UK Ekeh
UK Eke, Group Managing Director, FBN Holdings

Okey Onyenweaku

To get a good grasp of the real strength of First Bank Nigeria Holdings, FBNH, a probe into its nine months results for the year 2020 shows the company making a loud statement: “We are still the Elephant’’.

As proof of this,

the unaudited financial statement of the company for September 30, 2020, reveals that the company which has over the years kept its eyes on the ball grew its post-tax profit by 31.71%.

Details show that FBN Holdings,

the parent company of Nigeria’s oldest lender, FirstBank, made one of the largest improvements in its bottom-line in the third quarter of 2020. Its improved post-tax profit numbers came to N68.16 billion during this period, compared with the N51.75 billion it had made in Q3 2019.


The Group raked in ₦439.3 billion as gross revenue during the period under review,

which was 5.1 per cent higher than the ₦417.9 billion it had earned in Q3 2019, buoyed by non-interest income which grew 50.0 per cent y-o-y to ₦127.0 billion, and despite a 5.3 per cent y-o-y decline in net interest income to ₦192.7 billion.

FBNH’s operating income was better by 10.9 per cent to ₦319.7 billion instead of the ₦288.2 billion it had made as of September 2019, while operating expenses inched up 2.2 per cent y-o-y to ₦209.8 billion in the first nine months of this year.

The poor state of the Nigerian economy reflected in the volume of its risk assets which went bad in Q3 2020 as it had to make ₦46.7 billion provisions as impairment charge, which was 64.0 per cent higher than the ₦28.5 billion it set aside for this purpose in the corresponding period last year.

The financial group saw its total assets grow 16.8 per cent between December 2019 and September this year to ₦7.2 trillion, with loans and advances also improving 10.9 per cent this time to ₦1.9 trillion. Also, customer deposits rose 15.2 per cent to ₦4.6 trillion compared with ₦4.0 trillion in December 2019, which helped take its total liabilities up by 17.8 per cent year-to-date to ₦6.5 trillion.

Its post-tax return on average equity stood at 13.2% (Sept 2019: 12.2%), while post-tax return on average assets was 1.4% (September 2019: 1.2%). Net-interest margin dipped to 6.6% from 7.0% in Q3 2019, while Cost to income ratio also declined to 65.6% (Sept 2019: 71.2%) and its non-performing loan ratio improved to 8.8% (December 2019: 9.9%), which was still above the 5 per cent regulatory threshold Also, FirstBank Nigeria’s Basel 2 Capital Adequacy Ratio was bettered to 15.7% from 15.5% in December 2019. Commenting on the results, U.K. Eke, the Group Managing Director of FBNHoldings said:

“In the quarter under review, there was a gradual relaxation of the lockdown and measured resumption of economic activities. Our nine months financial results validate our investment to diversify revenue towards non-capital consuming transactions and non-funding transactions.

This has broadened our earnings base as we continue to innovate and extend our proposition to the customers through electronic banking offerings. “Despite the challenging operating environment, our results reaffirm our resilience, focus on enhancing shareholder value and capacity to deliver on long-term goals.

The steady growth in our performance with profit after tax up 31.7% y-o-y reflects the strength of our organisation to continually navigate the tough operating market conditions.” He added that the group will continue to keep tight control on risk management, while growing and diversifying its loan book, ensuring that the non-performing loan ratio for its vintage book remains at a single digit. “Similarly, and in line with our strategic objective, operational efficiency remains a key focus even within the high inflationary environment.

Going forward, our focus is to consolidate our leading position through our digital offerings and remain nimble to take advantage of emerging opportunities as we propel our performance for enhanced profitability,” Eke concluded. On his part, Dr Adesola Adeduntan, Chief Executive Officer,

FirstBank said:

“The commercial banking group increased its y-o-y growth in gross earnings and profit before tax by 5.0% and 9.3% respectively despite varying degrees of challenges in the operating environment. As the premier and leading financial inclusion service provider, we 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).

The number of FirstBank Agents is now 75,996,

an increase of 28.4% over the last quarter. “As we focus on strengthening our competitive position, we recently and successfully issued a US$350 million 144A /RegS 5-year senior unsecured Eurobond. This represents the First Bank Eurobond transaction from Nigeria since 2017 as well as the first benchmark Eurobond issue from an African bank in 2020. The issue was oversubscribed reaffirming our solid credit story and ability to leverage our strong market access, despite the current market volatility and challenging macroeconomic environment.

This is a testament to our focus and the trust that investors have in our franchise. “Finally, we will continue to execute on our strategy to lead a digital vision whilst supporting our customers and further grow our businesses across geographical footprints.”

For many industry experts, the company has rekindled the hopes of investors that the future looks bright and raises expectations of better yield in Q4 2020. Its growth of 0.8 per cent in revenue in its audited results in 2019; growth of 30.9 per cent to N83.6bn in profit before tax; growth of 26 per cent in profit after tax to N73.7bn; growth of 25 per cent in Net Asset to N661bn are testimonies that its management has a target to galvanise all resources available to achieve the vision and mission of the company. FBN Holdings Plc (FBN: TP: 8.69 – BUY) reported a 26.6% YoY growth in earnings in its audited FY’19 result.

The growth in earnings was bolstered by lower impairment charges (-41.5% YoY) and higher non-interest income.

The bank paid a final dividend of N0.38 per share, which translates to a dividend yield of 9.5% based on last market closing price. The company has shown vigour over the years. For instance, the formidable company has grown its profit before tax in five years from 2015 to 2019 by 287.3 per cent from N21.581 billion in 2015 to N83.595 billion in 2019. Similarly, profit after tax also rose 375 per cent from N15.539 billion in 2015 to N73.812 billion in 2019.

While revenue grew 24.4 per cent in the last five years, earnings per share also grew 353.4 per cent from 2015 to 2019. This is not a mean performance by any standard, especially at a time when the head and tailwinds are strong and devastating for businesses not only in Nigeria but also all over the world.

The twin-barreled pandemic; that is that of Coronavirus and low price of crude which have disrupted businesses, supply chains and even caused many deaths all over the world seem to have placed a strong knee on the neck of many firms and ‘they simply can’t breathe.’

The latest number of deaths according to Worldometer stood at 1.4 million coronavirus deaths while infections were 61 million as at Thursday November 25, 2020. The lender (Company) has remained formidable in the midst of all odds. In fact, in the previous years, its strong performances have also provided a sturdy base for the vigour and strength which it has displayed.

In a sense also, FBNH had seen that transiting to a holdco will become trendy and expedient going forward. And so, like one who had seen tomorrow, it quickly seized the opportunity when it offered itself in 2012 to restructure into a full-fledged holding company.

Ever since, the gains have favoured both the company, customers and shareholders as shareholder value has been enhanced. FBNH’s choice of that era has now become attractive to Nigerian banks which are restructuring to diversify their revenue base and remain competitive with other financial services.

With this drive, some banks are adopting the holding company structure. Now, to be clear, holding companies are neither new nor rare among Nigerian banks. It dates back to 2011 when the Central Bank of Nigeria (CBN) forced banks to give up their non-banking businesses or restructure into a holding structure.

The regulator, like its peers globally, believed that it was an important risk management strategy to separate lenders from entangling with other financial services like insurance or investments. ‘’One thing about First Bank is that this is the only bank that is fully entrenched in the entire economy of the country.

If you go to the nooks and crannies of this country, you will see First Bank.

Secondly, this is one bank that has lent its weight to all the critical sectors of the economy. When First Bank is not lending, then the whole economy feels the impact. So, if you are fully entrenched in an economy and that economy is challenged, realistically, you would feel the impact of this challenge.

And that is exactly what has happened to First Bank. If this bank is a bank that engages in Treasury bills, government instrument and it is not involved in the real sector, then, your books would be clean. It is very important that we put this in the right context. It is also important that banks finance the real sector. Eventually, it is the real sector that would spur growth and development of the economy’’ Adeduntan had told Business Hallmark in an interview.

In an operating arena where the economy is already in recession, negative by 3.2 per cent, stiff regulation and tight liquidity, there is a consensus that the opportunity may be very slim for any financial institution to sustain good profit margin.

Market observers, therefore, wonder the magic wand that FBNH is doing to be on top.

Analysts believe it has become hard for firms to fly in such weak economies as Nigeria where the economy which has already slid into recession in the third quarter 2020 is expected to offer; where inflation is hitting the roof top at about 13 per cent; where the Naira has lost value and vigour; where the budget deficit stood at -4.69% of GDP; where insecurity has halted business activities in some parts of Northern Nigeria; where unemployment remains very high; where the government is unstable; and where economic policies are done to favour a section of the country.

Recently, the government hiked the prices of fuel and electricity for the masses of the country that has as much as some 82 per cent of its population by some accounts in the poverty bracket.

‘’Who would expect companies to perform magic in a country where its citizens appear to have lost hope’’, a senior civil servant who would not want to be mentioned in print opined. ”

A very challenging time to run a financial institution, however, it also offers a chance for those, who drive to showcase their big balls”, an analyst who would not want his name mentioned in print said.

Its share price has also gained 9.2 per cent year to date as it rose from N6.50 per share as of January 3, 2020, to N7.10 per share by December 4, 2020.