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Stock & Analyst Updates | |
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Tuesday, October 22,
2019 / 06:00 AM /By
TheAnalyst/ Header Image Credit: EcoGraphics
FBNH has had a modest period over the first nine
months of the year 2019, a weak growth in gross domestic product (GDP) and a
weaker growth in consumer spending has taken its toll on the group's financial
performance. Top line gross earnings
grew from N441.5bn in 9 months 2018 to N439.9bn in 9 months 2019 (a slowing
down of growth in GE 2019 see chart 2 below), representing a decline of -o.4%. The banks bottom line profit before tax,
however, edged up by a strong +16.9% rising
from N51.3bn in 2018 to N60bn in 2019.
Highlights
The Key Highlights of group's 9 months 2019
performance was as follows:
Income Statement
Chart 1 FBNH on Impairments to loan in H1 2019
Source: FBNH financial statement 2014-H1 2019
Statement of Financial Position (Balance Sheet)
Chart 2 FBNH Gross Earnings (N'm) H1 2019
Source: FBNH's financial statement for H1 2019
Mixed Outcome for Investors and
Operations
Investors on the face of it, may seem pleased as
return on average equity rose from 8.7% in 9 month 2018 to 12.2% 9 months 2019,
suggesting that the bank has used N100 of equity to generate N12 of earnings in
9 months 2019 as against N8.70 over the same period of 2018, but the group
still saw earnings yield dip from 11.7%
in 9 month 2018 to 11.2% in 9 months 2019. In addition, even though the group's
cost of funds was cut from 3.6% in 2018 to 3.3% in 2019 the Holding company's
cost to income ratio from 59.5% in 9 months 2018 to 71,5% in 9 months 2019. The
banks rising cost ratio contradicts its 2018 strategic imperative of reducing
the cost ratio to between 53% and 55%, which would have placed it amongst the
lowest cost operators in the financial service sector.
Another worrisome aspect of the group's operations is
that its gross loans to deposit ratio (LDR) fell from 65.9% in 9 months 2018 to
52.8% in 9 months 2019. The fall in LDR is happening at a time the CBN raised
the minimum LDR from 60% by September 2019 to 65% by December. The pressure to
achieve the new LDR threshold could mean that the group either slows down
deposit growth or increases lending thereby possibly reversing its
non-performing loans-to- gross loans ratio which fell from 19.8% in 9 months
2018 to 12.6% in 9 months 2019 (see table 1 below).
Table 1 FBNH 9 months 2019
Financial Statement
FBNH 9 months 2019 Key Ratios % |
9M 2019 |
9M 2018 |
|
|
|
Post-tax return on
average equity[1] |
12.2 |
8.7 |
Post-tax return on
average assets[2] |
1.2 |
1.1 |
Earnings yield[3] |
11.2 |
11.7 |
Net-interest margin[4] |
7.3 |
7.7 |
Cost of funds[5] |
3.3 |
3.6 |
Cost to income[6] |
71.5 |
59.5 |
Gross loans to deposits |
52.8 |
65.9 |
Liquidity
(FirstBank(Nigeria)) |
36.8 |
42.2 |
Capital adequacy
(FirstBank (Nigeria))[7] |
15.1 |
17.4 |
Capital adequacy (FBN Merchant Bank)11 |
15.2 |
12.1 |
NPL/Gross Loans |
12.6 |
19.8 |
NPL coverage[8] |
61.7 |
78.5 |
PPOP[9]/impairment
charge (times) |
3.1 |
1.7 |
Cost of risk[10] |
1.9 |
4.5 |
Leverage (times)[11] |
9.5 |
7.7 |
BVPS[12] |
16.9 |
19.4 |
Conference call
FBNHoldings will
host a question and answer teleconference call with analysts and
investors on the unaudited results for the nine months ended 30 September 2019
on Friday 25 October 2019 at 3:00pm UK / 3:00pm Lagos / 10:00am New York /
4:00pm Johannesburg & Cape Town.
Related Commentary on 9M
Results for FBN
1.
FBN Holdings Plc - Lower Cost of Risk Supports ROE
- CardinalStone Research, October 22, 2019
1. FBNH Declares N51.75bn PAT in Q3 2019 Results,(SP:N5.30k)
2.
FBNH Notifies Of The Company's Board Meeting And Closed
Period
3.
FBNH Searches For Growth; H1 Operating Income Drops -0.3%
4.
FBN Holdings Plc - Unaudited Q2 19 Results Show Impact of
Lower Provisioning and Rising Cost
5.
FBNH Declares N31.72bn PAT in Q2 2019 Results,(SP:N5.65k)
6.
FBNH Exercises Option To Call Its US450m 8% Subordinated
Notes Due July 2021
7.
FBNH Holds 7th AGM; Shareholders Laud FY2018 Financial
Performance; Approves 26k Dividend
8.
FBN Holdings Plc. Reports Gross Earnings of N145.8bn in Q1
2019
9.
FBNH Releases Q1'19 Results; Declares N15.79 bln PAT in
Q1'19 (SP:N7.90k)
10. FBNH Notifies of a Change in the Qualifying Date for the
Payment of Dividend