Culled—Proshare
August 22, 2017/Proshare Research
First bank holding (FBNH) has a rich history, with deep penetration in the Nigerian market. FBH has the second highest number of branches in the country, with 875 branches in the country. Moreover FBNH has the second deepest deposit base in the country with a strong financial intermediation of N 2 trillion in loans.
Obviously, given the rich history and the asset strength FBNH has always been a cynosure of market participants. The present financial dynamic whereby FBNH still retains strong earning leverage but with growing dilution in its profit after taxes: Hitherto have caused asset managers to have diversely held positions on how to tag risk to First bank holding.
Certainly, providing risk notion held individually by some asset manager have become inevitable at this point. Thereby we are able to look through the lenses of such asset manager to have a glimpse on how they view FBNH. More importantly it does serve as a scale to weigh, weather FBNH is experiencing any material risk escalation.
Fig 1: Position of Selected Asset Managers
| Asset manage | positive | Negative | Recommendation | Conclusion |
| Cardinal stone | Gross earnings were largely in line with estimate with a faint deviation of 0.4. Impairment charge and NPL ratio fell 10 % and 26% respectively compare on a year on year basis. Thereby suggesting asset recovery is still place | Profit after taxes deviated from earlier projection by 20.5% as non-Interest income fell by sharply 37%. Largely due to high base year compared on year on year, evidently sustaining a diluted leverage factor. | buy at a target price of N7.4 | Appetite for credit creation persisted as loan stood at N 2 trillion. In attempt to lift the weight bore by PAT, the management decided to reclassify non-performing loan |
| VETIVA | Gross earnings beat estimate by 8% compared on a year on year basis .Profit after taxes fell in line with estimates. Non-performing loan moderated by 11% on year on year basis | Operating cost is deviating from earlier trend of cost containment as it rose by 12% year on year. Asset quality still remains a key pressure on earning, as it erodes leverage factor. | target price at N7.75 | An upward revision in gross earnings OPEX and NPL ratio to reflect the new reality |
| Investment one | Gross earnings beat estimate by 8% compared on a year on year basis .Profit after taxes fell in line with estimates. Non-performing loan moderated | Operating cost is deviating from earlier trend of cost containment as it rose by 12% year on year. Asset quality still remains a key pressure on earning, as it erodes leverage factor. | target price at N7.75 | An upward revision in gross earnings OPEX and NPL ratio to reflect the new reality |
| Elixir | Net interest income jolted higher by 30% triggered by asset rotation towards fixed income space. Specific impairment fell from 74 billion to 64.79 billion, reflective of moderation in specific impairment | Negative base effect of devaluation was a headwind to earnings as non-interest income softened b47 y/y. Expectedly high base due to devaluation gains continued to pose as a headwind throughout Q2 2017. Loan impairment still remains a substantial cause of worry as it poses a drag to the share price | Expectedly high base due to devaluation gains will continue to pose as an headwind throughout 2017 | |
| Cordros | impressive growth in net insurance premium | Rising operating expenses and loan impairment. Limited leg room due to the thin exchange rate gains. The capital adequacy ratio contracted from 18.1% in Q1 to 17.6. | Sell | The trio of re-pricing of asset, higher yield on fixed instrument and foreign exchange interest to provide support for net interest margin. Growth still remains lacklustre |
| United Capital | Moderation in non-performing loan by 22% | Asset quality still remains a challenge, as the cost of risk stands at 6%. The contraction in contribution from the investment securities stream by 7.9% on a year on year basis. The poor showing by investment security, run divergence to the on-going high yield environment. Moreover the shrinking in dollar revenue blunted non interest. Revenue The increase in operating cost by 10.2% on year on year basis. Triggering a rise in cost to income ratio from 53.3% in Q1 to 54.4% Q2. | Sell; target price of 4.9 | The weakness in underline earnings remain a concerns for the rest of the second half of the year. As outlook for FBH is largely dependent on its loan recovery effort coupled with the wider macro conditions |
| ARM | Relatively stronger net interest incomes as it outperform earlier projection of N 113 billion. Cheaper deposit expense, pointed t0 a more efficient deposit mobilization. | Impairment charges rose by 16.5% compare to the previous quarter, highlighting the asset challenge. Moreover rising operating cost softened the bottom line, at the same time undercutting earlier cost containing measures | The stock price provides considerable room for capital gain. Thereby sell at 5.23 |
Trading activities on FBNH shares reflected that it recorded +1.53% gains with 51.54mln volumes valued at N308.24mln traded on the day the banked released its Q2 2017 results while it closed negative the next day, July 28th, 2017, with -3.18% loss recorded and 96.86mln volumes valued at N548.66m traded.
For more details on Banking Sector Performance, kindly download our FBN Holdings Plc Comprehensive Performance Assessment Report
