FBN Holdings Plc, the parent company of First Bank of Nigeria Limited, has stepped up the tempo of credit expansion to support the economy; this is amid operating challenges that create risk-averse strategies. Alongside, the group enjoys a bolstering confidence showcased in the significant rise in customer deposits.
The quick-paced credit and deposit expansion stems from the upswing in the company’s dramatic turnaround after a paled sojourn in trimmed fortune. The tier-one lender was also mired by a worrying spate of developments that touched on the heart of corporate governance and ownership control.
In the company’s interim half year report ending June 30, 2022, loans and advances were grown by 30.4 percent to N2.88 trillion from N2.21 trillion in the preceding period. By this it achieved tremendous growth in interest income to N226.35 billion from N161 billion in HY 2021, reflecting a rise of 40.6 percent. Further data mined from the report revealed that loans and advances for three years rose by a whopping 72.5 percent to N2.88 trillion from N1.67 trillion in HY 2019.
The company grew its deposit base by 19.5 percent to N5.84 trillion in the review period from N4.89 trillion in HY 2021; or 36.5 percent in three years from N3.48 trillion in HY 2019.
The jump in interest income reflects the gains of bold steps in providing credit to the economy, especially the real sector, as the country struggles with frightening inflation and unemployment rates, currently at 20.6 percent and 33 percent respectively, according to data by the National Bureau of Statistics (NBS). The bank also achieved massive results in debt recovery efforts after it suffered the pangs of huge non-performing loans for a long time.
The positive outcome reflected in the bottom-line. Profits which result from efficient management as a component of overall good corporate governance, recorded positive uptrend. In the review period, pre-tax profit jumped by 45.4 percent to N65.72 billion from N45.23 billion in HY 2021.
The attendant effect of efficient operations which shows in well-managed costs streams, resulted in a quantum leap in post-tax profit to N56.53 billion from N38 billion in the corresponding period, reflecting an increase of 48.7 percent.
“What you see are results of a well-managed bank. You can see the signs of efficiency and good corporate governance. I believe FBN Holdings will do better when the operating environment becomes less challenging,” said Sam Ndata, Doyen of the Stockbrokers and Director at UIDC Securities Limited. He told THEWILL that the half-year impressive performance shows that the bank is going to continue in the same trajectory in the next two quarters of the year.
The moderate increase in fee and commission income to N70.69 billion from N69 billion, or 2.5 percent was not sustained in the electronic banking fee which dropped to N25.53 billion from N28.81 billion in HY 2021. But the letter of credit commission and fee recorded a 28.5 percent increase to N11.51 billion from N8.96 billion in the corresponding period showing the high volume of foreign transactions for members of the public.
The 128-year-old institution, which is fast regaining its ‘lost’ frontline position in the financial services sector after a lull in top-grade activities, grew assets by 16.3 percent to N8.93 trillion from N7.68 trillion in the corresponding year. As at FY 2021, the assets rose by 60.7 percent in three years to N8.93 trillion from N5.56 trillion in FY2019. “First Bank is strong, it will always experience a moment of slowdown as a going concern amid challenges in the economy. The half-year result is quite impressive considering the recovery it has to pass through,” said Frank Ikekhide, a financial analyst.
“It is evident that the bank will end strong this year. The half-year result is indicative of that. With a strong management team, reputable corporate governance and consistency in quality service delivery, the stakeholders will be delighted with the performance of First Bank,” Ikekhide told THEWILL by telephone.
Commenting on the results, the bank’s Managing Director/Chief Executive, Adesola Adeduntan, said, “Amidst a challenging operating and dynamic regulatory environment in the half year 2022, the commercial banking group remained focused on executing key initiatives to position the group for improved profitability in the full year 2022. Our half-year results further reinforced our drive towards our ‘Quantum Profitability Leap’ agenda.
“On the back of the impressive growth recorded in our top line, our profit before tax recorded a strong growth of 40.0 percent year on year to N60.0 billion, whilst profit after tax also grew by 42.3 percent year on year to N53.3 billion as the bank continues to reap the dividends of the successful restructuring of our balance sheet and revamping of our risk management architecture.”
“We continue to record progress in driving down our non-performing loan ratio which now stands at 5.4 percent at the end of H1 and we are on target to bring it within the regulatory limit of 5 percent by end of full-year 2022.”
FBN Holdings received top-rating during the third quarter of 2022. On September 16, Fitch Ratings announced the upgrade of FBN Holdings Plc’s (FBNH) and First Bank of Nigeria Ltd’s (FBN) Long-Term Issuer Default Ratings (IDRs) to ‘B’ from ‘B-‘, and according to the rating agency, the Outlooks are Stable. Fitch has also upgraded their Viability Ratings (VR) to ‘b’ from ‘b-‘.
It explained that the upgrade of the Long-Term IDRs follows that of the VRs, reflecting that corporate governance irregularities publicly raised by the Central Bank of Nigeria (CBN) in April 2021, including two longstanding related-party exposures, have largely been addressed and therefore risks to capitalisation have receded, helped by strong internal capital generation since the irregularities were raised.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
