FBNH 100 Days After CBN's Board Removal: The FUGAZE

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Tuesday, September 28, 2021 05:30 AM / by Proshare Research/ Header Image Credit: EcoGraphics



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The core business of the big players in the banking industry was not heavily impacted by the harsh economic environment brought about by the COVID-19 pandemic, except in Q2 and Q3 2020; however, by the end of 2020, earnings of the banks had looked upwards. This can be seen in the rating of the Tier 1 banks by major global rating agencies. As Fitch points out, the number of negative outlooks and watches on global financial institutions' ratings has declined in 2021, indicating that the pressure from the pandemic had receded (see illustration 9 below).

 

Illustration 9: FITCH Rating of FUGAZE

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Amongst tier 1 banks, FBNH ranked the highest in non-performing loans (NPLs) and cost-to-income ratio in 2020 and had the lowest net interest income in 2020.

 

Income Statement

FBN Holdings N50.59bn impairment charges ranked third among tier 1 banks, with ETI showing the highest impairment charge of N86.73bn. In contrast, GT Bank had the least impairment charge for losses in 2020.

 

Ecobank Transnational Inc (ETI) posted the highest net interest income of N346.61bn in 2020. The high net interest income reflected the bank's is in 35 continental markets. However, GT Bank ranked the highest in net interest margin (NIM), posting an NIM of 9.26%, indicating higher profitability in its core lending business.

 

Surprisingly, despite recording the highest net interest income of the FUGAZE banks in Nigeria in 2020, ETI ranked the least in profit before tax (PBT). In the bank's defence, it had a one-off goodwill impairment charge of N62.49bn related to the acquisition of Oceanic bank in 2011. Zenith bank recorded the highest PBT of N255.86bn while FBN Holding had N83.70bn in PBT, taking fifth place above ETI.

 

GT Bank had the highest investor return of 26.83% in ROE and 4.63% in ROA, while ETI ranked the least amongst the top banks in the industry (see illustration 10 below).

 

Illustration 10: FUGAZE in Numbers - The P&Ls

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Statements of Financial Position

None of the tier 1 banks met the loan-to-deposit ratio (LDR) requirement of 65% in 2020. Access bank, however, had the highest LDR of 57.60%, while UBA recorded the lowest LDR of 18.66%, explaining the bank's severe restraint in giving loans to customers.

 

Also, Zenith, Access, and UBA had NPLs below CBN's threshold of 5%. FBNH had the highest NPLs of 7.70%. Also, this shows a Y-o-Y improvement for the Holdco, as mentioned earlier. However, the sector giants all met the regulatory requirement of 15% in capital adequacy ratio (CAR), except ETI recording 12.3% in CAR in 2020. The CAR speaks to the solid capital base of the institutions (see illustration 11 below).

 

Illustration 11: FUGAZE in Numbers - The Balance Sheets

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

1.      Executive Summary: 100 Days After CBN's Board Removal: First Bank's Shaky House of Cards -  September 19, 2021

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


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Related Articles/References

1.    Of First Bank and Bad Debtors; A System's Throbbing Headache - Apr 30, 2021 - Proshare Editorial

2.  CBN Removes Boards of First Bank of Nigeria, FBN Holdings; Appoints New Chairmen - Apr 29, 2021 - Proshare News

3.   Analyzing the H1 2017 Performance of FBNHoldings Plc - A Comprehensive Report/Review on the Company - Oct 23, 2017, Proshare Research

4.   FBNHoldings Plc Q1'2017 Performance Assessment Report Updated - Sep 25, 2017, Proshare Research

5.   Bank NPLs (23) - The Case for a New Approach - Jun 07, 2020 - Debtors Africa

6.  W. Chan Kim and Renee Mauborgne (2004) "Blue Ocean Strategy" 

7.  Board Governance: A Thin Line Between Oversight and Operations - Sep 28, 2020 - IoD Centre for Corporate Governance

8. Leadership, Change and Corporate Transformation - The Nigerian Experience  Nov 07, 2017, Olufemi AWOYEMI - Proshare

9.   CEO Remuneration 2021 Report: From COVID to Collaboration - Aug 01, 2021, Proshare Research

10. Memo to the Market - The NSE, Oscar Onyema Foundation and Corporate Governance - Aug 20, 2018, Olufemi Awoyemi, Proshare

11.   FBN Holdings Plc - IR Page on Proshare Markets - Proshare Research

12.  Annual Accounts - IR Page in Proshare - Proshare Research

13.  Bernard Longe wins suit against First Bank Plc, Supreme Court decides today - Mar 05, 2010, Proshare



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Related News from the Report

1.      Of FBNH Numbers and Tables: A Look at the FBNH Ratios - Sep 27, 2021   

2.     Of FBNH Numbers and Tables: The Statement of Financial Position - Sep 26, 2021

3.     Of FBNH Numbers and Tables: The Trend of Cost and Profitability - Sep 25, 2021

4.     Of FBNH Numbers and Tables: Understanding Performance Patterns - Sep 24, 2021

5.     Adeduntan's Need for New Glasses: Confronting the Legacy Question -Sep 23, 2021

6.     First Bank Board Removal: When Boards Blur Vision - Sep 22, 2021

7.     First Bank and Institutional Learning - A Sense of History - Sep 21, 2021

8.     100 Days After CBN's Board Removal: First Bank's Shaky House of Cards - Sep 19, 2021


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