Of FBNH Numbers and Tables: Understanding Performance Patterns


Friday, September 24, 2021 05:30 AM / by Proshare Research/ Header Image Credit: EcoGraphics

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A look at FBNH's results in the recent past provides analysts with an insight into the bank's areas of comparative strength and weaknesses. Essentially, by undertaking such a procedure, the best strategies required to consolidate the gains from the past could be identified just as challenges from the past could be addressed appropriately.


Mapping FBNH's Customers and Connecting the Dots

Understanding the dispersion of FBNH's many depositors is important, as this would provide Management with helpful information on the specific patterns of demand peculiar to segments of the society. Using data available to Proshare Research, it was found that in Q1 2021, 35.89% of the total deposits were made into demand deposit accounts, while 41.73% of customer deposits in the said period were made into savings accounts. Deposits into domiciliary accounts amounted to 14.39%, while term accounts got only 7.57% of total deposits, the last 0.42% of deposits were attributed to preloaded electronic funds (see chart 3 below).


Chart 3: An Account-based Analysis of Customer Deposits - Q12021 (%)

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Source: FBNH, Proshare Research


Given the above, the CASA ratio of the bank, computed as the ratio of the current account and savings account to total bank deposits, was estimated at 76%, an outcome which ideally was large enough to have a positive impact on FBN's cost of funds.


Likewise, data on the spatial distribution of FBN customers show that many of the bank's customers are within Lagos, where they deposited N1.602tr; this corresponds to 39.1% of total deposits. Abuja FCT came in second with a deposit of N302.32bn, an equivalent of 7.45% of the total deposits. Rivers State, Edo, and Delta states contributed 7.14%, 5.16%, and 4.46% of total deposits. As for Oyo and Anambra they accounted for less than 4% of total deposits in the period. The other 30 states contributed under 30% of the total deposits (see chart 4 below).


Chart 4: A Locational Analysis of Customer Deposits as of Q12021(%)

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Source: FBNH, Proshare Research


Insider Lending, One Obligor Limit, and FBNH'S Net Exposure to Honeywell

Review of FBNH's borrowers shows that the country's oldest lender advanced 17.7% of its total loans in 2020 to the Manufacturing sector, exceeding the 16.5% recorded in 2019. The exposure to the Manufacturing industry includes a N75bn loan to Honeywell Flour Mills, of which a former FBNH Director, Oba Otudeko, owned a significant shareholding. The bank's corporate governance practices as questioned because of the insider loan, which exceeded the bank's single-obligor limit. According to the agreement, Honeywell Flour Mills reported that the loan had performed well. The loan was secured with collateral worth more than 170% of the forced sales value (FSV) and 230% of the loan's open market value (OMV). However, the regulator noted that the bank failed to perfect its lien on Otudeko's FBN shares used as collateral for the loan.


The Cash Reserves and Deposits Nexus, an LDR Problem

The CBN requires a minimum of 65% of total deposits to be loaned to customers; if unmet, the concerned bank would receive a cash reserve requirement levy equal to 50% of its LDR shortfall. From data available to Proshare, the analysts discovered that as of March 31, 2021, FBNH had a total deposit of N4.19trn, Access Bank and Zenith Bank held higher amounts- N4.58trn and N4.74trn as deposits, respectively. Interestingly, First Bank had an N1.42trn Cash reserve requirement exceeding Access Bank(N1.33trn) and Zenith Bank(N1.41trn). The variance resulted from the bank's inability to meet the statutory loans-to-deposit ratio (LDR). As of the end of Q1 2021, the LDR of the bank was 53.2% which falls 10 percentage points short of the statutory requirement (see Chart 5 below).


Chart 5: Cash Reserve Requirement for Tier 1 Banks in Q1 2021 (tr)

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Source: Data Available to Proshare Research


Further analysis of the hundred most significant loans in Q1 2021 showed that Banks collectively had their major Net Exposure to Dangote conglomerate and Kann Utility Company (owners of AEDC). The two companies accounted for over 10% of the banks' loans and receivables. Likewise, 89% of all banks' new loans and receivables in Q1 2020 were rated BBB, while 11% were rated AAA.


As of July 31, 2021, data available to Proshare showed that FBNH ranks first on the list of banks with the highest shares of the industry's Cash Reserve Ratio (CRR), the country's oldest lender accounts for 14% of the total CRR of the industry. Access and Zenith Bank are tied in second position contributing 13% of total CRR. UBA ranked fourth, accounting for 11% of the industry CRR. The fifth-largest share of the industry CRR came from GTB with 8%, Fidelity Bank and Ecobank each held a 5% share of the entire industry CRR, thus jointly ranked sixth. UBN and Stanbic both held the eighth position with 4% of industry CRR. FCMB had a 3% share of the CRR, representing the tenth-largest share of industry-wide CRR


In terms of CRR debts, FBNH ranked highest as of July 31, 2021, with a CRR debt of N1.41trn, while Access Bank ranked second with the second-highest CRR debts of N1.30trn, Zenith Bank ranked third with a CRR debt of N1.29trn. UBN, Stanbic, and FCMB retained the bottom three positions with CRR debts of N445bn, N378bn, and N330bn, respectively. The ten banks accounted for N8.14trn of the total industry CRR debt of N10.12trn (see table 1 below).


Table 1: Ranking of Banks based on Share of CRR, CRR Debits and CRR ratio

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Also, as of July 31, 2021, a look at the Local currency deposits (LCY) shows that Access Bank recorded the highest LCY deposit of N3.79trn, closely followed by FBNH with LCY deposits N3.75trn. Zenith Bank ranked third with LCY deposits amounting to N3.6trn. Once again, FCMB, Stanbic, and UBN occupied the bottom three spots, only that this time FCMB ranked ahead of Stanbic and UBN, having recorded an LCY deposit of N1tr (see table 2 below).


Data available to Proshare also shows that as of July 31, 2021, the banks with the highest CRR ratios were Stanbic with 54%, Ecobank with 48%, and UBN 47%. FBNH ranked fourth in this regard with a CRR ratio of 38%. The Bank with the least CRR ratios was FCMB which had a CRR ratio of 33%.


Available data as of 31 July 2021 showed that Access bank had the highest deposits with deposits of N4.82trn, Zenith Bank ranked second with customer deposits of N4.81trn, First Bank had deposits of N4.37trn, placing it third ahead of UBA and GTB, which had customer deposits of 4.13trn and 2.96trn respectively. The bottom three banks on the list were FCMB, UBN, and Stanbic, which saw customers deposits of 1.29trn, 1.183trn, and 1.01trn, respectively. The ten banks accounted for N27.98trn out of the total customer deposits of N34.49trn. Access Bank recorded the highest amount of Gross loans in the period with a total N3.37trn, while Zenith Bank came in second with a customer’s deposit of N2.9trn, First Bank ranked third with N2.57trn. In terms of gross loans, the bottom three banks were FCMB, Stanbic, and UBN, which had their Gross loans amounting to N913bn, N872bn, and N816bn, respectively.


As of July 31, 2021, Fidelity Bank ranked highest in terms of Loans to Deposit Ratio (LDR), a Tier 2 bank, topped the ranking with an LDR of 87%, followed by Stanbic with an LDR of 81%. Ecobank turned out to be the highest-ranking Tier 1 bank in terms of LDR as it recorded an LDR of 87%. FBN ranked the third lowest bank in terms of the ratio of liquidity to deposit, with an LDR of 59%. UBA and GTB, two other Tier 2 banks, ranked ninth and tenth positions with LDRs of 54% and 49%, respectively (see table 2 below).



Table 2: Ranking of Banks-based LCY Deposits, Customer Deposits, Gross Loans, and LDR

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Trend Assessment

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Downloadable Versions of 100 Days After CBN's Board Removal: First Bank's Shaky House of Cards Report (PDF)

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2.     Full Report: 100 Days After CBN's Board Removal: First Bank's Shaky House of Cards  -  September 19, 2021

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