August 5, 2025/Cordros Report
We update our outlook on FIRSTHOLDCO following the release of the Holdco’s H1-25 results. While the group’s gross earnings grew by 18.1% y/y, profitability declined by 22.3% y/y, primarily due to fair value losses. In this note, we revise our loan and deposit growth forecasts to 6.0% y/y and 10.0% y/y, respectively (previously: 29.7% y/y and 15.0% y/y), reflecting a more cautious approach to credit expansion aimed at preserving asset quality, alongside the dampening impact of a relatively stable naira on foreign currency deposits. Also, we have raised our loan loss provisioning assumptions as the group prepares to exit the CBN’s forbearance framework within the current financial year. As a result, we revise our 2025E EPS forecast downward to NGN14.70 (previously: NGN18.33), resulting in a lower year-end target price of NGN31.14/s (previously: NGN34.97/s) and a downgrade of our rating to “HOLD”. We retain our gross DPS estimate of NGN1.00 in 2025E, which translates to a dividend yield of 3.0% based on the last closing price of NGN33.60/s (4 August). Our model suggests the stock is trading at a 2025E P/E and P/B estimates of 1.7x and 0.3x, respectively.
Profitability headwinds persist: We expect continued accretion in FIRSTHOLDCO’s core income (+16.7% y/y) in 2025E, highlighting the impact of elevated yields. Although the loan book has pared so far, management noted that modest growth could be recorded in H2-25 if interest rates begin to moderate. Management further cited the downgrade of some loan exposures to Stage 3, causing the NPL ratio to spike to 12.9% (2024FY: 10.2%). Given this, we now project higher impairment charges (+34.2% y/y | previously: +12.0% y/y), translating to a cost of risk of 6.0%. Further down, we also expect foreign currency losses to undermine the higher net fees and commissions (+41.2% y/y), and result in a 22.1% y/y decline in non-core income. We now project operating income and OPEX to grow by 2.8% and 12.9% y/y, respectively, resulting in a 2025E cost-to-income ratio of 59.2% (2024FY: 43.0%). All told, we expect PBT and PAT to decline by 8.9% y/y and 7.2% y/y, respectively, resulting in a lower EPS of NGN14.70 (-19.7% y/y).
Asset quality pressures weigh on outlook: As hitherto mentioned, FIRSTHOLDCO recorded a further deterioration in the quality of its loan book in H1-25, with the NPL ratio spiking and resulting in a subpar NPL coverage of 38.8%. Given the CBN’s ongoing directives,, we expect the group to prioritize higher provisioning, cautious loan growth, and potential loan write-offs. In our view, this combination will weigh on the profitability outlook for 2025E. Notably, management expects to resolve the impaired loan exposures by the end of the year or by Q1-26, at the latest. We also anticipate that the second tranche of the bank’s capital raise will strengthen buffers maintain its capital adequacy ratio above the 16.0% percent regulatory threshold.
Valuation: Our year-end target price is NGN31.14/s, derived from a blend of DDM (40%), GGM (50%), relative P/E (5.0%) and relative P/B (5.0%) valuation methods. Assuming a 31.1% CoE and a forecast payout ratio of 6.8% at group level, our DDM TP amounted to NGN24.31/s. For GGM, we maintained CoE at 31.1%, and utilised an average RoE of 13.8%, and derived a TP of NGN35.16/s. On relative P/E, we utilised our Tier-1 peer average P/E (2.1x) and applied it to our 2025E EPS estimate of NGN14.70/s to derive a TP of NGN30.88/s. Lastly, for relative P/BV, we estimated forward book value per share of NGN88.48/s, applying it to the Tier-1 peer average P/B of 0.5x to derive a TP of NGN45.79/s.
