July 30, 2019/InvestmentOne Report
- Net interest income of N72.5billion, down 2.2% q/q; down 2.0% y/y
- Non-interest income of N30.7billion, up 5.2% q/q, up 0.6% y/y
- Profit before tax of N20.6billion, up 6.5% q/q; up 2.6% y/y
- Profit after tax of N15.9billion, up 0.8% q/q; down 5.4 y/y
FBNH kicked off earnings release for the Tier 1 banks late yesterday with the release of its Q2 2019 scorecard. Topline and bottom line were somewhat lackluster, with both net-interest income and non-interest income down 2.2% and 5.2% q/q respectively and somewhat flat on a half year basis. While PBT came in at N20.6billion (up 6.5% q/q and 2.6% y/y) on the back of the 40.3% q/q (58.1% y/y) decline in impairment charges, PAT came in flat q/q to N15.9billion and down 5.4% y/y on the back of a higher effective tax rate.
Bye-Bye NPLs?
However, the main attraction of the financial statement was the decline in the bank’s NPLs to 14.5% from 25.3% in Q1 2019. We recall that management had given some guidance to a single digit NPL ratio by FY 2019, which will be achieved via a combination of loan recoveries, loan restructuring, loan growth and write-offs. The decline was on the back of the write off the US$400m Atlantic Energy debt which had long plagued their books. Also contributing to the decline in NPLs was the 3.5% YtD rise in the bank’s loan book position.
Similarly, impairment charges were down 40% q/q to N8.3billion and by extension, Cost of Risk (CoR) improved 70bps to 2.0% in Q2 2019.
Rising OPEX
While we are impressed with management’s efforts in delivering as promised, we highlight the depreciation in the bank’s Cost-to-Income Ratio to 70.0% in H1 2019 from 68.4% in Q1 2019 and 50.0% in H1 2018. We believe this was on the back of the 6.0% q/q and 23.1% y/y in total Opex.
Nonetheless, Net interest margin was some flat at 7.5% from 7.9% in Q1 2019, which is understandable, given the current happenings in the interest rate environment. Cost of funds was appreciated 10bps q/q supported by the 2.0% q/q increase in deposits and ROE came in 40bps lower at 11.4%, which is just a little below management’s guidance of 12-14% in FY 2019.
FBNH PLC Q2/H1 2019 (YE: DEC) (N millions) | ||||
Q2 2019 | Q/Q
| H1 2019 | Y/Y
| |
Interest Income | 109,731 | -2.1%
| 221,780 | -1.6%
|
Interest Expense | -37,195 | -1.8%
| -75,063 | -0.9%
|
Net Interest Income | 72,536 | -2.2%
| 146,717 | -2.0%
|
Non-interest income | 30,692 | 5.2%
| 59,864 | 0.6%
|
Profit before provisions | 103,228 | -0.1%
| 206,581 | -1.2%
|
Loan Impairment charges | -8,260 | -40.3%
| -22,107 | -58.1%
|
Total Opex | -74,418 | 6.0%
| -144,620 | 23.1%
|
PBT | 20,567 | 6.5%
| 39,871 | 2.6%
|
Tax | -4,642 | 32.2%
| -8,154 | 52.2%
|
Tax rate
| 22.6%
| 438bps
| 20.5%
| 667bps
|
PAT | 15,925 | 0.8%
| 31,717 | -5.4%
|
Source: Company financials, Investment One Research
