Interest income increased by 11.5% y/y to NGN404.83 billion supported by the growth across all major contributors to the line, with the largest contributions coming from loans and advances to customers (51.4%; +6.7% y/y to NGN207.96 billion) and investment securities (44.0%; +13.9% y/y to NGN178.21 billion). Interest expense was also up, increasing by 16.3% y/y to NGN182.96 billion, driven by a combination of increased expenses on deposits from customers (+18.0% y/y to NGN125.05 billion) and borrowings (+17.8% y/y to NGN41.41 billion). Net interest income settled 7.9% higher year-on-year at NGN221.88 billion.

Non-interest income grew by 21.2% y/y to NGN124.83 billion, and was driven by the growth in fees and commissions income (+22.2% to NGN80.00 billion). Also, the bank recorded growth in income from investment securities trading (+58.7% y/y to NGN10.64 billion). Consequent on the growth in funded and non-funded income, the bank recorded an 8.0% growth in operating income to NGN328.45 billion.

Operating expenses settled 10.0% higher year-on-year, driven primarily by increased regulatory costs – AMCON levy (+20.2% y/y to NGN19.99 billion) and NDIC premium (+32.4% y/y to NGN9.74 billion). Nonetheless, the bank’s cost-to-income ratio (ex-LLE) settled lower at 66.1% relative to 64.9% in the prior year, while profit-before tax improved significantly by 4.2% y/y to NGN111.29 billion. Finally, given lower income tax expense (-21.2% y/y to NGN22.20 billion), profit-after-tax increased by 13.3% y/y to NGN89.09 billion.

Comment: The bank’s performance is in line with expectations for FY-19, although there was a slowdown in the momentum witnessed over the first three quarters of the year. While this was partly due to the increased credit impairment charges, it is signal of what we expect in the coming year as contracting margins weigh on profitability in the highly regulated environment. Our estimates are under review.