FSDH Initial Reaction: FBN Holdings FY23 results 
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May 27, 2024/FSDH Research

Key Performance Highlights:

• FBN Holdings reported an impressive set of numbers for FY23, with the gross earnings vaulting 95.7% YoY to N1,595.3 billion compared to N815.2 billion in FY22, while the operating profit skyrocketed 127.0% YoY to N358.0 billion in FY23. Moreover, the bank reported a 127.5% YoY rise in gross earnings to N609.7 billion in 4Q23 (4Q22: N268.0 billion). The FY23 gross earnings growth was powered by a 74.0% YoY jump in interest income to N960.3 billion (60.2% of gross earnings), supported by a 17.6x YoY spurt in net gains from financial instruments at FVTPL. The rise in interest income was attributable to the strong rate environment (earning yields grew to 10.7% from 8.8% in FY22). Ultimately, the net interest margin improved to 6.1% in FY23 from 5.8% in FY22. On the other hand, interest expense soared 118.0% YoY to N411.4 billion in FY23, driven by increased deposits from customers. As the impairment charges shot up 231.4% YoY to N227.4 billion in FY23, the net interest income after impairment grew a mere 9.1% YoY to N321.5 billion in FY23.
   
• Net fee and commission income increased by 63.8% YoY to N193.2 billion in FY23 led by electronic banking fees (+20.4% YoY to N66.3 billion), Letters of credit commission and fees (+278.4% YoY to N60.6 billion), Account maintenance fees (+12.3% YoY to N22.3 billion), and funds transfer and intermediation fees (+204.9% YoY to N20.6 billion). Moreover, the Group’s gain on the sale of investment securities increased by 55.4% YoY to N34.8 billion in FY23, and the gain from the fair value of financial assets reported at fair value through profit or loss (FVTPL) ballooned 17.6x to N680.6 billion in FY23 (FY22: N38.6 billion). However, FBN Holdings incurred a foreign exchange loss of N332.8 billion in FY23 compared to a foreign exchange income of N32.4 billion in FY22. Additionally, the dividend income was up 81.4% YoY to N5.7 billion in FY23, while the other operating income fell 14.2% YoY to N19.2 billion in FY23 due to lower recoveries.
   
• In FY23, the Group’s personnel expenses grew 52.6% YoY to N179.1 billion owing to increased wages and salaries. The depreciation charges climbed 40.5% YoY to N29.5 billion, and the amortization of intangibles surged 96.2% YoY to N13.9 billion in FY23. Furthermore, the Company’s operating expenses increased by 49.6% YoY to N341.9 billion in FY23, primarily driven by regulatory costs, maintenance costs, administrative and other charges, advertising and corporate promotions. Consequently, the operating profit soared 127.0% YoY to N358.1 billion in FY23. The Group’s loss from discontinued operations declined 18.8% YoY to N112 million versus N131 million in FY22. The effective tax rate for the year marginally declined to 11.4% in FY23, compared to 11.8% in FY22. Consequently, the profit for the year shot up 127.9% YoY to N310.4 billion in FY23 (FY22: N136.2 billion). Accordingly, FBN Holdings reported earnings per share of N8.59 versus N3.75 in FY22, a 129.0% YoY rise.
   
• On a segmental basis, Commercial Banking and Business Group’s revenue soared 99.9% YoY to N1,492.8 billion in FY23 compared to N746.9 billion in FY22, along with an 84.1% YoY jump in Merchant Banking and Asset Management Business Group revenue to N97.4 billion in FY23. However, the other revenue marginally declined by 4.3% YoY to N5.1 billion in FY23 compared to N5.3 billion in FY22.
   
• FBN Holdings’ total assets grew by 60.1% YoY to N16.9 trillion (FY22: N10.6 trillion) on the back of a 67.8% YoY rise in customer loans and 20.5% YoY growth in investment securities. Gross loans improved by 68.8% YoY to N6.6 trillion (FY22: N3.9 trillion) due to growth in lending and benefiting from the rise in foreign currency loans following currency devaluation. Despite the volatile business environment, the Group’s NPL ratio remained well within the regulatory threshold at 4.7% (FY22: 4.3%), while the coverage ratio further improved to a solid at 91.7% in FY23 (FY22: 80.5%). In FY23, Customer deposits increased by 49.7% to N10.7 trillion (FY22: N7.1 trillion). Driven by robust earnings, offsetting the rising operating expenses, the cost-to-income ratio improved to 49.1% in FY23 (FY22: 61.7%). Moreover, FBN Holdings noted that cost management remains a key priority as the Group focuses on further efficiency improvement.
   
• The Group proposed a final dividend of 40 kobo per share for FY23 (FY22: 50 kobo per share), subject to appropriate withholding tax and shareholder approval. The dividend will be payable to all shareholders registered in the Company’s books at the close of business on 13 August 2024.

Market Reaction: The investor reaction to the FY23 performance was subdued as FBN Holdings stock declined 9.31% to close at N20.45, versus a 0.37% loss for the All-Share Index on 24/5.

FBN Holdings Earnings Highlights FY23

Source: Company Financials, FSDH