FSDH Initial Reaction: FBN Holdings 3Q23 results 
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November 2, 2023/FSDH Research

Key Performance Highlights:

• On October 27, FBN Holdings reported a solid set of numbers for 3Q23 as the gross earnings jumped 75.0% YoY to N329.0 billion compared to N188.0 billion in 3Q22, while profit before tax vaulted 61.1% YoY to N64.1 billion in 3Q23 compared to N40.0 billion in 3Q22. However, the bank reported a 17.1% QoQ decline in gross earnings in 3Q23. The bank’s interest income rose 74.0% YoY to N250.5 billion in 3Q23, mainly due to higher interest rates and increased loan and investment volumes. Interest expense surged 132.4% YoY to N110.2 billion in 3Q23, driven by increased deposits from customers. Although the impairment charges shot up 65.0% YoY to N24.7 billion in 3Q23, the net interest income after impairment grew 41.7% YoY to N115.6 billion in 3Q23.
   
• Net fee and commission income was up by 38.8% YoY to N45.3 billion in 3Q23, mainly due to a 36.0% YoY increase in fee and commission income to N54.6 billion driven by Letters of credit commissions and higher electronic banking fees, partially offset by a 24.1% YoY increase in fee and commission expense to N9.3 billion. In 3Q23, the bank incurred a foreign exchange income of N1.8 billion compared to a foreign exchange loss of N14.4 billion in 3Q22. However, a gain on the sale of investment securities decreased by 93.4% YoY to N298.0 million in 3Q23. Notably, FBN Holdings recorded a gain from the fair value of financial assets reported at fair value through profit or loss (FVTPL) of N16.3 billion compared to the gain of N10.6 billion in 3Q22. Additionally, the dividend income was up significantly by 791.0% YoY to N989.0 billion in 3Q23, and the company’s other operating income rose 49.3% YoY to N4.3 billion in 3Q23 due to higher recoveries.
   
• The bank’s personnel cost increased 62.0% YoY to N48.0 billion, and the depreciation, amortization and impairment charges climbed 48.4% to N9.8 billion in 3Q23. Moreover, the company’s operating expenses increased by 49.3% YoY to N62.9 billion, primarily driven by regulatory costs, maintenance costs, advertising and corporate promotions. Ultimately, the operating profit vaulted by 61.0% YoY to N63.9 billion in 3Q23. During the quarter, the company reported a loss from discontinued operations of N25 million, up 19.0% YoY versus an N21 million loss in 3Q22. The effective tax rate for the year increased to 23.1% in 3Q23, compared to 12.8% in 3Q22. Consequently, the profit for the year soared 42.0% to N49.2 billion in 3Q23. Accordingly, the bank reported earnings per share of N1.35 versus N0.96 in 3Q22, a 41.1% YoY gain.
   
• On a segmental basis, Commercial Banking and Business Group’s revenue increased 81.0% YoY to N922.2 billion in 3Q23 compared to N509.4 billion in 3Q22, along with a 69.9% YoY jump in Merchant Banking and Asset Management Business Group revenue to N60.6 billion in 3Q23. Other revenue also soared 81.2% YoY to N3.8 billion in 3Q23 compared to N2.1 billion in 3Q22.
   
• On July 7, FBN Holdings announced that Barbican Capital (an affiliate of Honeywell Group Limited) acquired 4,770,269,843 units of FBN Holdings, resulting in a 13.3% equity stake.

Market Reaction: The investor reaction to the 3Q23 performance was positive as FBN Holdings stock jumped 4.04% higher at N16.75, versus a 1.45% gain for the All-Share Index on 10/30.

FBN Holdings Earnings Highlights 3Q23

Source: Company Financials, FSDH