October 30, 2023/CSL Research

FBNH 9M 2023 unaudited numbers showed strong growth in both Interest and Non-Interest Income. Interest Income was up 71.1% y/y driven by growth in Interest Income on both Investment Securities and Loans. Net Loans to customers were up 41.1% (including the impact of devaluation) in 9M 2023 compared with December 2022. Earnings yield improved significantly to 10.5% in 9M 2023 from 8.1% in 9M 2022.

Interest Expense on the other hand, also grew significantly, up 112.0% y/y resulting in an uptick in cost of funds to 3.4% in 9M 2023 from 2.1% in 9M 2022. Customer Deposits were up 29.9% in 9M 2023 compared with the FY 2022 position. Overall, Net Interest Income grew strongly, up 51.4% y/y and 11.9% q/q, driving NIMs up to 6.2% in 9M 2023 compared with 5.4% in 9M 2022. In line with our prognosis, yields continue to grow faster than funding cost with the rising rate environment.

Net Fee and Commission Income also grew strongly, up 30.8% y/y and 17.9%q/q. Major drivers of the y/y growth were a strong growth in electronic banking fees (up 22.0% y/y), growth in letters of credit commissions and fees (up 54.4% y/y), growth in funds transfer & intermediation fees (up 42,1% y/y), growth in custodian fees (up 39.4%y/y), growth in credited related fees (up 39.4% y/y) and growth in account maintenance (up 14.6% y/y).

FBNH 9M 2O23

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Source: Company’s Financials, 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 214.9% y/y but declined 83.9% q/q (Q3 2023 compared with Q2 2023) due to significantly lower fair value gains in Q3. The group reported fair value gains of N251.2bn in 9M 2023 but the impact on profit was moderated by a foreign exchange revaluation loss of N117.6bn in 9M 2023.

Operating Expenses grew 33.3% y/y and 28.7% in Q3 2023 compared with Q2 2023. The stronger y/y growth in Total Operating Income (+73.3% y/y) compared with the growth in opex led to an improvement in Cost to Income Ratio (CIR ex provisions) to 5o.0% in 9M 2023 from 65.0% in 9M 2022.

9M 2023 impairment Charge grew significantly, up 124.4% y/y to N82.4bn compared with N36.7bn in 9M 2022, bringing 9M 2023 annualised Cost of Risk (COR) to 2.3% compared with 1.5% in 9M 2022. With NPL ratio of 4.6% and NPL coverage of 85.4%, we do not envisage any near-term risk to asset quality. Q/q, Impairment Charge was down 39.2% q/q.

Pre-tax Profit grew strongly, up 156.3% y/y to N270.3bn while Net profit was up 159.2% y/y to N236.4bn bringing 9M 2023 annualised ROAE to 26.6% compared with 13.7% for 9M 2022.

We have a buy recommendation on the stock and a target price of N18.11/s. Current price: N16.10/s. Our target price is under review.

FBN Nigeria reports Capital Adequacy Ratio (CAR) of 16.0% for 9M 2023.

Kindly click on the below link to download the full report.

​FBN Holdings 9M 2023 Quick Take.pdf​​​