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Stock Analysis: FBN Holdings Gets ‘Hold’ Rating After Weak Performances

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By Modupe Gbadeyanka

Not too long ago, FBN Holdings Plc released its earnings for the first quarter of 2018, however, the firm recorded weaker than expected performances across most line items.

Particularly, the gross earnings moderated 2 percent y/y to N139 billion – weaker than prior quarter’s N154 billion and the N153 billion estimate of Vetiva Research.

The unconvincing top line performance was driven by weaker than expected performances from both Interest and Non-Interest Income lines.

Whilst Non-Interest Income rose by a marginal one percent to N23.6 billion, the income line was 27 percent and 40 percent lower than the N32.4 billion estimate and prior quarter’s N39.5 billion.

According to analysts at Vetiva Research, Interest Income moderated 3 percent y/y and 2 percent q/q to N111 billion – missing the N120 billion estimate.

With Interest Expense coming largely in line with our estimate at N35.2 billion, Net Interest Income was down 6 percent y/y to ₦75.7 billion (below our N85.5 billion estimate).

In line with the trend observed across most banks in Q1’18, we had expected the implementation of IFRS 9 to result in a significant one-time write off from earnings at the beginning of Q1’18 and a more tempered loan loss provision for the period.

However, the initial application of IFRS 9 resulted in a more contained charge of N36.1 billion versus the average N95.5 billion recorded by other tier-one banks.

Consequently, FBNH reported a loan loss provision of N25.3 billion versus our N11.1 billion estimate. With this, Operating Income came in flat y/y at N74 billion – albeit significantly weaker than our N107 billion estimate.

Furthermore, with Operating Expense coming in at N55.2 billion – better than our N64.9 billion estimate, PBT was down 6 percent y/y to N18.8 billion – significantly missing our N41.9 billion estimate.

Overall, PAT was down 9 percent y/y to N14.8 billion – behind our N35.2 billion estimate. TP revised to N12.82 (Previous: N15.88).

We have revised our estimates across most line items to reflect the earnings miss. Most notably, we raise our loan loss provision to N121 billion (Previous: N44.3 billion) following Q1’18 trend and in line with management guided cost of risk of 6.0 percent.

Also, with the one-time write-off coming in lower than we had expected, we raise our loan growth forecast marginally higher to 3 percent (Previous: 0 percent).

Despite this, we cut our Interest Income estimate to N449 billion (Previous: N481 billion) following weaker than expected Q1’18 run rate.

Similarly, we revise our Non-Interest Income estimate lower to N110 billion (Previous: N130 billion). Hence, we revise our Gross Earnings estimate to N550 billion (Previous: N610 billion). With Operating Expense coming in 15 percent better than we had estimated for Q1’17, we lower our Operating Expense estimate to N218 billion (Previous: N250 billion) – translating to a cost to income ratio of 53 percent.

Overall, we revise our PAT estimate lower to N58.3 billion for FY’18 – translating to an EPS of N1.62.

Consequently, our Target Price (TP) is revised lower to N12.82 (Previous: N15.88) – FBNH trades at FY’18 P/B and P/E ratios of 0.6x and 7.7x vs. Tier I averages of 1.0x and 4.7x respectively.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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Banking

Development Bank of Nigeria Wins Financial Inclusion Leadership Award

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Development Bank of Nigeria

By Aduragbemi Omiyale

In recognition of its unwavering commitment to fostering access to financing for Nigerian micro, small and medium enterprises (MSMEs), Development Bank of Nigeria Plc has been rewarded with the Financial Inclusion Leadership Award at the Champions of Inclusion Nigeria Financial Inclusion Awards.

This was at the 2024 International Financial Inclusion Conference (IFIC) organised by the Central Bank of Nigeria (CBN) in collaboration with the World Bank and other stakeholders.

The chief executive of the lender, Mr Tony Okpanachi, said the recognition affirms the company’s efforts in expanding access to financial services for MSMEs in Nigeria.

“We are honoured to receive the Financial Inclusion Leadership Award, which is a testament to our bank’s commitment to expanding access to financial services for all Nigerians. This award recognises our efforts to bridge the financial inclusion gap, particularly for a priority sector like the MSMEs.

“Additionally, this award is a validation of our strategic focus on driving financial inclusion for small businesses, and we are proud to be at the forefront of this initiative that drives that. We will continue to innovate and expand our financial inclusion programmes, ensuring that more Nigerian small and startup businesses have access to services,” he stated.

On his part, the Chief Operating Officer of DBN, Mr Bonaventure Okhaimo, said the accolade demonstrates the firm’s dedication to driving financial inclusion and economic growth in Nigeria.

“This award acknowledges our Bank’s innovative approach to widening opportunities for MSMEs in Nigeria to grow and scale their businesses,” he said.

“This award will motivate us to continue pushing the boundaries of financial inclusion, exploring more innovative solutions and partnerships to expand our reach and impact.

“We are committed to ensuring that more small businesses and startup enterprises in Nigeria have access to financial services, this award will further inspire us to accelerate our efforts in this regard,” he stated.

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The Banker Magazine Declares Zenith Bank as Bank of the Year in Nigeria

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zenith bank branch

By Modupe Gbadeyanka

The Banker Magazine of the Financial Times Group in the United Kingdom has announced Zenith Bank Plc as Bank of the Year, Nigeria.

At the Banker’s Bank of the Year Awards 2024 held on in London on Wednesday, December 4, 2024, it was stated that Nigerian lender clinched the award for its strong management, sound business model and strategy, and approach to sustainability and ESG banking practices.

The chief executive of Zenith Bank, Ms Adaora Umeoji, described the recognition as a “testament to the unwavering trust and loyalty of our esteemed customers, the unparalleled leadership and guidance of the board and management as well as the hard work and dedication of our staff.”

She said, “It also reflects our bank’s steadfast commitment to delivering excellent services to our customers and contributing to the growth and development of the Nigerian economy.”

“We will continue to invest in innovative technologies, expand our range of products and services, and maintain our commitment to exceptional customer service in order to sustain our position as Nigeria’s Number One Bank,” Ms Umeoji assured.

The Banker’s Bank of the Year accolade is among the most coveted and widely regarded award in the banking industry.

Often contested by the world’s leading financial institutions, the winners span across Africa, Asia-Pacific, Central & Eastern Europe, Latin America, the Middle East, North America and Western Europe.

Recall that last month, Zenith Bank commissioned its branch in Paris, France following the granting of the final approval by the country’s banking regulator, the Autorité de ContrôlePrudentiel et de Résolution (ACPR).

This is part of the bank’s global expansion strategy, and its commitment to serving clients wherever their businesses are around the world.

Zenith Bank has continued to earn numerous awards, with this latest accolade coming on the heels of several recognitions, including being the Number One Bank in Nigeria by Tier-1 Capital for the 15th consecutive year in the 2024 Top 1000 World Banks Ranking, published by The Banker Magazine.

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CBN Reveals Phone Numbers to Report Banks Not Disbursing Cash

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cash deposits

By Modupe Gbadeyanka

The Central Bank of Nigeria (CBN) has published some phone numbers citizens can call to report any bank that fails to give them cash over-the-counter or at Automated Teller Machines (ATMs).

In a circular, the banking sector regulator said cash has been made available to lenders to disburse to their customers, saying they have no reason to do so.

DMBs are directed to ensure efficient cash disbursement to customers OTC and through ATMs as the CBN will intensify its oversight roles to enforce this directive and ensure compliance,” a part of a circular signed by acting Director of Currency Operations, Solaja Mohammed Olayemi; and the acting Director for Branch Operations, Isa-Olatinwo Aisha, stated.

It encouraged members of the public who are unable to obtain cash at their banks to “report these instances using the designated reporting channels and format provided,” saying it will “assist the CBN in addressing issues hindering the availability of cash and further improve currency circulation.”

They are to reach the central bank through designated phone numbers of the CBN branch in the state where the incident occurred or via email.

According to the circular, the complaints should be sent with “the relevant details which shall include account name/name of the DMB/amount/time and date of incidents, amongst others.”

CBN directive cash banks

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