In the last financial year as it was the one before, and indeed many more years back in time, the competitive and operating space in the financial industry had been paved with serious obstacles, setting up the industry for failure. In the current one, it is not different. Rather, it is becoming more challenging with elevated levels of inflation and hawkish monetary policy from the regulatory authorities.
However , for FBNH, it was an opportunity to turn adversity to success as it maintained a steady growth profile .In the last nine months of the current financial year, the banking giant helped more Nigerians to reach for greatness and fulfil their financial desires .
With experienced and seasoned leadership at Board level FBNHoldings achieved strong business performance with a sustained growth trajectory, strengthened core fundamentals in a challenging environment with franchise strength, solid funding base, improved operational excellence and disciplined capital management that underpin strong investment case .Driving growth through expansion, innovation, integration, and sustainability with renewed focus on growing alternate banking channels ,it accelerated revenue expansion with cutting-edge digital innovations and expanded financial access through Agent Banking initiatives
Despite the inclement operating environment with the above means the bank satisfied the five critical constituencies that any player is expected in this industry to serve .
The first is the surplus units from which it borrows with the best possible term in rates of interest and maturity structures as well as the maximum liquidity that enables them to have the funds back when they want them , or as agreed .
Moreover, it equally deployed loans to the borrowers that need the funds as cheaply as possible ; it created better value to its shareholders that require maximum or adequate returns on their investments, a situation that made them remain invested in the bank and be willing to continue to provide additional resources when needed ; achieved better risk management, the fundamental nature of banking, and satisfied 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 ; it maximized the exploitation of the opportunities available and minimized the threats in the environment.
BETTER VALUE DELIVERY TO SHAREHOLDERS
FBNHoldings – a dominant player in the industry and diversified financial services group with a structure that supports synergies created better value to its shareholders that require maximum or adequate returns on their investments, a situation that made them remain invested in the bank and be willing to continue to provide additional resources when needed
It boosted its gross earnings heavily and wrenched up bottom line with a deft application of management’s experience beginning from leveraging net interest income. It had gross earnings increased YoY by 134% to ₦2.25 trillion compared to its 9M ’23 when it recorded ₦ 962.4b. This impressive earning was driven by impressive growths in both interest and non-interest income . The Strong earnings consequently drove a 128% YoY growth in the bottom-line, to ₦610.9 billion compared to ₦ 267.9b) in the corresponding period of 2023 .Profit after tax stood at N533.88bn , recording a growth of 125.82 % from N236.4b in the corresponding period of September 2023 .
To achieve the above feat ,the bank guided the growth of interest income by157.7% percent to N1.63trn from N633.80 billion. This boost primarily reflects a strategic increase in lending volumes and an environment of rising rates that enabled banks like FBN Holdings to maximize returns on loans and other interest-bearing assets.
However, Interest Expense also escalated to N326.3 billion in Q3, a 208% year-on-year increase, with the nine-month figure reaching N759.1 billion—up 214% year-on-year.
This reflects the high cost of funding in Nigeria’s current high-interest rate regime, with rising costs of customer deposits and borrowed funds squeezing net margins despite revenue growth.
Its net interest income, which is a guide to how well a bank manages the interest rates it pays for borrowing and lending, jumped by 131.4% to N873.94b to give a positive outlook to pre-tax profit . By hauling up net interest income by that magnitude , FBNH showed the importance absolute figure or volume over percentage .
Its escalating interest expenses were not the only the potential spoiler, the poor credit environment also played the same role with situation precipitating the bank to make higher provision in terms of impairment in the period under review. Its impairment charge for losses rose by 111.5% to N171.4 billion YoY from N81.5b . The direct negative impact on the bottom-line was mitigated as the bank’s net interest income after impairment still rose to N702.6 b from N294.5 b in 2023 , an increase of 138.6% to retain its positive outlook.
But as much as N205.327billion was made from fees and commissions and other sundry items by the bank. And this is an increase of 47% YoY ,compared to last year’s N139,534 billion.The rising figure indicates that the bank is mindful of the deleterious effects of rising interest rates and how it can wipe out whole investments, especially in a global crisis such as we are now.
Another potential spoiler showed up in Foreign exchange loss of N226.73b compared to N97.38b .However , this potential spoiler was knocked off by its whopping Net gains from financial instruments at FVTPL N551.76b in 2024 as against N244.37b in the corresponding period of 2023 .
Having had a strong showing in earnings, piling costs do not seem to be having unbearably depressing effects on profits. In fact it revealed how much of a balancing act the bank achieved between earnings and expenditure in the period.
This manifested in its Operating income of ₦1,458.7 billion, up by 109.6% y-o-y from its (Sep 2023 figure ₦696.0 billion. The strength of the oldest bank lies in the fact that its operating income moved at a faster pace compared to its Operating expenses of of ₦676.8 billion, up 94.8% y-o-y relative Sep 2023 figure of ₦347.5 billion. The beauty of its efficient operation is confirmed by operating profit margin that inched impressively to 64.8% from.33.3% .
Delivering tImpressive Returns to Shareholders.
FBNHoldings has confirmed this belief with facts and figures over the years with its efficient profit machine . In the first nine months of 2024 financial year, this bank has achieved what proved this belief further . FBNH delivered values to its shareholders at a CIR of 46.4% (Sep 2023*: 49.9%) .
This pushed its Earnings per share to an unusual height of Basic Earnings Per Share (EPS)4 ₦14.72, up 125.1% y-o-y (Sep 2023*: ₦6.54)
To cement its place as the most profitable bank, return on equity (ROE), and return on assets (ROA), improved to 32.8% per cent and 3.2% per cent in 2024 from 26.6% per cent and 2.5% per cent respectively in 2023.
The positive impacts of the bank’s efficient profit machine are clearly visible on its stock, FBNH closed its last trading day (Monday, December 9, 2024) at 26.35 NGN per share on the Nigerian Stock Exchange (NGX), recording a 0.2% gain over its previous closing price of 26.30 NGN. FBN began the year with a share price of 23.55 NGN and has since gained 11.9% on that price valuation, ranking it 80th on the NGX in terms of year-to-date performance. As of last trade, FBN Holdings PLC (FBNH:LAG) traded at 26.40, 43.49% above the 52 week low of 18.40 set on Apr 25, 2024. FBN Holdings is the fifth most traded stock on the Nigerian Stock Exchange over the past three months (Sep 10 – Dec 9, 2024). FBNH has traded a total volume of 1.49 billion shares—in 19,082 deals—valued at NGN 40.4 billion over the period, with an average of 23.7 million traded shares per session. A volume high of 245 million was achieved on November 25th, and a low of 1.28 million on October 10th, for the same period.
One of the most popular valuation metrics is the price-to-earnings ratio (P/E), which measures the share price of a stock as a multiple of its earnings. The closer this figure is to one or below one, the cheaper the stock. Using FBNH’s current share price of N26.35 and its trailing twelve months earnings per share (EPS) of N16.62 ,the stock has a P/E ratio of 1.6x his compares to the banking sector price-to-earnings ratio (P/E) average of 1.3x , indicating investors’ optimism towards FBNH stock .This contrasted with the investors are pessimistic on the Nigerian Banks industry, indicating that they anticipate long term growth rates will be lower than they have historically.
Another valuation metric is the price-to-earnings growth (PEG) ratio, which adjusts the P/E ratio by the stock’s earnings growth. Similarly, a PEG below 1x suggests that the stock is undervalued relative to its earnings growth potential and may offer attractive growth at a reasonable price, appealing to growth-oriented investors.
Boosted by its recent performance, FBNH has a PEG ratio of less than one, making it attractive for growth-hungry investors. Additionally, the group’s strong capital assets appear to be reflected in its lower price-to-book ratio of 0.4x , compared to the banking sector average of 0.79 .
FBNH ’s valuation metrics, including a low P/E ratio, a reasonable P/B ratio, and a relatively higher P/S ratio, combined with a very low PEG ratio, suggest that it might be an attractive investment, especially for those looking for growth opportunities at a reasonable price. Besides valuation dynamics, FBNH is known for its dividend payouts. In 2023, it paid a dividend per share of N3.2, marking a 3.23% increase from the previous year.
The stock currently has a dividend yield of 6% based on its current share price, and this could likely increase as we expect the bank to raise its dividend payout ratio. Continuing this trend, the bank is expected to declare an interim dividend for the recently ended half-year, enhancing its appeal as an investment, especially for income-oriented investors.
To achieve the above better and improved values for its shareholders, other constituencies were also satisfied
The Surplus Units
To boost its bottom line aggressively it has to adequately satisfy the surplus units from which it borrows with the best possible term in rates of interest and maturity structures and the maximum liquidity that enabled depositors to have the funds back when they wanted them , or as agreed .The bank’s customer Total Deposits hit N11.2 trillion, an of +77%, YoY and 49.0% when compared with N7.547trn figure in 31 December 2023.
In the period under review, Customer deposits grew to N16.7 trillion as of Q3 2024, a substantial increase from N10.7 trillion at the end of December 2023. The rise was driven by growth in domiciliary deposits.
The domiciliary account deposits rose significantly to N5.36 trillion in Q3 2024 from N2.75 trillion in December 2023. This jump indicates a higher accumulation of foreign currency deposits, possibly due to elevated dollarization in customer savings amid exchange rate volatility
Term deposits increased to N3.46 trillion from N2 trillion at the end of 2023. This growth reflects FBN Holdings’ emphasis on fixed deposits to stabilize funds, likely motivated by the competitive interest rates offered to attract and retain funds for longer terms . In 2024 , the the costly deposits was foregone in favour of cheaper and more stable deposits resulting in a reduction of expensive and shorter dated deposits .
This culminated in the reduction of cost of funds which declined for the year. The results were a testament of the bank’s capability to deepen its roots in the retail segment. This has led, in the main, to a remarkable increase in the volume of transactions across various electronic platforms as well as significant customer acquisitions. This growth in transactions on the bank’s digital channels continues to support the bank’s retail push as fees from e-products increased with retail deposit balances also growing. The bank also stated that it would continue its investment in the retail end of the market to consolidate its leadership in both the corporate and retail segments.
The Bank remains a clear leader in the digital space, with several firsts in the deployment of innovative products, solutions and an assortment of alternative channels that ensure convenience, speed and safety o transactions.“To continue to cater to the varied appetites of our customers in a constantly changing world and stay ahead of the competition, therefore, we have invested massively in new technologies and innovative solutions in the last financial year. This is geared towards ensuring that we continue to provide best in class quality services that create value for all our stakeholders,” he said, noting that Fidelity Bank made significant progress in the adoption and integration of sustainable banking principles into its business, especially in its credit administration process.
The Deficit Units
The deficit units from which borrowed from the banks were equally kept satisfied .The loan portfolio increased to N9.37 trillion in Q3 2024 from N6.36 trillion in December 2023, with notable drivers in this growth pattern .Further insights reveal overdraft balances jumped from N866 billion to N2.48 trillion, while term loans increased from N5.3 trillion to N7.33 trillion.
These gains appear to reflect the bank’s push toward flexible credit products and a high-demand environment for short-term financing solutions.Project finance loans, while smaller, grew to N5.47 billion in Q3 2024, reflecting FBN Holdings’ selective lending in infrastructure and high-impact sectors.The latest results will come as a boost to FBN Holdings as it embarks on a planned N350 billion rights issue.
The financial holding company recently announced commencement of its Rights Issue, offering 5.983 billion ordinary shares at 50 kobo each, priced at N25 per share, raising N150 billion for existing shareholders.The offer is structured as one new share for every six ordinary shares held as of October 18.
The Regulatory Authorities
The fourth constituency adequately satisfied by GTCO is the regulatory authorities with its capability to ensure no excessive risks were taken as it operated prudently and within stipulated regulatory requirements . With its Net loans to deposits 26.9% as against 32.9% , Liquidity ratio 43.5% compared to 31.1% and Capital adequacy ratio 39.6% as against 21.9% ,IFRS 9 Stage 3 loans to total loans at 3.1% (31 December 2023: 4.2%), coverage for lifetime credit impaired loans at 331.3% compared to 191.1% as at 31 December 2023 and Cost of Risk driven down to to 2.2% from 4.5% as at 31 December 2023 , GTCO has fortified itself against any unforeseen circumstance of risk .
The bank’s balance sheet was robust as the loan to deposit ratio, liquidity ratio and capital adequacy ratios were 44.2 per cent, 72.0 per cent and 25 per cent respectively, all well above the regulatory threshold. However, there was a moderation in the bank’s capital adequacy ratio (CAR), from 27.0 per cent in 2017 as a result of the initial IFRS9 adjustment for the new expected credit loss (ECL) model for impairment recognition. The bank’s non-performing loans ratio, however, increased marginally to 4.9 per cent in 2018 from 4.7 per cent in 2017. However, this is still within the regulatory threshold and far below industry peers. The bank has assured shareholders of the bank’s commitment of continuing to deliver superior returns in the years ahead .
Similarly, the bank’s total assets grew by 62.3% per cent, from ₦16.9 trillion, Dec 2023 to ₦27.5 trillion in 2024 ; while shareholders’ fund grew by 48.6 per cent, from N1.75trn in 2023 to N2.60trn in 2024. For such weighty shareholders’ fund, it is natural to pull in heft deposits as total deposits grew 56.8% percent to ₦16.7 trillion from ₦10.7 trillion .
The bank’s balance sheet was robust as the loan to deposit ratio, liquidity ratio and capital adequacy ratios , all well above the regulatory threshold. .
CREDIT QUALITY
The bank’s non-performing loans ratio, however, increased marginally to 4.9 per cent in 2018 from 4.7 per cent in 2017. However, this is still within the regulatory threshold and far below industry peers.
COST OF RISK Cost of risk 2.7% (Sep 2023*: 2.0%)
Also, the bank’s robust risk management framework ensured that the cost of risk increased marginally 2.7 per cent in 2024 from 2.0 per cent in 2023 despite a significant increase in impairment charges for losses of ₦171.4 billion, up by 111.5% y-o-y (Sep 2023*: ₦81.0 billion) re-affirming the bank’s enhanced asset quality.
In the same breadth, coverage ratio increased by 34.2 per cent from 143.4 per cent to 192.4 per cent over the same period, an indication of prudent disposition consistent with the bank’s known record of excellent credit risk management.
Balance Sheet growth
Customer deposits grew to N16.7 trillion as of Q3 2024, a substantial increase from N10.7 trillion at the end of December 2023. The rise was driven by growth in domiciliary deposits.The domiciliary account deposits rose significantly to N5.36 trillion in Q3 2024 from N2.75 trillion in December 2023. This jump indicates a higher accumulation of foreign currency deposits, possibly due to elevated dollarization in customer savings amid exchange rate volatilityTerm deposits increased to N3.46 trillion from N2 trillion at the end of 2023. This growth reflects FBN Holdings’ emphasis on fixed deposits to stabilize funds, likely motivated by the competitive interest rates offered to attract and retain funds for longer terms
The loan portfolio increased to N9.37 trillion in Q3 2024 from N6.36 trillion in December 2023, with notable drivers in this growth pattern
Further insights reveal overdraft balances jumped from N866 billion to N2.48 trillion, while term loans increased from N5.3 trillion to N7.33 trillion.
These gains appear to reflect the bank’s push toward flexible credit products and a high-demand environment for short-term financing solutions.
Project finance loans, while smaller, grew to N5.47 billion in Q3 2024, reflecting FBN Holdings’ selective lending in infrastructure and high-impact sectors.
The latest results will come as a boost to FBN Holdings as it embarks on a planned N350 billion rights issue.
The financial holding company recently announced commencement of its Rights Issue, offering 5.983 billion ordinary shares at 50 kobo each, priced at N25 per share, raising N150 billion for existing shareholders.
The offer is structured as one new share for every six ordinary shares held as of October 18.
The bank’s share price is currently trading at N27.1 per share.
