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May 26, 2022/FSDH Report

Key Performance Highlights:

• FBN Holdings filed its FY21 results on 26 May, reporting stellar performance with gross revenue growing by 28.4% to N757.6 billion and profit before tax rising by 99.1% to N166.7 billion. The company reported a massive 118.8% jump in gross earnings to N330.2 billion in 4Q21. Interest income remained challenged during the year, given the moderated interest rate environment negatively impacting yields; as a result, interest income declined 4.1% to N369.0 billion in FY21, from N384.8 billion in FY20, while the interest expense increased by 5.7% to N140.8 billion. The impairment charges jumped 48.3% YoY to N91.7 billion in FY21. Consequently, the Net Interest Income after Impairment declined by 28.1% YoY to N136.5 billion from N189.8 billion in FY20.
   
• Net fee and commission income jumped 24.4% YoY to N116.6 billion, powered by a 24.2% YoY growth in Fee and commission income, partially offset by a 23.1% YoY rise in Fee and Commission expense due to increased SMS charges and Agent banking expenses. The fee and commission income increased mainly on the back of growth in Funds transfer and intermediation fees (up 38.9% YoY), Letters of credit commissions and fees (up 32.0% YoY), and Electronic banking fees (up 15.8% YoY). The bank’s foreign exchange income jumped 382.5% to N7.0 billion, driven by foreign exchange trading gain. However, the net gains on the sale of investment securities were N31.3 billion, versus N48.1 billion in FY20. The gains from the fair value of financial assets reported at FVTPL came in at N53.7 billion versus N23.8 billion in FY20. The dividend income climbed to N6.5 billion in FY21, from N4.0 billion in prior-year, and other operating income also shot up 905.2% YoY to N149.4 billion in FY21 due to N141.0 billion of recoveries during the year, due to recovery on the Atlantic Energy Ltd loan, which was previously written off. The amount recognized is net of expenses incurred in relation to the recovery.
   
• The bank’s personnel cost increased 28.0% YoY to N128.8 billion in FY21, and the depreciation charges bumped up by 7.4% YoY. Moreover, the company’s operating expenses rose 6.7% YoY to N177.1 billion, driven by high inflation and currency devaluation. Consequently, FBN Holdings posted a profit from continuing operations of N151.1 billion for FY21, compared to N75.6 billion in 2020. During the year, the company reported a loss from discontinued operations of N68 million versus an N14.1 billion profit in the prior year. Resultantly, the profit for the year was reported at N151.1 billion, a 68.4% YoY rise in FY21. The bank reported earnings per share of N4.17, a 70.2% jump compared to N2.45 in FY20.
   
• In segmental break-up, Commercial Banking and Business Group’s revenue spurted 29.7% YoY to N713.6 billion in FY21, supported by a 9.8% YoY rise in Merchant Banking and Asset Management Business Group revenue. However, other revenue decreased by 36.7% YoY to N1.3 billion in FY21.
   
• In the company’s quarterly performance, the gross earnings increased significantly by 118.8% to N330.2 billion in 4Q21. A 25.1% YoY increase in interest income was offset by a 54.7% spurt in interest expense in 4Q21. The impairment charge for losses vaulted by 309.7% YoY to N62.1 billion in 4Q21, and the fee and commission income increased by 43.6% to N36.8 billion in 4Q21, partially offset by a 25.3% increase in the fee & commission expense in 4Q21 to N6.1 billion. A 1045.7% YoY increase in the other operating income to N146.4 billion in 4Q21 was supported by a 49.7% YoY rise in net gain from financial instruments at FVTPL to N24.0 billion in 4Q21. Other operating income during the quarter ballooned as the bank recovered previously written off loans to Jide Omokore-backed Atlantic Energy Limited. Consequently, FBN Holdings’ profit for the quarter stood at N110.3 billion in 4Q21 against N21.6 billion in 4Q20. Earnings per share also stood at N3.05 per share in 4Q21, a massive improvement from N0.58 per share in 4Q20.
   
• First Pension Custodian Limited, a subsidiary of FBN Holdings’ flagship subsidiary, First Bank of Nigeria Limited, entered into a definitive agreement with Access Bank Plc for the planned acquisition of the entire share capital of Access Pension Fund Custodian Limited held by Access Bank Plc. This will further boost the company’s market share in the industry, aid revenue diversification, and support annuity income.
   
• During the year, FirstBank appointed Alhaji Ahmad Abdullahi as the Non-Executive Director and Chairman of the Company of the Bank, following the resignation of Mr. Remi Babalola, effective 17 December 2021.
   
• The bank proposed a final dividend of 35 kobos per share for FY21, a decline from 45 kobos per share in FY20, subject to appropriate withholding tax and approval by shareholders.

Market Reaction: The investor reaction to the strong performance was positive as FBN holdings stock closed 1.90% higher versus a 1.06% gain for the All-Share Index (5/26). 

FBN Holdings Earnings Highlights FY21

Source: Company Financials, FSDH