First Bank announces bumper harvest, posts N52bn profit before tax

As Nigerian Banks continue to groan under tighter regulation, FBN Holdings Plc, the parent company of First Bank Nigeria Limited has posted an impressive half year result for the period ended June 30, 2015, giving investors’ hope for a stronger year end performance.

The financial conglomerate at the end of the six months period posted profit after tax of N40.06 billion, representing 7.7 per cent rise compared to N37.18 billion recorded in the comparable period of 2014.

FBNH’s interest income rose by 24.8 per cent during the period from N164.85 billion to N205.79 billion while interest expenses rose by 47 per cent to N73.1 billion from N49.69 billion in the comparable period of 2014.

While the operational and personnel expenses rose by 10.6 and 22.5 per cent respectively, its personnel expenses increased in the first half of 2015 to N47.46 billion as against N38.73 billion in 2014.

Its expenses also increased to N64.28 billion in the first half compared to N58.07 billion spent the corresponding period of 2014.

Further analysis reveal profit before tax stood at N52.08 billion compared to the previous year’s figure of N48.25 billion representing an increase of 7.9 per cent.

The total assets of FBN Holdings Plc stood at N4.418 trillion, a 1.7 per cent improvement over its assets of N4.342 trillion in the comparable period of 2014.

During the half year period, total liabilities of the bank went up slightly by 0.96 per cent to N3.856 trillion.

Customers deposit increased by 2.4 per cent to N3.126 trillion from N3.05 trillion while loans and advances to customers dropped by 4.3 per cent N2.085 trillion from N2.178 trillion.

Looking back, the team, as Onasanya would say has in the last six years grown the group’s  total Assets from a paltry figure of N2.009billion in 2009, representing about 116 per cent to N4.342trillion in 2014.

Similarly, its profit after tax has leapt by 559 per cent to N82.838billion in 2014 from N12.569billion in 2009 while Gross earnings rose by 120 per cent to N480billion in 2014 from N217billion in 2009.

Further analysis disclosed that customer deposits was N3.050billion as customer loans and advances also rose to N2,179billion.

Presently, other performance indicators of the bank which include; NPL at 3.9%, loans /deposits at 67.7%, CAR at 19.1% and ROAE at 17.0% have been fairly impressive.

In the year preceding his impending exit, FBN Holdings’ audited results for the full year ended December 2014, showed that its pre-tax profit grew by 1.7 percent to N92.9 billion from N70.6 billion the previous year.

It gross earnings were up by 21.3% year-on-year and stood at N480.6 billion, from N396.2 billion in its 2013 financial year.

While the bank’s net interest income rose to N243.9 billion, up 6.0 per cent year-on-year (December 2013: N230.1 billion). Its earnings per share closed at N2.55 against N2.16 in 2013.

The 2014 audited account also showed that FBN Holdings’ Non-interest income went up by 66.1 per cent year-on-year from N67.3 billion to N111.8 billion, adding that operating income of N355.1 billion, up 19.8% year-on-year (Dec 2013: N296.4 billion).

The company paid a dividend of 10 kobo and a bonus of one new share for every 10 held, against the N1.05 dividend it paid in 2013.

“Profit before tax stood at N92.9 billion (Dec 2013: N91.3 billion), up 1.7% y-o-y. Income tax expense for the year was N10.0 billion (Dec 2013: N20.7 billion).

This improved the effective tax rate to 10.8% from 22.7%.

This was primarily driven by an increase in the tax exempt income from utilising available capital allowances.

This performance translates into pre-tax return on average equity of 18.7% (Dec 2013: 20.0%) and post-tax return on average equity of 16.7% (Dec 2013:15.5%),” the summary of the result release by the group stated.

Even though the bank believes that target focus should apply now in its expansion plans, it had increased its branches from 510 in 2009 to 892 business locations.

But this is a bit regrettable as it has started closing down non-profitable outlets which seem to have added to its huge cost of operations.

”In spite of the highlighted challenges, FBN Holdings Plc delivered solid financial results in 2014, across a number of key financial metrics including gross earnings and profit before taxes.

This strong performance is championed by our Commercial Banking franchise, First Bank of Nigeria Limited, and buoyed by our Investment Banking and Asset Management business which is rapidly growing into a powerhouse in the investment banking space,” said Chairman of FBNH, Oba Otudeko.

Discerning investors know from the chairman’s statement that the life wire of the group is the first Bank Nigeria Limited, the commercial Banking arm of the FBNH group which is being managed by Mr. Onasanya, and has contributed immensely to the survival of the Elephant.

”The bank prepared me very well for that job unconsciously. I had the opportunity in my days as the deputy general manager and financial controller to also combine that with being the co-coordinator of the enterprise transformation project.

That gave me the opportunity to understand the strengths, weaknesses and opportunities of the bank.

In addition, my foray into First Pension Custodian gave me the opportunity to use the services of the bank as a customer. I was able to see the bank from the viewpoint of customers.

After six months of being an executive director of banking, operations and services, I was appointed group managing director. This was after Lamido Sanusi Lamido was appointed Governor of Central Bank.

Though a challenging task, I am delighted at my achievements.” Onasanya said External effect rumple income stream

The regulatory headwinds affected FBN operations in several critical ways.

The increase in Cash Reserve Ratio, both on the public sector and private sector funds which grew from 12% progressively to 50% and then to 75% on public sector and for private sector, from 12% progressively to 20%.

This, as a Group, has had the impact of about N560 billion sitting at the Central Bank of Nigeria at zero interest rate.

But now, the Group seems to be on its feet as other business areas discovery thrives.

The Banking Group also was hit by the introduction of treasury single accounts which is basically taking away collections from federal government agencies away from the banking system into the Central Bank of Nigeria.

Also, FBN said in its presentation that; “The fact that on the cash reserve ratio the Group have N560 billion sitting in CBN earning zero interest rate.

That has actually shaved off over N64 billion in revenues for the Group.