated in the prior period, weakened by interest income which was lower by 9.23 per cent and net fee and commission income that declined 16.38 per cent during the period under review.
The impairment for credit loss was lower marginally by 0.37 per cent to N11.03 billion, though many customers had tough time repaying their loans during this period due to the aftermath of the COVID-19, compelling banks in the country to restructure many of these loans.
The bank’s net trading income improved 27.77 per cent to N4.67 billion, while other operating income hitched up marginally by 1.64 per cent to N19.33 billion. Despite the drop in the lender’s earnings, cost continued upward as personnel cost increased 6.33 to N7.05 billion and other operating expenses rose 3.39 per cent to N8.66 billion in H1 2020.
Earnings per share (EPS) for the period under review is evaluated as 4 kobo, down by 33.53% from the previous EPS of 6 kobo in H1’19. The value of Wema Bank share has declined by -29.73 per cent to N.52 this week.