February 1, 2024/CSL Research
FBNH FY 2023 unaudited numbers showed strong growth in both Interest and Non-Interest Income. Interest Income was up 66.3% y/y (8.4% above our forecast) driven by growth in Interest Income on both Investment Securities and Loans. Net Loans to customers were up 67.95% y/y (including the impact of devaluation).
Interest Expense on the other hand, also grew significantly, up 105.5% y/y and 10.8% above our forecast resulting in an uptick in cost of funds. Customer Deposits were up 52.6% y/y, also inclusive of the impact of devaluation on FCY deposits. Overall, Net Interest Income grew strongly, up 45.9% y/y and 6.6% ahead of our forecast.
Net Fee and Commission Income also grew strongly, up 45.6% y/y and 7.5% above our forecast. While all Fee and Commission Income lines showed y/y growth, major drivers were a growth in electronic banking fees (up 19.6% y/y), strong growth in letters of credit commissions and fees (up 153.68% y/y), strong growth in funds transfer & intermediation fees (up 201.2% y/y) and sturdy growth in other fees and commissions (up 264.62%y/y).
FBN Holdings FY 2023
| 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 262.0% y/y and 51.1% above our forecast. The group reported fair value gains of N683.5bn for FY 2023 with N432.3bn of the total reported in Q4 but the impact on profit was moderated by a foreign exchange revaluation loss of N375.9bn for FY 2023 (N258.2bn of the total reported in Q4).
Operating Expenses grew 46.8% y/y and came in 13.9% higher than our forecast. The stronger y/y growth in Total Operating Income (+85.8% y/y) compared with the growth in opex led to an improvement in Cost to Income Ratio (CIR ex provisions) to 48.7% in 2023 from 61.7% in 2022.
FY 2023 impairment Charge grew significantly due to the devaluation impact on FCY Impairments, up 192.1% y/y to N200.4bn (of which N118.1bn was taken in Q4 2023) compared with N68.6bn in FY 2022, bringing FY 2023 Cost of Risk (COR) to 3.8% compared with 1.6% for FY 2022.
Pre-tax Profit grew strongly, up 129.4% y/y to N362.2bn while Net profit was up 127.6% y/y to N309.9bn, almost in line with our forecast of N302.4bn, bringing FY 2023 ROAE to 23.0% compared with 14.7% for FY 2022.
We have a hold recommendation on the stock with a target price of N29.64/s. Current price: N23.85/s.
We await the audited numbers.
Kindly click on the below link to download the full report.
FBN Holdings FY 2023 Quick take.pdf
