October 30, 2024/Cordros Report
FBN Holdings Plc (FBNH) published their 9M-24 unaudited numbers yesterday (29 October), recording a 125.1% y/y increase in EPS to NGN14.72 (vs 9M-23: NGN6.54). We attribute the substantial earnings expansion to the increases across the group’s core (+164.6% y/y) and non-core (+82.4% y/y) income lines.
FBNH delivered a 164.6% y/y growth in interest income to NGN1.63 trillion in 9M-24. In line with the banking sector trend, the rise in interest income was largely driven by the elevated yields in the fixed-income space and the rising earning assets (+73.1% YTD to NGN11.10 trillion). As a result, the group’s earnings yield increased by 450bps y/y to 14.7% in the review period. Parsing through the contributory lines, the group recorded higher income from loans and advances to customers (+128.1% y/y to NGN915.35 billion), investment securities (+194.2% y/y to NGN538.60 billion), and loans and advances to banks (+448.6% y/y to NGN179.06 billion).
Elsewhere, interest expense advanced by 214.3% y/y to NGN759.07 billion as the group incurred higher costs on deposits from customers (+159.5% y/y to NGN422.45 billion) and financial institutions (+349.1% y/y to NGN234.21 billion), due to the elevated interest rates in the debt market and deteriorating funding mix (CASA 9M-24: 79.3% | 2023FY: 81.2%). In the same vein, the group incurred higher costs on borrowings (+285.2% y/y to NGN102.42 billion). Accordingly, the net interest income ex-LLE expanded by 138.6% y/y to NGN702.55 billion after accounting for the 111.5% y/y increase in credit impairment charges. Ultimately, the group’s net interest margin (NIM) increased by 170bps y/y to 7.9% in 9M-24.
The HoldCo recorded a higher non-interest income (+82.4% y/y to NGN585.13 billion), majorly driven by the higher gains from investment securities (+95.0% y/y to NGN572.04 billion), net fees & commission income (+48.9% y/y to NGN171.34 billion), and FX trading gains (+80.2% y/y to NGN37.66 billion). The preceding was sufficient to offset the FX revaluation losses (NGN264.39 billion) recorded in the review period.
Further down, operating expenses expanded by 94.8% y/y to NGN676.82 billion due to an increase in personnel costs (+89.2% y/y to NGN210.41 billion), maintenance costs (+118.0% y/y to NGN88.08 billion), AMCON levy (+61.3% y/y to NGN78.80 billion), and depreciation (+87.6% y/y to NGN45.10 billion). Consequent to the group’s operating income (+109.3% y/y) growing faster than OPEX, the cost-to-income ratio (ex-LLE) settled lower at 46.4% relative to 49.9% in the prior year.
All told, profitability was stronger in 9M-24 as PAT settled 124.9% y/y higher at NGN526.28 billion. FBNH’s RoAE and RoAA ultimately settled at 32.8% (vs 9M-23: 26.6%) and 3.2% (vs 9M-23: 2.5%), respectively.
Management call on Tuesday (5 November 2024) at 3:00 pm Lagos time. Click here to register.
Comment: The financial performance of FBNH in 9M-24 was impressive, particularly the higher income from the group’s core banking and e-banking activities. We like that the HoldCo leveraged the prevailing interest rate environment and rising digital payments to grow both income lines. Going into the last quarter of the year, we are optimistic that the combined impact of the elevated yield environment, improved risky asset creation, and strong balance sheet management will support the group’s earnings growth. Our estimates are under review.
