June 2, 2023/Cordros Report
FBN Holdings Plc (FBNH) published its Q1-23 unaudited financial report this morning, revealing double-digit expansions across its core (+64.1% y/y) and non-core (+11.8% y/y) income lines. Consequently, the group’s EPS grew markedly by +55.1% y/y to NGN1.38 in Q1-23.
The group recorded a 64.1% y/y growth in interest income to NGN179.61 billion, driven by gains recorded across the loans and advances to customers (+60.4% y/y) and investment securities (+106.8% y/y) contributory lines. We highlight that the growth in these income lines was supported by the twin impact of the higher yield environment and the rise in the group’s interest-earning assets (+5.7% YTD to NGN7.38 trillion).
Interest expense grew by 84.9% y/y to NGN67.76 billion owing to the higher cost incurred on deposits from customers (+88.0% y/y) and financial institutions (+22.1% y/y). We attribute the higher cost on deposits from customers to the increase in the bank’s deposits (+4.2% YTD to NGN3.95 trillion) amid a slight deterioration in its CASA mix (Q1-23: 82.7% vs 2022FY: 84.8%). Consequently, the group recorded an expansion in net interest income (+53.6% y/y). Eventually, net interest income ex-LLE closed 48.3% higher year-on-year after taking account of the 93.1% y/y growth in the group’s impairment charges in Q1-23.
Non-interest income advanced by 11.8% y/y to NGN72.33 billion, buoyed by higher gains from investment securities (+114.1% y/y) and net fees and commission income (+29.2% y/y) in the period. Accordingly, operating income rose by 29.9% y/y to NGN167.28 billion.
Operating expenses grew by 20.6% y/y, triggered by increases in the group’s regulatory and personnel costs. Precisely, the group incurred higher costs on personnel expenses (+22.2% y/y), NDIC premium (+135.6% y/y), and AMCON levy (+6.9% y/y) in Q1-23. However, subsequent to the higher operating income than OPEX, the group’s operational efficiency improved as the cost-to-income ratio (ex-LLE) settled at 66.5% (vs 71.6% in the prior year).
The HoldCo’s profit before tax grew by 53.3% y/y to NGN56.11 billion. FBNH’s ROAE and ROAA ultimately settled at 20.1% and 1.9%, respectively.
The group will hold a conference call on Monday (05 June) at 3 pm Lagos time to discuss the results. Kindly click here to register.
Comment: We Like that FBNH delivered impressive numbers in the quarter, despite the unfavourable business environment. Over the rest of 2023, we believe the group will sustain the growth momentum across its core and non-core income lines supported by our expectations of a higher interest rate environment and higher income from fees and commission, respectively. Our estimates are under review.
