FBN Holdings FY2020 Results: Resilient Growth in Profit Despite Harsh Economic Realities

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Tuesday, February 09, 2021, / 07:00 AM / by Adaeze Nwachukwu, Proshare Research / Header Image Credit: FBNH


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FY 2020 unaudited results released by FBN Holdings show a marginal uptick in profit amidst a tough macroeconomic environment induced by the COVID-19 pandemic.

 

Key Highlights/Takeaways

  • Interest income declined Year-on-Year (Y-o-Y) by -10.50% from N431.43bn in 2019 to N386.58bn in 2020 (fell by -27.90% in USD terms to $1.01bn in 2020 - using the official CBN rate at the different periods).
  • Interest expense also declined by -14.75% Y-o-Y from N152.35bn in 2019 to N129.89bn in 2020 (fell by -31.32% in USD terms to $340.91m in 2020).
  • Profit before tax grew Y-o-Y by +3.76% from N75.29bn in 2019 to N78.11bn in 2020 (declined by -16.41% in USD terms to $205.02m in 2020).
  • Earnings per share from continuing operations increased Y-o-Y by +11.79% from N1.95 in 2019 to N2.18 in 2020
  • Total assets increased Y-o-Y by +22.91% from N6.20trn in 2019 to N7.62trn in 2020 (declined marginally by -0.98% in USD terms to $20.01bn in 2020)
  • Total equity grew Y-o-Y by +14.29% from N661.13bn in 2019 to N755.60bn in 2020 (fell by -7.92% in USD terms to $1.98bn in 2020)

 

Price and Volume Movements- Choppy as They Go!

FBNH had irregular share price movements in 2020, prices fell as low as N3.95 at the peak of the COVID-19 pandemic as traders and investors headed for the door. However, with the gradual reopening of the economy and the easing of socioeconomic lockdowns and restrictions, share prices started to rise and closed higher than the pre-COVID era. Share price grew by+9.09% at the end of 2020, while, Year-to-date (YTD) it grew by +2.08% as of February 4, 2021. Share Price as of 4 February 2020 was N7.35.

 

The volume of shares traded was also volatile in 2020 with the highest volume traded in October 2020 while the lowest volume traded was in March 2020 with 8.41m units on the bloc. Y-o-Y volume traded dropped by -51.68% at the end of 2020. By yhe beginning of 2021, the volume of shares traded rose by +800% as of 4 February 2021. The rise in the volume of shares traded may have been driven by large  profit-taking positions (see chart 1 below).

 

 

Chart 1: FBNH's Price and Volume Movement Jan 2020 to 4th Feb. 2021

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*share price and volume movement as of 4 Feb 2021

Source: NSE, Proshare Research

 

Profitability- A Fringe Spark

Despite the harsh COVID-19-induced business realities of 2020 the Holdco's  profit before tax (PBT) grew marginally by +3.76% Y-o-Y from N75.29bn in 2019 to N78.11bn in 2020. This was driven by a -14.75% decline in interest expense, although, interest income declined by -10.50% Y-o-Y.

 

2017 recorded the highest percentage growth in profit before tax of +137.59% while 2020 recorded the lowest percentage growth in PBT of +3.76% (see chart 2 below).

 

Operating expense for the period declined marginally by -2.31% Y-o-Y from N172.71bn to N168.73bn, while other operating income also slipped slightly by -0.53% Y-o-Y.

 

In contrast to the growth of PBT in Naira terms, PBT declined by -16.41% in US dollar terms from $245.27m in 2019 to $205.02m in 2020 as a result of the devaluation of the domestic currency. (CBN's official rate was used for translation at the different periods).


 

Chart 2: FBNH's Profit Before Tax 2015 - 2020 (N'bn)

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Source: FBNH Financial Statement, Proshare Research

 

The group's impairment charges declined Y-o-Y by -0.43% from N51.09bn in 2019 to N50.88bn in 2020. Impairment charges have been on a steady decline with 2020 recording the lowest impairment charge as against 2016 which saw the highest charge of N226.04bn representing a growth of +89.43% between 2015 znd 2016 (see chart 3 below).

 

Chart 3: FBNH's Impairment Charges 2015 - 2020 (N'bn)

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Source: FBNH Financial Statement, Proshare Research

 

Total Assets- Buoyed by The Cash Pump

Total assets grew Y-o-Y by +22.91% which was the highest percentage growth in total assets recorded by the group in over five years. From N6.20bn in 2019 to N7.62bn in 2020. Growth in total assets was majorly driven by a +64.13% Y-o-Y increase in cash and balances with central banks and a +12.55% Y-o-Y increase in investment securities. FY 2018 records the lowest percentage change of +6.34% growth in total assets.

 

Converting to US dollar terms, total assets declined marginally by -0.98% Y-o-Y from $20.21bn in 2019 to $ 20.01bn in 2019. This was a result of the devaluation of the Naira (see chart 4 below).

 

Chart 4: FBNH's Total Assets 2015 - 2020 (N'trn)

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Source: FBNH Financial Statement, Proshare Research

 

Loan-to-Deposit Ratio- A Pandemic and Its Lending Brakes

The Holdco's loan-to-deposit ratio (LDR) fell marginally to 52.98% in 2020 from 53.43% in 2019. A look over the last five years shows that 2018 posted the Holdco's highest LDR with 180.06% in LDR, while 2020 saw the lowest LDR.

 

Total loans and advances of the group grew Y-o-Y by +20.59%, which was majorly driven by +22.40% growth in loans to banks while loans to customers grew by +19.85% Y-o-Y.

 

Total deposits grew Y-o-Y by +21.61%, the growth in deposits from customers outstripped those from banks. Deposit from customers grew Y-o-Y by +23.37% while deposits from banks grew +13.37% for the period (see chart 5 below).

 

 

Chart 5: FBNH's Loan-to-Deposit Ratio  2015 - 2020

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Source: FBNH Financial Statement, Proshare Research

 

Total Equity- Giving Shareholders a Smiley

The growth in total equity over the last few years have been mixed. In 2020, total equity grew Y-o-Y by +14.29% from N661.13bn in 2019 to N755.60bn in 2020. Growth in shareholders fund for the period was driven by +89.89% Y-o-Y significant growth in retained earnings, +15.18% increase in fair value reserve, and a +31.25% growth in foreign currency translation reserve.

 

In 2019, the group recorded the highest percentage growth of +24.59% in total equity while 2018 records the highest percentage decline of -21.24% in total equity during the period under review (see chart 6 below).

 

Translating to US dollar terms, the total equity of the group declined by -7.92% Y-o-Y from $2.15bn in 2019 to $1.98bn in 2020. This was driven by the devaluation of the domestic currency.

 

 

Chart 6: FBNH's Total Equity  2015 - 2020 (N'bn)

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Source: FBNH Financial Statement, Proshare Research

 

The COVID-19 pandemic had a significant impact on the earnings of Nigerian banks, especially in Q2 and Q3 results. The result posted by the HoldCo (FBNH) for its FY2020 showed resilience.

 

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However, the impact of the devaluation of the domestic currency which was the reporting currency of the group was reflected in the earnings of FBNH. Translating the group's earnings to US dollar terms showed a decline in both top line and bottom-line earnings.

 



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Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

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