FBNH Q4'15 & Q1'16 Conference Call & Earnings Presentation: The key takeaways


Wednesday, April 27, 2016 7:22 PM / Research

The macro-economic challenges remain daunting; with corresponding strict industry regulations. The new policy by Federal Government on full implementation of Treasury Single Account played a significant role on the liquidity challenges within industry. However, the reduction in harmonized CRR on private and public sector deposit to 20% from 25% for ease of liquidity challenges.

There are strong indications that microeconomic challenges that influenced business outlook in 2015 financial year are likely to persist in 2016. The low oil price, FX scarcity and market volatility would continue to adversely impact business.

As a result of difficult operating environment in the financial year, FBN-Holding Plc delivered unimpressive performance, with attendant plunge in bottom-line and weak performance across key performance indicators.

In both Q4’15 and Q1’16 periods- the top-line closed with mixed outlook, recording 4.9% growth in Q4’15 and a decline of 15.2% in Q1’16 respectively while PAT down by 82% and 8.3% respectively 

This has translated to significant fall in ROaE, which closed lower at 2.7% in Q4’15 against 19.6% recorded in Q4’14. Similarly, we observed same pattern in ROaE in Q1’16 to close lower at 14.4% when compared with 17.0% recorded inQ1’15.

Also, we observed unimpressive posture of the NPL ratio, hitting above regulatory threshold to close at 18.1% and 21.50% in both Q4’15 and Q1’16 periods respectively against 2.9% and 3.9% recorded in Q4’14 and Q1’15 respectively. This reveals unimpressive posture of the bank towards risk assets management and strategies.

In addition, the impairment losses gained a significant weight to move up by 36.00% and 212.5% in both Q14’15 and Q1’16 respectively. Meanwhile, the operating efficiency and cost management remain slipped further as CIR remained bloated at 61.4% in Q4’15 but closed with improved outlook at 59.4% in Q1’16 against 66.5% and 65.1% recorded in Q4’14 and Q1’15 respectively.

Summarily, below are the key takeaways from the 12Months earnings presentation as presented by the management of the bank;

         Implementation of TSA impacts deposit posture

         Retail deposits continue to grow impressively representing 66.2% and 70.2% of total deposits at FY 2015 and Q1 2016 respectively

         Customer deposits maintained decline trend to N2.3trn in Q1 2016

         Gross earnings maintained weak growth to close lower by 15.2% (YoY) in Q1'16

         Increase in regulatory cost impacts operating expenses

         12% of loan book was restructured in 2015FY while 54% of restructure loans are NPL

         Oil and Gas is accounting 70% of NPL restructured with significant contribution from downstream, though with adequate cover.

         Oando and Atlantic Energy exposure impact NPL outlook

         The size of exposure to oando is adequately covered

         The bank adequately met its FX obligations

         The new management is revamping the risk and credit units


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