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FBN Q3 ,2023:Back With Full Force

Despite   the challenges of a rough competitive space,    First Bank Nigeria Holdings  grew its profit before tax  impressively in the first nine months of the current financial year by 159.2%  while its  share price inched up by 90.5% year on year   

In the last financial year as it was the one before and indeed many more years back in time, the competitive space in the  banking  industry was paved with  many obstacles, setting up the industry for failure.

Although , the high-rate environment led to an elevated lending rates and returns on investment securities, making interest income grow in the current year  ,  the fragile economy which has increased the banks’ default risk   justified  the need to increase provisions for dodgy loan assets  .Beyond that ,high Cash reserve ratio as well as high inflationary pressures  have continued to put  the industry players in a tight corner .

During the period, the players’ incomes  were   suppressed by exorbitant operating expenses , excessive provision for impairment on loan  loss charges  just as  well elevated CRR has hindered adequate funding to real sectors that can grow the economy. 

However , in spite the above challenges and forces in the operating environment  , First Bank Nigeria Holdings  has shown with competitive resource base deployed to create core competences in certain  areas of its operations ,it is possible to squeeze water out of a stone in the business of financial intermediation ;in fact ,  it was, indeed ,  an opportunity for it to turn adversity to success as it maintained a superior values to its stakeholders with its profile taking  an upward turn sharply .  

  FBN, Nigeria’s  premier bank, no doubt , is back with full force. The bank  has shown clearly where it is headed, the very top of its banking peers again where it belonged.

What with its audacious moves in recent times, powering its way to the top of tier 1  banks again , to spiking its balance and sheet size and profitability  ;  in last few years ,it has been making bold  moves  to the big time, ramping up returns and taming costs as well as leading in regulatory requirements. The rise can be pinned down to responsible banking led by Adesola Kazeem Adeduntan.

In managing the risks ,the bank,like others , has to satisfy five main constituencies. One is the surplus units from which it borrows .These units demand the best possible term in rates of interest and maturity structures and the maximum liquidity to enable them to have the funds back when they want them , or as agreed . The marketing machine of the bank, it would seem is working overtime, growing deposits; that section of the bank’s balance sheet swung up 29.2% year -to -date to ₦8.9 trillion from: ₦6.9 trillion in Dec 2022 .This confirms its success here .

The second constituency is the deficit units which borrow from the banks . They want to borrow when they need the funds and as cheaply as  possible .Like the lenders ,the borrowers also impose the obligation of maximum on the banks to enable them to obtain funds when they need them . Its customers’ loans and advances (net) of ₦5.3 trillion, up 40.1% y-t-d (Dec 2022: ₦3.7 trillion to satisfy the deficit units .

In addition to satisfying the surplus and the deficit sectors ,the shareholders must also be satisfied .These require maximum or adequate returns on their investments in order to remain invested in the bank and to be willing to continue to provide additional resources and when needed . FBNH'[s Profit after tax of ₦221.1 billion, up 158.2% y-o-y (Sep 2022: ₦85.7 billion) is a proof of its capability to live up to their expectations .

To this is added the fourth  constituency , the regulatory authorities ,whose interest is to ensure that the bank  does not undertake excessive risks and that it operates prudently and within stipulated regulatory requirements .There is , finally the community at large. Its NPL/Gross Loans of 4.6% from 4.7% which is still within the regulatory minimum is a high point of its performance .

As the provider of the environment within which it operates . the bank owes an obligation to the community to be a good corporate citizen, capable of maximizing the exploitation of the opportunities available and minimizing the threats in the environment .In this area ,this is a role model .


Creating Competitive and Adequate Values to the Shareholders

To generate the above volume of profits for shareholders ,FBNH had gross earnings moved swiftly up  in the first nine months  of 2023 and wrenched up bottom line by 159.2% with a deft application of management’s experience beginning from leveraging interest income  and whirling  to non-interest income operations .By hauling  up net interest income by 71% to N633.8 billion from N370.4 billion,  FBNH showed that it has what it takes in the art of  the risk of mismatches between assets and liabilities and between borrowing and lending rates .To achieve this much, the bank had to shell the economy with above volume of loans .Consequently , it generated N60 from every N100 from earned from its earning assets after the cost is deducted .

 However , its impairment charges for losses on loan shot upward by 124.4% to N82.4b from N36.7b was its potential spoiler .But after the growth of its net interest income by  driving its earning yield to 10.5% from 8.1%  and minimized the growth pace of  its cost funds to 3.4% from 2.1%  to increase its net interest income ,which is a guide to how well a bank manages the interest rates it pays for borrowing and lending, jumped many paces to give a positive outlook to pre-tax profit. Its net interest income inched up by 51.4%  to N377.7b from  N249.5b .   By this , its  net interest margin grew to to 6.2% from 5.4%  to reduce the negative impact of the impairment on its bottom line . 

However ,a good game changer for the first nine months came from the non interest income segment .Its jumped by 108.2 %  as its income hit N327b from  N157.0b due to a higher trading income and net fees and commission. The Group has witnessed strong non-interest income growth over the last 5 years

. Specifically ,its net fee and commission income  contributed N118.9b of the total non interest income while Trading gain which include Foreign exchange trading income, Gains on sale of investment securities, Trading losses on debt securities delivered N133.6b .Also , its trading Others include commission on bonds contributed N59.4b   


Pre-tax profit of the leading bank, buoyed by 156.3 percent in the period to to N270.3billion from N105.5  billion. This helped  to shoot up pre-tax profit margin to  27.4 percent, up from  19.3 percent. with that rise in pre-tax profit, the bank’s net profit flew  159.2 percent to N 236.4billion from N 91.2 billion in the period, leading to a rise in net profit margin to  24 percent from  16.7 percent.

 To cement its  audacious profitability ,return on equity (ROE), and return on assets (ROA), improved to  26.6 per cent and  2.5 per cent in 2023 from 13.7 per cent and 1.3per cent respectively in 2022.  


The current share price of FBN Holdings Plc (FBNH) is NGN 20.00. FBNH closed its last trading day (Monday, November 20, 2023) at 20.00 NGN per share on the Nigerian Stock Exchange (NGX). FBN began the year with a share price of 10.90 NGN and has since gained 83.5% on that price valuation, ranking it 51st on the NGX in terms of year-to-date performance. Shareholders can be optimistic about FBNH knowing the stock has accrued 26% over the past four-week period alone—19th best on NGX.


Competitive Resource Base

The starting point of its successful strategies is the acquisition, retention and development of resources .   The bank management key priority is to fortify itself with rock solid financial resources . The rationale behind its drive to fortify itself with the biggest assets may not be farfetched .  Size is a source of competitive advantages. Large companies are essential to the wealth creation process for a number of reasons  First, having a capacity to match the resources and global distribution of large competitors brings advantages .Also , large companies also tend to devote a disproportionate share of their resources to training and education   Moreover ,   it opens  the door to many of tomorrow’s mega-opportunities will require significant resources.   Finally ,    the fortunes of large companies include their potential to generate significant employment.

The bank’s total assets grew by 36.7per cent, from N10.58 trillion in the preceding year to N 14.46trillion in 2023;  1,373,853           995,741 while shareholders’ fund grew strongly  by  38per cent, from N 995.74billion in  2022  to N 1.374trillion    in 2023  . For such weighty shareholders’ fund, it is natural to pull in heft low cost deposits as total deposits grew 30 percent to N 9.25trillion from N 7.12trillion.


The bank’s balance sheet was robust as the loan to deposit ratio, liquidity ratio and capital adequacy ratios were  58 per cent and  16  per cent respectively, all well above the regulatory threshold.  


The bank’s non-performing loans ratio  decreased marginally to 4.6 per cent in 2023 from 4.7 per cent in 20 22. This is still within the regulatory threshold and far below industry peers.


 Also, the bank’s robust risk management framework ensured that the cost of risk  increased marginally    from  1.5 per cent in the prior year to  2.0 per cent in 2023 . This  came up  through the  increased  in impairment charges by  124.4 per cent, N82.2 billion, compared to N36.7b Despite this increment this is below the industry average , re-affirming the bank’s enhanced asset quality. In the same breadth, coverage ratio increased by  85.4 per cent from  75.1 per cent over the same period, an indication of prudent disposition consistent with the bank’s known record of excellent credit risk management.


As a result of the significant improvement in efficiency, the bank’s cost-to-income ratio settled at  50 per cent from  65 per cent in 2022.

The Management Points of View

Speaking on the performance for that financial year,Nnamdi Okonkwo, the Group Managing Director commented:  “Over the period, we have delivered a strong performance and growth enabled by focused execution of our strategic plans. Gross earnings were up by 80.1%, while our profit before tax grew by 156% year-on-year. At the same time, our credit risk portfolio remains healthy, with an NPL ratio of 4.6% and a coverage of 85.4%. Cost to income ratio improved to 50% from 65% in 2022 on the back of enhanced revenue generation as well as effective cost containment initiatives despite the high inflationary environment.

We remain committed to leveraging technology, automation and our brand strength to enhance our value proposition, increase revenues and improve the overall operational efficiency of the Group. We are confident in our continuous progress in generating sustainable value for our shareholders.” 

Business Groups514, 15   Commercial Banking  • Gross earnings of ₦922.2 billion, up 79.8% y-o-y (Sep 2022: ₦512.9 billion)  • Net interest income of ₦371.0 billion, up 49.3% y-o-y (Sep 2022: ₦248.5 billion)  • Non-interest income of ₦293.0 billion, up 111.6% y-o-y (Sep 2022: ₦138.5 billion) • Operating expenses of ₦339.1 billion, up 34.0% y-o-y (Sep 2022: ₦253.0 billion)   • Profit before tax of ₦248.5 billion, up 157.9% y-o-y (Sep 2022: ₦96.4 billion) • Profit after tax of ₦221.1 billion, up 158.2% y-o-y (Sep 2022: ₦85.7 billion) • Total assets of ₦13.8 trillion, up 37.2% y-t-d (Dec 2022: ₦10.1 trillion) • Customers’ loans and advances (net) of ₦5.3 trillion, up 40.1% y-t-d (Dec 2022: ₦3.7 trillion) • Customers’ deposits of ₦8.9 trillion, up 29.2% y-t-d (Dec 2022: ₦6.9 trillion) 

Commenting on the results, Dr Adesola Adeduntan, Chief Executive Officer of First Bank of Nigeria Limited (Commercial Banking Group) stated that:  

“In the nine months ended September 30, 2023, FirstBank Group reported impressive financial results, reflecting sustained growth and resilience of the franchise.

Our gross earnings at the end of the quarter were ₦922.2 billion, marking a remarkable increase of 79.8% year-on- year. The substantial increase of 49.3% y-o-y in net interest income reflects our commitment to managing interest rate dynamics effectively and optimising our interest-earning assets, while the impressive growth of 111.6% y-o-y in non-interest income underscores our success in diversifying the Bank’s revenue streams and providing value-added services to our customers. Growth of 157.9% and 158.2% y-o-y in Profit Before Tax and Profit After Tax respectively reflect our commitment to delivering exceptional value to our shareholders and stakeholders.

This performance is a testament to the dedication and hard work of our entire team, and it reaffirms FirstBank’s position as one of the leading players in the commercial banking industry. As we continue to face dynamic market conditions, our agility, risk management capabilities and strategic approach will remain pivotal in sustaining this impressive growth trajectory. Looking ahead, we are committed to sustaining this momentum, exploring new growth opportunities through innovation and upholding our core value of customer centricity 

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