Investors react positively to FBN Holdings’ stellar N757.6bn earnings

BY CHARLES ABUEDE

Investors reacted positively on Thursday to the stock of FBN Holdings which closed 1.9 percent higher when compared to the 1.06 percent gain in the All-Share Index following the release of the 2021 full-year earnings where it reported a solid bottom-line performance driven by higher recoveries during the year.

At the filing of the financial institution’s FY 2021 results to the exchange, an analysis shows that the top lender reported stellar performance with gross revenue growing by 28.4 percent to N757.6 billion from N590.2 billion in 2020, and profit before tax rising by 99.1 percent to N166.7 billion at the end of 2021 from N83.7 billion in 2020.

The stellar performance was largely driven by the revenue increases recorded across the subsidiaries of the group during the year. Consequently, in a segmental breakdown, First Bank’s commercial banking and business group’s revenue spurted 29.7 percent year on year to N713.6 billion in full-year 2021, buoyed by a 9.8 percent year on year rise in merchant banking and asset management business group revenue. However, other revenue decreased by 36.7 percent year on year to N1.3 billion in FY21.

Furthermore, the group’s net fee and commission income spurted 24.4 percent year on year to N116.6 billion, driven by a 24.2 percent year on year growth in fee and commission income, partially offset by a 23.1 percent year on year rise in fee and commission expense due to increased SMS charges and agent banking expenses. The fee and commission income increased mainly on the back of growth in funds transfer and intermediation fees which were up 38.9 percent year on year. Also, letters of credit commissions and fees rose 32 percent year on year, and electronic banking fees were up 15.8 percent year on year. The bank’s foreign exchange income jumped 382.5 percent to N7 billion, driven by foreign exchange trading gain.

On the other hand, the net gains on the sale of investment securities were N31.3 billion, as against N48.1 billion in FY20. The gains from the fair value of financial assets reported at FVTPL came in at N53.7 billion versus N23.8 billion reported in FY20. The dividend income climbed to N6.5 billion in FY21, from N4 billion in the prior year, and other operating income also shot up 905.2 percent year on year to N149.4 billion in FY21 due to N141 billion of recoveries during the year, due to recovery on the Atlantic Energy Ltd loan, which was previously written off. The amount recognized is the net of expenses incurred in relation to the recovery.

FBN Holdings also reported that its interest income had remained challenged during the year, given the moderated interest rate environment which negatively impacted yields, and as a result, interest income declined 4.1 percent to N369 billion in the year 2021 from N384.8 billion in the previous year, while the interest expense increased by 5.7 percent to N140.8 billion.

Meanwhile, the impairment charges jumped 48.3 percent year on year to N91.7 billion in 2021, and as a result, the Net Interest Income after Impairment declined by 28.1 percent year on year to N136.5 billion from N189.8 billion in the year 2020.

After reporting a 70.2 percent surge in its earnings per share (EPS) to N4.17 from N2.45 in 2020, the leading financial institution saw its profits for the year at N151.1 billion, rising 68.4 percent year on year in 2021 while it posted a profit from continuing operations of N151.1 billion for FY21, compared to N75.6 billion in 2020.

During the review year, the company reported a loss from discontinued operations of N68 million versus a N14.1 billion profit in the prior year. On the other hand, the bank’s personnel cost increased 28 percent year on year to N128.8 billion in FY21, and the depreciation charges bumped up by 7.4 percent year on year. Moreover, the company’s operating expenses rose 6.7 percent year on year to N177.1 billion, driven by high inflation and currency devaluation.

Elsewhere, during the final quarter of 2021, the company reported a massive 118.8 percent jump in gross earnings to N330.2 billion and a 25.1 percent year on year increase in interest income was offset by a 54.7 percent spurt in interest expense in the final three months of 2021.

Also, during the quarter FBN’s impairment charge for losses vaulted by 309.7 percent year on year to N62.1 billion in the last quarter of 2021, and the fee and commission income increased by 43.6 percent to N36.8 billion in Q4 of 2021, partially offset by a 25.3 percent increase in the fee & commission expense to N6.1 billion.

In addition, a 1045.7 percent year on year increase in other operating income to N146.4 billion in the 2021 fourth quarter was supported by a 49.7 percent year on year rise in net gain from financial instruments at FVTPL to N24 billion in the quarter.

Other operating income during the quarter overfed as the bank recovered previously written off loans to Jide Omokore-backed Atlantic Energy Limited. As a result, FBN Holdings’ profit for the quarter stood at N110.3 billion as against N21.6 billion in the corresponding quarter of 2020 and then its earnings per share also stood at N3.05 per share, indicating a massive improvement from N0.58 per share in the last quarter of 2020.

Major highlights during the year for the bank were the appointment of Ahmad Abdullahi as non-executive director and chairman of the company, following the resignation of Remi Babalola effective 17 December 2021, the increase in share ownership by the billionaire, Femi Otedola.

Also, recently, First Pension Custodian Limited, a subsidiary of FBN Holdings’ flagship subsidiary, First Bank of Nigeria Limited, entered into a definitive agreement with Access Bank Plc for the planned acquisition of the entire share capital of Access Pension Fund Custodian Limited held by Access Bank Plc. This will further boost the company’s market share in the industry, aid revenue diversification, and support annuity income.

Meanwhile, First Bank Holdings has proposed a final dividend of 35 kobos per share for FY21, a decline from the 45 kobos per share announced in full-year 2020. The proposition is, however, subject to appropriate withholding tax and approval by shareholders.