Economy
FBN Holdings: Lacklustre Performance Across Income Lines in Q3-17
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.
By Dipo Olowookere
Sustained bargain-hunting in local stocks further lifted the Nigerian Exchange (NGX) Limited by 1.12 per cent on Monday.
The buying pressure was across the major sectors of Customs Street, though the consumer goods space came under profit-taking, closing flat.
But the banking counter expanded by 3.14 per cent, the industrial goods index gained 2.82 per cent, the insurance sector increased by 0.25 per cent, and the energy segment soared by 0.08 per cent.
Consequently, the All-Share Index (ASI) surged by 2,721.83 points to 246,183.96 points from 243,462.13 points, and the market capitalisation went up by N1.755 trillion to N158.812 trillion from N157.057 trillion.
Custodian Investment and NEM Insurance chalked up 10.00 per cent each to sell for N75.90 and N30.80, respectively, BUA Cement rose by 9.98 per cent to N303.10, First Holdco improved by 9.95 per cent to N105.50, and FTN Cocoa advanced by 9.94 per cent to N9.29.
On the flip side, SUNU Assurances shrank by 10.00 per cent to N3.60, Tripple Gee slipped by 9.77 per cent to N3.51, ABC Transport tumbled by 9.62 per cent to N7.05 per cent, Abbey Bank crashed by 9.00 per cent to N9.10, and Coronation Insurance dipped by 7.69 per cent to N2.40.
The market breadth index was flat yesterday, as there were 31 price gainers and 31 price losers.
First Holdco led the activity chart during the session, with a turnover of 203.9 million shares valued at N21.5 billion. Access Holdings sold 190.7 million equities worth N4.8 billion, UBA traded 29.2 million stocks for N1.4 billion, Zenith Bank transacted 24.7 million shares valued at N2.9 billion, and Sterling Holdings exchanged 23.6 million equities worth N187.4 million.
When trading activities ended at 4 pm, investors traded 851.6 million stocks for N49.6 billion in 56,873 deals compared with the 685.9 million stocks valued at N42.7 billion transacted in 44,134 deals last Friday, representing a rise in the trading volume, value, and number of deals by 24.16 per cent, 16.16 per cent, and 28.86 per cent, respectively.
By Adedapo Adesanya
Oil prices settled over 1 per cent higher on Monday as the market weighed the prospect of renewed US-Iran negotiations against escalating supply risks following escalations in the Middle East.
Brent crude futures gained $1.12 or 1.3 per cent to trade at $89.22 per barrel, while the US West Texas Intermediate (WTI) crude soared by 74 cents or 0.9 per cent to $83.23 a barrel.
The Middle East conflict escalated over the weekend, with the US conducting a ninth straight night of attacks against Iran, while American allies Kuwait and Bahrain reported more Iranian strikes.
Traders weighed hopes of renewed US-Iran negotiations against Yemen’s Houthis’ imposition of a naval blockade against Saudi Arabia. The group said the “maritime embargo” was retaliation for what it described as a Saudi siege of Yemen.
This development brings the US-Iran war officially to the southern entrance of the Red Sea and threatens an export route used by Saudi Arabia to bypass disruptions in the Strait of Hormuz. About 20 per cent of global oil supplies flowed through the waterway.
Iran had previously instructed the Houthis to prepare to close the Bab el-Mandeb Strait if the US continued attacking Iranian power infrastructure. A full closure could disrupt oil shipments equivalent to about 7 per cent of global supply.
Meanwhile, Iran has received a proposal for a 10-day ceasefire, and both Iran and the US have left open the possibility of renewed negotiations.
Market analysts noted that if a ceasefire does not materialise and the Strait of Hormuz remains largely closed while the Houthi threat to Red Sea shipping intensifies, the risk of a significant rebound in oil prices would be substantial.
Kpler analysts said in a note that there is also the possibility that a record amount of crude oil on water, estimated at around 1.35 billion barrels, could limit the next leg of oil price increases.
A drone struck a tanker loading crude oil at the Caspian Pipeline Consortium’s (CPC) Black Sea export terminal on Monday, forcing the suspension of exports for the second time in less than 24 hours.
The CPC system accounts for roughly 1 per cent of global oil supply, carrying crude primarily from Kazakhstan’s giant Tengiz, Kashagan and Karachaganak fields, with additional volumes from Russian producers in the Caspian region.
By Adedapo Adesanya
The Central Securities Clearing System (CSCS) Plc has declared the first interim dividend in its history after posting its financial results for the first half of 2026, reflecting robust earnings growth, improved operating efficiency and stronger capital market activity.
The board approved an interim dividend of N1.00 per ordinary share for the six months ended June 30, 2026, citing the company’s strong cash generation, resilient balance sheet and confidence in the sustainability of its earnings.
The interim payout represents about 56 per cent of the total dividend of N1.78 per share paid for the 2025 financial year, underscoring its strong earnings momentum while preserving financial flexibility to invest in technology, innovation and future growth.
CSCS recorded one of the strongest financial performances in its history during the review period, with total operating income rising by 92 per cent to N18.51 billion from the corresponding period of 2025.
The growth was driven by higher transaction fee income as capital market activity strengthened, continued expansion in depository services, increased collateral management revenues and stronger contributions from data and technology-enabled services. Investment income also improved as the company optimised its investment portfolio.
Despite the sharp rise in revenue, operating expenses increased by only 38 per cent, reflecting disciplined cost management and the scalability of the company’s business model.
As a result, operating profit surged by 186 per cent to N10.11 billion, while profit before tax climbed by 115 per cent to N13.21 billion. Earnings per share also rose significantly to 190.1 kobo from 109.1 kobo in the corresponding period of 2025.
The organisation also recorded improvements in operating efficiency. Its cost-to-income ratio declined to 45.4 per cent from 63.2 per cent a year earlier, while operating profit margin improved to 54.6 per cent from 36.8 per cent.
According to the company, the results demonstrate not only the benefits of stronger market activity but also the resilience of its operating model and its ability to convert revenue growth into higher profitability, improved shareholder returns and sustainable long-term value creation.
Commenting on the interim dividend, the Chairman of CSCS Plc, Mr Temi Popoola, said the board’s decision reflected confidence in the firm’s financial strength, earnings quality and long-term strategic direction.
He said the strong performance was driven not only by increased market activity but also by sustained improvements in operational efficiency, disciplined cost management and the continued diversification of revenue streams.
Mr Popoola noted that the Board remained committed to balancing shareholder returns with investments in technology, innovation, resilience and new growth opportunities that would strengthen CSCS’ position as Nigeria’s leading financial market infrastructure and one of Africa’s foremost post-trade institutions.
The chief executive of CSCS Plc, Mr Shehu Yahaya Shantali, attributed the strong performance to the resilience of the entity’s business model, the dedication of its workforce and the confidence of market participants.
He said the first-ever interim dividend demonstrated the company’s ability to translate strong earnings growth and improved operating efficiency into enhanced shareholder value.
Mr Shantali added that CSCS would continue to strengthen its core market infrastructure, invest in technology and innovation, diversify its revenue base and enhance value creation for stakeholders while supporting the development of Nigeria’s capital market.
