BY EMEKA EJERE
Full Year 2019 audited numbers of FBNH released recently showed an increase in Pre-tax profit to N83.6 billion, compared to N73.6 billion reported in its earlier released unaudited numbers.
It also shows a marginal interest income growth up 1.6% year-on-year (y/y) mainly due to a decline in yields on customer loans. While Net Loans to customers were up 10.9% y/y, Interest Income on those loans declined 6.8%.
Also Interest Expense grew marginally up 1.4% y/y despite an 11.9%
y/y growth in Interest Bearing Liabilities reflecting a decline in funding cost on the back of the low-interest rate environment. Net Interest Income was up 1.7% y/y. Overall, NIMs declined to 7.7% in December 2019 compared to 7.8% in December 2018.
Moderate growth was also recorded in Net Fee and Commission Income up 11.2% y/y, mainly due to significant growth in E-banking income (up 41.2%y/y) and credit-related fees (up 104.7% y/y), letters of credit commission (up 49.0% y/y) and other fees and commission (up 30.1% y/y).
The result also showed that Other Income, including Net Insurance Premium, Net gains on investment securities, Net gains or loss on financial instruments, Dividend Income, Other Operating Income, was up 32.9% y/y.
However, Impairment Charge declined 41.5% y/y to N51.1 billion, compared with N87.5bn for FY 2018, resulting in a decline in Cost of Risk (COR) to 2.6% compared to 4.3% for FY 2018. The bank’s NPL ratio declined further to 9.9% from 24.7% for FY 2018.
The Group’s unaudited financial statement had shown that earnings have been strong since after three to five years of its internal operation restructuring, particularly the release of legacy non-performing assets from its portfolio.
Analysts at Meristem Securities had predicted moderate growth in loan volumes but hoped it would support interest earnings while interest expense should trend downwards. The analysis revealed that the Group raked in N440.622 billion from its portfolio interest yielding assets class as income, rising mere 1.43% from N434.410 billion in 2018.
Apparently, the management’s key strategic decision to pursue balance sheet efficiency as its core focus in 2019 yielded results for the leading financial group. Assets quality increased as a result of massive decline in the amount of impairment charge on credit losses booked in the year.
Specifically, impairment booked at the Group level slid to N41.711 billion in 2019. This translates to more than 52% decline when compare with N86.911 billion booked in 2018
FBNH has grappled with non-performing loans since the recession of 2015 and had taken significant impairment charges over the last five years. Analysts estimated cumulative impairment charges booked in the period to about N530 billion.
“Most of these impairment charges were derived from exposures into oil and gas clients”, analysts said.
The Group reported a decline in net insurance premium from N15.541 billion in 2018 to N11.388 billion. Harsh economic environment that characterised the whole of the financial year 2019 necessitated an increase in operating expenses. This was derived on the back of increased overhead in assets maintenance as well as personnel cost.
Surprisingly, the Group was able to reduced directors’ emolument in the period from N4.007 billion in 2018 to N3.3 billion in 2019. Both regulatory cost and maintenance expenses steeply increased. Operational and other losses pushed operating expenses up among other overheads like outsourced cost, underwriting expenses etc.
Thus, operating expenses ballooned to N190.364 billion in 2019. This represents a 28.65% increase y/y when compare with N147.976 billion in 2018. At about 4% growth, Profit for the year expanded to N61.947 billion as against N59.667 billion made in 2018. FBNH total assets expanded more than 11% in the year from N5.568 trillion to N6.181 trillion at the end of financial year 2019.
Increase in cash and balances with the Central Bank of Nigeria contributed greatly to the total assets expansion. It was also more likely due to increased cash reserve ratio on account of the bank’s inability to meet the apex bank loan to deposit ratio requirement.
The unaudited report had shown that cash and balances with the CBN berthed at N1.023 trillion as at the end of financial year 2019 as against N653.335 billion in the previous year.
