Economy

FBN Holdings: Lacklustre Performance Across Income Lines in Q3-17

Published

7 years ago

27/10/2017

First Bank of Nigeria Holdings Plc (FBNH) released unaudited Q3-17 results yesterday, wherein gross earnings grew marginally by 1.85% q/q and 0.40% y/y (1.77% above our estimate), while PBT and PAT rose 28.01% q/q (71.19% y/y) and 24.44% q/q (145.47% y/y), respectively.

The growth in earnings is broadly supported by (1) growth in funding income (by 7.73% q/q and 17.43% y/y), which more than subdued the 6.57% and 37.91% y/y contraction in NIR (above our estimate by 13.30%) and (2) decline in opex by 3.51% q/q (+2.27% y/y) to miss our estimate by 4.14%.

The contraction in NIR stemmed from significant declines in dividend income (-50.62% q/q and +119.18% y/y), net gains on foreign exchange income (-72.86%q/q and -96.16% y/y), net gains on investment securities (-259.215 q/q and -270.29% y/y), net fee income (-7.95% q/q and -3.77% y/y), net insurance premium (-33.44% q/q and -23.79% y/y), and net gains on financial instruments (-37.77% q/q and -13.82% y/y). The cumulative impact more than offset the surge in other income (+233.80% q/q and +209.68% y/y).

The marginal growth in funding income (broadly in line with our estimate) reflects the lackluster performance on the interest income lines – investment securities (-1.515 q/q and +22.35% y/y), loans to banks (+3.95% q/q and -24.48% y/y), and loans to customers (+8.80% q/q and 12.23% y/y) – and interest expense lines – deposit to customers (-2.30% q/q and -2.74% y/y), deposit from banks (-17.26% q/q and +85.56% y/y) and borrowings (=8.43% q/q and -8.19% y/y).

Specifically, over 9M-17, gross earnings grew by 5.17%, in line with our estimate. While PBT declined 3.52%, PAT grew by 7.81%, both above our estimates of -6.82% and -1.85% respectively. The marginal growth in gross earnings over the period broadly reflects the impressive yield on interest earning assets (+210 bps to 12.28%) and consequently, robust interest income, which more than offset the significant decline in NIR (47.08%).

Over 9M-17, asset quality deterioration persisted. Despite 190 bps contraction in NPL to 20.10% compared to H1-17, annualized cost of risk remains elevated, rising 20 bps to 5.60% (annualized) following additional provisioning of N35.18 billion in Q3-17, which raised total loan loss provision during the period to N97.69 billion, albeit 14.93% lower compared to N114.72 billion in 9M-16.

However, noteworthy is the 90.08% y/y growth in net recoveries from loans previously written off (with an additional recovery of N1.32 billion over Q3) which we believe reflects the gradual improvements in the general commerce and manufacturing sectors following increased FX liquidity. FBNH reported CAR of 17.8% for the bank in FY-16 and 17.6% for H1-17. Relative to both periods, CAR contracted to 17.2% in 9M-17, though still largely above the required regulatory minimum of 16% for systemically important banks. The 40 bps contraction over Q3 leaves a lot to question.

Parsing through the balance sheet, FBNH’s loan book declined 7.52% y/y (albeit higher 2.27% relative to H1-17), while the holding of investment securities increased 6.43% y/y (+5.50% from H1-17 level). On the other hand, deposits declined marginally by 10.85 y/y and 1.94% over H1-17.

For the rest of 2017, we expect interest expense will remain elevated, as liquidity pressure (liquidity ratio was down to 47.4% in 9M-17, from 50.4% and 52.7% in H1-17 and FY-16, respectively) persists, and with the US Feds rate hike impact on the LIBOR further compounding the already stretched LCY interest rate.

Although we expect the re-pricing of assets, higher yields on investment securities, and FX interest income to support NIM, risk asset creation will remain subdued as the bank takes strategic steps to clean its loan portfolio.

On impairment charges, the bank’s restructuring of some FCY obligations reflected in the contraction in NPL during the period. We expect this to contract further, as the bulk of the upstream oil and gas reclassification reflects in the balance sheet, resulting in lower provisioning by FY-17 in line with our previous forecast.

Based on our last TP of N6.41, implying 4.23% upside from yesterday’s close price of N6.15, we have a HOLD recommendation on the stock. Our estimates are under review.

Economy

FAAC Disburses 1.727trn to FG, States Local Councils in December 2024

Published

19 hours ago

14/12/2024

Modupe Gbadeyanka

By Modupe Gbadeyanka

The federal government, the 36 states of the federation and the 774 local government areas have received N1.727 trillion from the Federal Accounts Allocation Committee (FAAC) for December 2024.

The funds were disbursed to the three tiers of government from the revenue generated by the nation in November 2024.

At the December meeting of FAAC held in Abuja, it was stated that the amount distributed comprised distributable statutory revenue of N455.354 billion, distributable Value Added Tax (VAT) revenue of N585.700 billion, Electronic Money Transfer Levy (EMTL) revenue of N15.046 billion and Exchange Difference revenue of N671.392 billion.

According to a statement signed on Friday by the Director of Press and Public Relations for FAAC, Mr Bawa Mokwa, the money generated last month was about N3.143 trillion, with N103.307 billion used for cost of collection and N1.312 trillion for transfers, interventions and refunds.

It was disclosed that gross statutory revenue of N1.827 trillion was received compared with the N1.336 trillion recorded a month earlier.

The statement said gross revenue of N628.972 billion was available from VAT versus N668.291 billion in the preceding month.

The organisation stated that last month, oil and gas royalty and CET levies recorded significant increases, while excise duty, VAT, import duty, Petroleum Profit Tax (PPT), Companies Income Tax (CIT) and EMTL decreased considerably.

As for the sharing, FAAC disclosed that from the N1.727 trillion, the central government got N581.856 billion, the states received N549.792 billion, the councils took N402.553 billion, while the benefiting states got N193.291 billion as 13 per cent derivation revenue.

From the N585.700 billion VAT earnings, the national government got N87.855 billion, the states received N292.850 billion and the local councils were given N204.995 billion.

Also, from the N455.354 billion distributable statutory revenue, the federal government was given N175.690 billion, the states got N89.113 billion, the local governments had N68.702 billion, and the benefiting states received N121.849 billion as 13 per cent derivation revenue.

In addition, from the N15.046 billion EMTL revenue, FAAC shared N2.257 billion to the federal government, disbursed N7.523 billion to the states and transferred N5.266 billion to the local councils.

Further, from the N671.392 billion Exchange Difference earnings, it gave central government N316.054 billion, the states N160.306 billion, the local government areas N123.590 billion, and the oil-producing states N71.442 billion as 13 per cent derivation revenue.

Economy

Okitipupa Plc, Two Others Lift Unlisted Securities Market by 0.65%

Published

1 day ago

14/12/2024

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.65 per cent gain on Friday, December 13, boosted by three equities admitted on the trading platform.

On the last trading session of the week, Okitipupa Plc appreciated by N2.70 to settle at N29.74 per share versus Thursday’s closing price of N27.04 per share, FrieslandCampina Wamco Nigeria Plc added N2.49 to end the session at N42.85 per unit compared with the previous day’s N40.36 per unit, and Afriland Properties Plc gained 50 Kobo to close at N16.30 per share, in contrast to the preceding session’s N15.80 per share.

Consequently, the market capitalisation added N6.89 billion to settle at N1.062 trillion compared with the preceding day’s N1.055 trillion and the NASD Unlisted Security Index (NSI) gained 19.66 points to wrap the session at 3,032.16 points compared with 3,012.50 points recorded in the previous session.

Yesterday, the volume of securities traded by investors increased by 171.6 per cent to 1.2 million units from the 447,905 units recorded a day earlier, but the value of shares traded by the market participants declined by 19.3 per cent to N2.4 million from the N3.02 million achieved a day earlier, and the number of deals went down by 14.3 per cent to 18 deals from 21 deals.

At the close of business, Geo-Fluids Plc was the most active stock by volume on a year-to-date basis with a turnover of 1.7 billion units worth N3.9 billion, followed by Okitipupa Plc with the sale of 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.3 million units sold for N5.3 million.

In the same vein, Aradel Holdings Plc remained the most active stock by value on a year-to-date basis with the sale of 108.7 million units for N89.2 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with a turnover of 297.3 million units worth N5.3 billion.

Economy

Naira Trades N1,533/$1 at Official Market, N1,650/$1 at Parallel Market

Published

1 day ago

14/12/2024

Adedapo Adesanya

By Adedapo Adesanya

The Naira appreciated further against the United States Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) by N1.50 or 0.09 per cent to close at N1,533.00/$1 on Friday, December 13 versus the N1,534.50/$1 it was transacted on Thursday.

The local currency has continued to benefit from the Electronic Foreign Exchange Matching System (EFEMS) introduced by the Central Bank of Nigeria (CBN) this month.

The implementation of the forex system comes with diverse implications for all segments of the financial markets that deal with FX, including the rebound in the value of the Naira across markets.

The system instantly reflects data on all FX transactions conducted in the interbank market and approved by the CBN.

Market analysts say the publication of real-time prices and buy-sell orders data from this system has lent support to the Naira in the official market and tackled speculation.

In the official market yesterday, the domestic currency improved its value against the Pound Sterling by N12.58 to wrap the session at N1,942.19/£1 compared with the previous day’s N1,954.77/£1 and against the Euro, it gained N2.44 to close at N1,612.85/€1 versus Thursday’s closing price of N1,610.41/€1.

At the black market, the Nigerian Naira appreciated against the greenback on Friday by N30 to sell for N1,650/$1 compared with the preceding session’s value of N1,680/$1.

Meanwhile, the cryptocurrency market was largely positive as investors banked on recent signals, including fresh support from US President-elect, Mr Donald Trump, as well as interest rate cuts by the European Central Bank (ECB).

Ripple (XRP) added 7.3 per cent to sell at $2.49, Binance Coin (BNB) rose by 3.5 per cent to $728.28, Cardano (ADA) expanded by 2.4 per cent to trade at $1.11, Litecoin (LTC) increased by 2.3 per cent to $122.56, Bitcoin (BTC) gained 1.9 per cent to settle at $101,766.17, Dogecoin (DOGE) jumped by 1.2 per cent to $0.4064, Solana (SOL) soared by 0.7 per cent to $226.15 and Ethereum (ETH) advanced by 0.6 per cent to $3,925.35, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.