According to the financial statements audited for FY:2025, impairment charges jumped 93.83% YoY to NGN826.30bn. This sharp increase is attributable to the bank s exit from legacy loans under the central bank s regulatory forbearance, which was introduced in 2020 to support balance sheet health amid the COVID-19 pandemic. Consequently, loans and advances to customers written off contributed mostly (+112.06% YoY to NGN786.82bn) to total impairment, while impairment charge declined by 16.57% YoY to NGN36.52bn.

Thus, cost of risk increased by about 120bps from a year ago to c.3.40% for FY:2025. Similarly, OPEX expanded by 32.08% YoY to NGN1.23trn, reflecting cost pressure in the period, which was propelled by higher salaries and wages (+33.02% YoY to NGN304.76bn). 

Going forward, we expect a notable improvement in earnings driven by resilient interest income, as we expect a stronger 17.91% (vs. 2.94% in FY:2025) loan growth for FY:2026. Furthermore, this view is hinged on lower impairment charges, supported by better risk management and loan performance following the significant balance sheet clean up.

We envisage higher non-interest income aided by improved digital footprint and modest fair value gains. We note that major downside risk includes a resurgence in impairment charges and lower than expected loan growth. Given our considerations and current market dynamics, we place an UNDERWEIGHT rating on the ticker. FIRSTHOLDCO currently trades at a P/B ratio of 0.76x, well above the five-year mean P/B of 0.44x, suggesting that the stock could be in overbought territory.

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