Increased non-interest income spurs FBN holding to growth as earnings spike

Increased non-interest income spurred FBN Holdings Plc, the owner of First Bank of Nigeria Plc to growth as first quarter earnings spike. 

For the first three months through March 2015, FBN Holdings pretax profit increased by 8.7 percent to N26.90 billion from N24.80 billion the same period of the corresponding year (Q1) 2014.

Profit after tax followed the same growth trajectory as it moved by 4.90 percent to N22.6 billion in 2015 as against N21.60 billion the previous year.

The fulcrum of the bank’s impressive results was as a result of a 23.50 percent increase in gross earnings to a record N126.80 billion driven by a 51.2 percent spike in noninterest income.

Interest income rose by 17 percent to N95.30 billion in 2015 from N81.5 billion in 2014.

FBN Holdings impressive results are coming amid a slump in oil price that culminated in the devaluation of the naira. These uncertainties culminated in exchange rate risk on Nigeria lenders.

“In spite of the volatile political and macroeconomic environment that has characterised the first quarter, we returned a profit before tax of N26.9 billion, a 9% increase over the same period in 2014,” said, Bello Maccido, the Group CEO in a recent release to Businessday.

“Given this, we are cautiously optimistic about the rest of the year, as the country and economy benefits from improving confidence, and remain focused on managing effectively the macroeconomic challenges,” said Maccido

Nigeria CBN in November 2014 lowered the target band for the naira and raised interest rates by 100 basis points to 13 percent, as it sought to stem losses to its foreign reserves from defending the local currency.

The devaluation of the naira, which is due to a slump in oil price, has restricted foreign currency trading of lenders in Africa largest economy Nigeria.

“What we clearly see is a very tough half year,” Chief Executive Officer Ladi Balogun, who heads the nation’s ninth largest lender by market share, said in a recent interview in Lagos. “It is important that we restore liquidity in the foreign exchange market as quickly as possible.”

FBN Holdings is cutting costs while improving on profit as cost to income ratio reduced to 65.1 percent in 2015 as against 66.2 percent in 2014.

Net interest income increased by 1 percent, impacted  by a 57.4 percent  y-o-y increase in increase in interest expense to N35.7 billion due to the impact of an increase in the monetary policy rate from 12 percent  to 13 percent.

FBN Holdings is aggressive about lending as loans to deposit ration jumped to 67.70 percent in 2015 from 66.30 percent in 2014.

Loans to customers reduced by 2.60 percent to N2.1 trillion in 2015 compared with N2.2 trillion last year.

Customer deposits were up by 5.1 percent to N3.2 trillion in 2015 as against N3.1 trillion the previous year.

Total assets increased by 3.9 percent to N4.5 trillion in 2015 from N4.3 trillion last year. With a total asset of N4.5 trillion, FBN Holding is the largest lender by assets.

FBN Holdings share price closed at N8.80 on the floor of the exchange while market capitalization was N315.87 billion.

“We expect improved traction from investments committed in the prior year to diversify revenue streams and enhance profitability. We will continue building a resilient business and drive efficiencies towards delivering sustainable returns to our esteemed shareholders,” said Maccido.


Source : BusinessDay

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