July 21, 2023/CSL Research

FBNH H1 2023 unaudited numbers showed strong growth in both Interest and Non Interest Income. Interest Income was up 69.3% y/y driven by growth in Interest Income on both Investment Securities and Loans. Net Loans to customers were up 38.9% (including the impact of devaluation) in H1 2023 compared with December 2022. Earnings yield improved significantly to 9.4% in H1 2023 from 7.5% in H1 2022.  

Interest Expense on the other hand, also grew significantly, up 98.7% y/y resulting in an uptick in cost of funds to 2.9% in H1 2023 from 1.9% in H1 2022. Customer Deposits were up 26.9% in H1 2023 compared with the FY 2022 position. Overall, Net Interest Income grew strongly, up 55.2% y/y and 12.2% q/q, driving NIMs up to 5.8% in H1 2023 compared with 5.1% in H1 2022. In line with our prognosis, yields continue to grow faster than funding costs with the rising rate environment.

Net Fee and Commission Income also grew strongly, up 26.3% y/y and 8.8%q/q. Major drivers of the y/y growth were strong growth in electronic banking fees (up 33.2% y/y) and growth in letters of credit commissions and fees (up  28.1%), growth in custodian fees (up 40.5%y/y), and growth in credited related fees (up 28.4% y/y). 

Source: Company data, 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) increased by  195.9% y/y and 297.5% q/q (Q2  2023 compared with Q1 2023). The group reported fair value gains of N234.4bn in H1 2023 but the impact on profit was moderated by a foreign exchange loss of N98.4bn in H1 2023.

H1 2023 Impairment Charge grew significantly, up 165.4% y/y to N57.6bn compared with N21.7bn in H1 2022, bringing H1 2023 annualised Cost of Risk (COR) to 1.9% compared with 1.3% in H1 2022.  With NPL ratio of 4.% and NPL coverage of 82.2%, we do not envisage any near term risk to asset quality. Q/q, Impairment Charge was up 141.1% q/q. 

Pre-tax profit grew strongly, up 213.8% y/y to N206.3bn while Net profit was up 231.1% y/y to N187.2bn bringing H1 2023 annualised ROAE to 31.5%  compared with 12.8% for H1 2022. 

We have a buy recommendation on the stock and a target price of N18.11/s. Current price: N18.05/s. Our target price is under review. 

FBN Nigeria reports Capital Adequacy Ratio (CAR) of 16.5% for H1 2023