FBN Holdings Plc FY'19 Audited Results - Earnings Climb on Lower Cost of Risk


Tuesday, April 07, 2020 / 06:55 PM / by CardinalStone Research / Header Image Credit: FBN Holdings


FBN Holdings Plc (FBN: TP: 8.69 - BUY) reported a 26.6% YoY growth in earnings in its audited FY'19 result. The growth in earnings was bolstered by lower impairment charges (-41.5% YoY) and higher non-interest income (+20.5% YoY).

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The bank proposed a final dividend of N0.38 per share, which translates to a dividend yield of 9.5% based on last market closing price.



  • Net interest margin (NIM) was relatively flat at 7.7% (FY'18: 7.8%). In our view, NIM was supported by growth in interest income from investment securities (+15.2% YoY), which offset the 5.6% decline in loan based interest income. NIM was also supported by the 30bps moderation in funding cost to 3.1% in the period.

  • Non-interest income (+20.5% YoY) grew in FY'19, supported by higher fees and commission income (+11.2% YoY) and a 17.8x increase in fair value gains on financial instruments

  • Operating expenses climbed 18.3% YoY. Management had previously linked this pressure to measures aimed at business realignment to improve operational efficiency in subsequent years. Overall, cost-to-income ratio rose to 70.0% from 63.7% in FY'18. Impairment charges declined by 41.5% YoY in the period and drove down cost of risk to 3.0% in FY'19 from 4.2% in FY'18.

  • NPL ratio fell to 9.9% (FY'18: 24.7%), in line with managements guidance of a single digit ratio by the end of the financial year. We note that loan write-offs and restructuring were the two key drivers of lower NPL ratio in the review period. As at FY'19, the value of absolute NPLs was N196.9 billion compared to N535.0 billion in FY'18, with total loans written off amounting to N366.4 billion, two-fold the amount of charge-offs in FY'18. This is indicative of the bank's sustained book cleaning effort, in our view.

  • Gross loan growth was weaker (-6.1%) at N1.9 trillion, though we note the impact of charge-offs during the period. Ex charge-offs, gross loan growth would have been 11.0% in FY'19. This is more evident in the 10.9% growth in net loans and advances to customers, the first expansion in 3 years.

  • All in, ROE improved to 12.4% in FY'19 from 9.7% in FY'18. On regulatory compliance, CAR slipped to 15.5% in FY'19 from 17.3% in FY'18, while liquidity ratio also came in lower at 38.2% from 45.2% in FY'18 (regulatory guidance: 30.0%).

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