July 31, 2024 Cordros Report
FBN Holdings Plc (FBNH) published its H1-24 unaudited numbers yesterday (30 July), recording a 94.7% y/y increase in earnings per share to NGN10.11 (H1-23: NGN5.19). We attribute the substantial earnings expansion to the increases across the group’s funded (+155.4% y/y) and non-funded (+71.1% y/y) income lines.
FBNH delivered a 155.4% y/y increase in interest income to NGN947.69 billion in H1-24, largely driven by the elevated yield in the fixed income and rising earning assets (+50.4% YTD to NGN19.04 trillion). Parsing through the contributory lines in nominal terms, the group recorded higher income from loans and advances to customers (+123.1% y/y to NGN568.90 billion), investment securities (+176.7% y/y to NGN307.02 billion), and loans and advances to banks (+314.1% y/y to NGN71.78 billion).
Elsewhere, interest expense advanced by 196.5% y/y to NGN432.76 billion as the group incurred higher costs on its deposits from customers (+158.4% y/y to NGN262.70 billion) and financial institutions (+244.5% y/y to NGN103.70 billion) due to the elevated interest rates and deteriorating funding mix (CASA H1-24: 79.9% | 2023FY: 81.2%). In the same vein, the group incurred higher costs on its borrowing (+367.6% y/y to NGN66.37 billion). Accordingly, the net interest income ex-LLE expanded significantly by 134.8% y/y to NGN421.95 billion. Ultimately, the group’s net interest margin (NIM) increased by 190bps y/y to 7.7% in H1-24.
The group recorded a higher non-interest income in H1-24 (+71.1% y/y to NGN435.73 billion), majorly driven by the higher gains from net fees & commission income (+50.4% y/y to NGN110.84 billion) and FX revaluation (+88.1 y/y to NGN432.20 billion), amid a decline in gains from investment securities (-72.7% y/y to NGN11.83 billion). The preceding was sufficient to offset the FX loss (NGN165.05 billion) incurred.
Further down, operating expenses increased by 95.1% y/y to NGN445.69 billion, primarily driven by an increase in personnel expenses (+105.8% y/y to NGN134.20 billion), AMCON levy (+24.4% y/y to NGN77.26 billion), depreciation and amortization (+108.4% y/y to NGN30.49 billion), and NDIC premium (+185.8% y/y to NGN20.74 billion). Considering the group’s operating income (+95.9% y/y) grew faster than OPEX, the cost-to-income ratio (ex-LLE) settled lower at 46.9% (H1-23: 46.6%).
Profitability was stronger in H1-24 as PAT grew by 95.1% y/y to NGN365.30 billion.
Comment: We like that FBNH recorded solid growth across its major income lines in H1-24. Over H2-24, we are optimistic that the combined impact of the elevated yield environment, revaluation gains recorded in the year, and the CRR reduction for merchant banks from 32.5% to 14.0% will support the group’s earnings growth. Our estimates are under review.
