FSDH Initial Reaction: FBN Holdings 2Q23 results 
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July 24, 2023/FSDH Research

Key Performance Highlights:

• On July 20, FBN Holdings reported a solid set of numbers for 2Q23 as the gross earnings jumped 125.4% YoY to N397.0 billion compared to N176.1 billion in 2Q22, while profit before tax vaulted 414.1% YoY to N150.2 billion in 2Q23 compared to N29.2 billion in 2Q22. Moreover, the bank reported a 53.0% QoQ rise in gross earnings in 2Q23. The bank’s interest income rose 74.2% YoY to N203.7 billion in 2Q23, mainly due to higher interest rates and increased loan and investment volumes. Interest expense surged 112.5% YoY to N78.2 billion in 2Q23, driven by increased deposits from customers. Although the impairment charges shot up 290.9% YoY to N40.7 billion in 2Q23, the net interest income after impairment grew 21.6% YoY to N84.8 billion in 2Q23.
   
• Net fee and commission income was up by 23.7% YoY to N38.4 billion in 2Q23, mainly due to a 24.3% YoY increase in fee and commission income to N46.0 billion driven by higher electronic banking fees, partially offset by a 27.6% YoY increase in fee and commission expense to N7.6 billion. In 2Q23, the bank incurred a foreign exchange loss of N101.4 billion compared to a foreign exchange income of N10.8 billion in 2Q22. However, a gain on the sale of investment securities increased by 27.5% YoY to N10.0 billion in 2Q23. Notably, FBN Holdings recorded a gain from the fair value of financial assets reported at fair value through profit or loss (FVTPL) of N231.8 billion compared to the loss of N3.5 billion in 2Q22. Additionally, the dividend income was up 52.3% YoY to N4.3 billion in 2Q23, while the company’s other operating income declined 41.3% YoY to N2.6 billion in 2Q23 due to higher recoveries and lower sundry income.
   
• The bank’s personnel cost increased 14.3% YoY to N33.9 billion, and the depreciation, amortization and impairment charges climbed 12.8% to N7.5 billion in 2Q23. Moreover, the company’s operating expenses increased by 37.5% YoY to N78.9 billion, primarily driven by higher inflation. Ultimately, the operating profit vaulted by 412.1% YoY to N150.2 billion in 2Q23. During the quarter, the company reported a loss from discontinued operations of N29 million, up 16.0% YoY versus an N25 million loss in 2Q22. The effective tax rate for the year decreased to 8.7% in 2Q23, compared to 17.3% in 2Q22. Consequently, the profit for the year soared 468.1% to N137.1 billion in 2Q23. Accordingly, the bank reported earnings per share of N3.82 versus N0.89 in 2Q22, a 474.5% YoY gain.
   
• On a segmental basis, Commercial Banking and Business Group’s revenue increased 117.2% YoY to N362.0 billion in 2Q23 compared to N166.6 billion in 2Q22, along with a 194.7% YoY jump in Merchant Banking and Asset Management Business Group revenue to N33.4 billion in 2Q23. Other revenue also soared 135.1% YoY to N1.7 billion in 2Q23 compared to N743 million in 2Q22.
   
• On July 7, FBN Holdings announced that Barbican Capital (an affiliate of Honeywell Group Limited) acquired 4,770,269,843 units of FBN Holdings, giving it a 13.3% equity stake.

Market Reaction: The investor reaction to the 2Q23 performance was positive as FBN Holdings stock jumped 9.97% higher at N19.85, versus a 1.68% gain for the All-Share Index on 7/21.

FBN Holdings Earnings Highlights 2Q23

FSDH Research