May 2, 2025/InvestmentOne Report
Gross Earnings Increase Marginally: In Q1:2025, First Holdco Plc grew gross earnings marginally by 1.73% YoY to NGN742.94bn. This was primarily driven by improved income from core business as interest income expanded by 37.43% YoY to NGN625.28bn, constituting 84.16% of gross earnings in the period. The rise in interest income stemmed from higher income earned through investment securities (+51.75% YoY to NGN222.33bn) and loans and advances (+30.63% YoY to NGN402.95bn).
In the same vein, interest expense increased by 14.87% YoY to NGN260.09bn, mainly on the back of the 16.65% YoY increase in interest incurred on deposits, which rose to NGN231.08bn in the first quarter of 2025. Nevertheless, net interest income stood at NGN365.19bn in Q1:2025, representing a YoY growth rate of 59.78%.
Non-Interest Income Slumps: Although non-interest income contributed about 15.88% to gross earnings in the period, coming in at NGN118.01bn, this represents a 57.13% decline from what was printed in Q1:2024. The slowdown in non-interest income can be traced to the NGN47.91bn net loss from financial instruments, relative to the NGN288.94bn gain recorded in the first quarter of 2024. This was triggered by fair value loss of NGN57.11bn in Q1:2025, which was augmented by NGN9.20bn trading gains on debt securities. However, non-interest income was supported by fee and commission income of NGN77.72bn and foreign exchange income of NGN80.48bn.
Weak Top-line Growth Drags Profit: In terms of expenses, total operating expenses increased by 15.28% YoY to NGN245.29bn, driven mainly by AMCON levy (+40.62% YoY to NGN55.11bn), advert and corporate promotions (+390.46% YoY to NGN19.03bn) and outsourced cost (+60.22% YoY to NGN12.93bn). Eventually, the bank recorded profit before tax of NGN186.48bn, 21.82% YoY lower, reflecting the adverse effect of the weak growth in topline, particularly due to the slowdown in non-interest income. Given the impact of the 5.98 billion shares raised from the rights issue exercise, diluted EPS amounted to NGN4.05, representing a 29.69% YoY decline. Furthermore, ROE and ROA came in at 27.51% and 2.66%, relative to 32.13% and 2.87% respectively in Q1:2024.
Outlook: We still maintain a STRONG BUY rating on the stock given our expectation of better
improvement in gross earnings in subsequent months, which should be buoyed by substantial support from higher interest income as interest rates remain modestly high. Furthermore, we expect the bank to gradually grow its loan book and increase securities holdings in the course of the year to expand asset yield.
We still maintain a STRONG BUY rating on the stock given our expectation of better improvement in gross earnings in subsequent months, which should be buoyed by substantial support from higher interest income as interest rates remain modestly high. Furthermore, we expect the bank to gradually grow its loan book and increase securities holdings in the course of the year to expand asset yield.
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