FSDH Initial Reaction: FBNH 2Q22 results 
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August 2, 2022/FSDH Research

Key Performance Highlights:

• FBN Holdings filed its 2Q22 results on 29 July with a 12.2% YoY jump in gross earnings to N176.2 billion compared to N157.0 billion in the prior-year quarter. However, the bank reported a 2.4% decline in gross earnings on a QoQ basis. The bank’s interest income grew by 41.4% YoY to N116.9 billion in 2Q22 from N82.7 billion in 2Q21, partially offset by a 16.3% YoY rise in interest expense to N36.8 billion. The interest income primarily rose due to a 47.8% YoY jump in income from loans and advances to customers, supported by a 47.0% YoY rise in interest income from investment securities. The impairment charges declined 23.0% YoY to N10.4 billion in 2Q22. As a result, the Net Interest Income after Impairment expanded 85.9% YoY to N69.7 billion in 2Q22.
   
• Net fee and commission income jumped 7.3% YoY to N31.0 billion, mainly due to a 5.5% YoY increase in Fee and commission income, further enhanced by a 2.8% YoY decrease in Fee and Commission expense. The fee and commission income soared due to higher letters of credit commissions and fees (up 39.9% YoY) in 2Q22. The bank’s foreign exchange income stood at N10.8 billion in 2Q22 compared to a foreign exchange loss of N2.2 billion. The company recorded a gain on the sale of investment securities of N7.8 billion versus a gain of N3.6 billion in 2Q21. FBN Holdings recorded a loss from the fair value of financial assets reported at fair value through profit or loss (FVTPL) of N3.5 billion, versus a gain of N19.3 billion in 2Q21, primarily driven by fair value losses of N3.2 billion in 2Q22. The dividend income spurted 49.5% YoY to N2.8 billion in 2Q22, driven by a N2.0 billion dividend income from Africa Finance Corporation. In comparison, the other operating income declined 73.4% YoY to N4.5 billion in 2Q22, driven by lower sundry income.
   
• The bank’s personnel cost increased 12.3% YoY to N29.7 billion in 2Q22, while the depreciation charges edged 2.7% lower to N6.6 billion in 2Q22. Moreover, the company’s operating expenses soared 24.9% YoY to N57.4 billion, driven by a 52.5% YoY jump in regulatory cost to N23.4 billion in 2Q22. Resultantly, the operating profit jumped 10.5% YoY to N29.3 billion in 2Q22. During the quarter, the company reported a loss from discontinued operations of N25 million versus an N23 million loss in 2Q21. The effective tax rate for the quarter increased to 17.3% in 2Q22, compared to 14.7% YoY in 2Q21. Consequently, the profit for the year rose 7.5% YoY to N24.1 billion in 2Q22. Accordingly, the bank reported earnings per share of N0.66 versus N0.62 in the prior-year quarter.
   
• In segmental break-up, Commercial Banking and Business Group’s revenue vaulted 41.7% YoY to N214.9 billion in 1H22 compared to N151.7 billion in 1H21, coupled with a 19.1% YoY jump in Merchant Banking and Asset Management Business Group revenue to N10.5 billion in 1H22. Other revenue also soared 90.0% YoY to N872 million in 1H22.
   
• Furthermore, earlier this month, at the AGM, FBN Holdings Plc announced an N0.35 per share dividend for the year ended 31 December 2021. This is 10 kobo less than the N0.45 it paid for the year ended 31 December 2020.

Market Reaction: The investor reaction to the quarterly performance was subdued as FBN Holdings stock closed 0.45% lower versus a 0.83% loss for the All-Share Index (1/8). However, the stock remained unchanged at N10.95 on Tuesday (2/8) versus a 1.35% gain for the All-Share Index. 

FBN Holdings Earnings Highlights 2Q22

Source: Company Financials, FSDH