May 27, 2022/CS; Research

FBNH released Q1 2022 unaudited numbers. Interest Income was up 39.7% y/y driven by growth in Interest Income on investment securities and Loans due to an improvement in earnings yield. Earnings yield improved to 7.6% in Q1 2022 from 6.8% in Q1 2021. Net Loans to customers were up 6.0% at the end of Q1 compared with the December 2021 position. Interest Expense also grew significantly also, up 43% y/y resulting in an increase in Q1 2022 cost of funds to 2.0% from 1.6% in Q1 2021. Customer Deposits were up 5.0% in Q1 2022 compared with December 2021. Overall, Net Interest Income was up 37.9% y/y driving NIMs up 5.1% in Q1 2022 compared with 4.6% in Q1 2021.  

Net Fee and Commission Income weakened, down 4% y/y, mainly due to a 15.4% y/y decline in electronic banking fees.  

Q1 2022 Nm

Source: Company, CSL Research.

Other Income (Foreign Exchange Income, Net Gains on Investment Securities, Net Gains or Loss on Financial Instruments held at FVTPL, Dividend Income, Other Operating Income) grew significantly, up 54.6% y/y, driven mainly by trading gains on debt securities which grew 451% to N15.9bn from N2.9bn in Q1 2021. The group also reported sundry income of N2.2bn compared with only N501m in Q1 2021. 

Q1 2022 impairment Charge declined 33.6% y/y to N8.8bn compared with N13.2bn in Q1 2021, bringing Q1 2022 annualized Cost of Risk (COR) to 1.2% compared with 2.3% for Q1 2021.  

OPEX increased significantly, up 25.7% y/y. However, the stronger growth in Total Operating Income (up 30.5% y/y) led to a marginal improvement in the cost to income ratio (ex-provisions) to 67.0% in Q1 2022 from 69.6% in Q1 2021. Growth in Other Operating Expenses (up 41.2%) was the major contributor to OPEX growth, mainly driven by increased regulatory cost (AMCON charge, NDIC etc.) which was up 89.6% y/y. 

Pre-tax profit was up 93.2% y/y to N36.5bn while Net profit was up 107.7% y/y to N32.4bn, bringing Q1 2022 annualized ROAE to 14.5% compared with 8.2% in Q1 2021. 

Our target price and rating are being reviewed. Current price: N11.50 /s 

FBN Holdings will host a question-and-answer teleconference call with analysts and investors on the audited results for the full year December 31, 2021, and unaudited first quarter March 31, 2022, on Friday, June 3, 2022, at 3:00pm UK / 3:00pm Lagos / 10:00am New York / 4:00pm Johannesburg & Cape Town.