FBNH Searches For Growth; H1 Operating Income Drops -0.3%


Sunday, September 22, 2019 / 02.30PM / Proshare Research / Header Image Credit: techdeeps.com

FBNH group is still in search of sustained earnings as its topline revenue remained flat between H1 2018 and H1 2019, growing by slightly over 0%. FBNH gross earnings grew by +0.3% to N294.23bn in 2019 H1 from N293.34bn in H1 2018 (see chart 1 below).


FBNH also recorded an increase of 24.3% in its operating expenses, i.e. FBNH operating expense increased from N119.27bn in H1 2018 to N148.29bn in H1 2019. The bank's operating income declined by -0.3% from N210.94bn in H1 2018 to N210.25bn in H1 2019. Interest income also decreased by -1.6% from N225.40bn in H1 2018 to N221.78bn in H1 2019 while Net interest income also dropped by -2.0% from N149.640bn in H1 2018 to N146.717bn in H1 2019.


FBNH Profit before tax rose by +2.6% from N38.88bn in H1 2018 to 39.87bn in H1 2019. The bank profit after tax also declined by -5.6% from N33.52bn in H1 2018 to N31.64bn in H1 2019. Obviously, the Group had a tough time in H1 2019 as it struggled to keep ahead of the slow economic growth curve.


Chart 1 FBNH Gross Earnings (N'm) H1 2019

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Source: FBNH's financial statement for H1 2019


Asset Quality Improves; But Slightly

FBNH total assets grew by +1.8% from N5.57trn in Dec. 2018 to N5.67trn in H1 2019. Loan and advances given to customer also increased by +4% from N1.66trn in Dec. 2018 to N1.74trn in H1 2019. FBNH total liabilities increased by +1.4% from N5.04trn in Dec. 2018 to N5.11trn in H1 2019. Impairment to loan ratio dropped from 5.22% in Dec.2018 to 1.27% in H1 2019 (see chart 2 below). The Leverage ratio of FBNH remained constant for both H1 2019 and Dec. 2018 (90%). There was a drop in the return on total asset by 1.17% in Dec.2018 to 0.70% in H1 2019. Return on Equity also decline from 12.30% in Dec.2018 to 5.64% in H1 2019. The bank's overall asset quality and investor returns improved between the end of 2018 and H1 2019, but underlying Group performance appears fragile.

Chart 2 FBNH on Impairments to loan in H1 2019

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Source: FBNH financial statement 2014-H1 2019

A Slow Year, So Far

The year 2019 has so far not given indications of a strong Group financial performance for FBNH as a number of the Holdco's operating numbers are either negative or slow-growing. Improvement in its asset quality is a major positive development but its revenue numbers appear relatively low and its cost to income ratio (CIR) has risen.

Chart 3 FBNH Cost to Income Ratio (CIR) 2014-H1 2019

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Source: FBNH financial statement 2014-H1 2019

The rise in CIR reflects the groups surging costs despite an earlier commitment by its management in 2018 to bring costs-to-income closer to 55% in the short term.

FBNH's H1 2019 result is a test of how hard the Groups management led by UK Eke is prepared to go to build a resurgent banking and finance franchise.

Download Full H1 2019 Banking Sector PDF Report Here


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