June 2, 2023/InvestmentOne Report

• Gross revenue of N805.13billion, up 37.13%q/q, up 6.32%y/y.         
• Net interest income of N363.25billion, up 17.69%q/q, up 59.15%y/y.
• Profit before tax of N157.90billion, up 31.79%q/q, down 5.26%y/y.
• Profit after tax of N136.31billion, up 29.80%q/q, down 9.86%y/y.

The long-awaited FY 2022 financial result for FBN Holdings was released today. According to details from the result, gross earnings grew by 6.32% y/y to N805.13 billion, from N757.30 billion recorded in the previous year. The growth in revenue was majorly driven by the uptrend in interest income which expanded by 49.56% y/y to N551.94 billion due to the 48.92% y/y and 106.98% y/y increase in loans and advances to customers and investment securities to N403.62 billion and N47.88 billion, respectively. We highlight that the high interest rates environment stemming from the rate hikes by the CBN to curb inflation could have contributed to the higher interest income recorded. Consequently, net interest income rose by 59.15% y/y to N363.25 billion despite the 34.01% y/y increase in interest expense in FY 2022. On the flip side, non-interest income declined by 34.87% y/y to N253.02 billion from N388.51 billion in the previous year. 

Furthermore, despite the improvement with regards to impairment charge for losses which declined by 25.18% y/y from N91.71 billion to N68.62 billion, performance was still underwhelming for FY 2022. This can be largely attributed to the significant decrease in other operating income to N22.40 billion from N149.42 billion in the past week mostly driven by income from recoveries which fell sharply from N141.03 billion in FY 2021 to N13.70 billion in the year under review, while dividend income shrank by 51.44% y/y to N3.17 billion. Additionally, operating expenses rose by 23.34% y/y from N177.13 billion to N218.48 billion, stoking further pressure on the bottom line. Hence, profit before tax (PBT) declined by 5.26% y/y to N159.90 billion, while a 39.16% rise in income tax expense pushed profit after tax (PAT) downwards by 9.86% y/y to N136.17 billion. Nonetheless, the bank declared a final dividend of N0.50 (FY 2021: N0.35), amounting to a dividend yield of c.3.52% (as of close of market today). 

On a sequential basis, gross earnings rose by 37.13% q/q propelled by the increase in interest income (+26.08% q/q) and non-interest income (+73.34% q/q) which was sufficient to sustain improved bottom-line despite the expansion in loan impairment charges (+112.72% q/q) and OPEX (+27.07% q/q). As such, PBT and PAT edged higher by 31.79% q/q and 29.80% q/q, respectively. 

Going forward, we envisage a reversal in bottom-line performance by the group for FY 2023 basically on the back of the elevated interest rate environment which should cause further increase in earnings that would outweigh operating expenses and overall cost. We also expect the strength of the group and its historical performance to keep the stock price afloat amidst tough macroeconomic conditions.