FBN Holdings – Earnings Impress But Regulatory Concerns Linger

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FBN Holdings Plc reported a 60.0% YoY growth in EPS to N0.64 in its unaudited Q1’20 result. Earnings support largely stemmed from elevated trading gains. We also note improvement in cost to income ratio (65.1% vs Q1’19: 67.7%), cost of risk (1.9% vs Q1’19: 2.7%) and NPL ratio (9.2% vs Dec. 19: 9.9%). Key regulatory ratios such as CAR (15.3%) and liquidity ratios (30.1%) remain, however, concerning.
Highlights:
  • Net interest margins (NIM) weakened by 1.4ppts to 6.3%. A 20 bps moderation in funding cost was not enough to ease NIM pressure. Overall, net interest income slipped by 15.9% YoY
  • Non-interest income soared 88.9% YoY. Key drivers of non-interest income growth are N21.8 billion in trading gains (vs N1.3 billion in Q1’19) and a two-fold increase in dividend income to N4 billion. Also supporting non-interest income was the 6.8% YoY growth in net fees and commission income, largely driven by increases in LC-related fees (+18.0% YoY) and E-Banking fees (+9.7% YoY).
  • Operating expenses climbed 7.9% YoY. However, we note the improvement in efficiency as the cost-to-income ratio moderated 2.6 ppts to 65.1% during the quarter. Cost of risk also slid lower to 1.9% from 2.7% in Q1’19, reflecting the 30.0% YoY fall in provision for loan losses.
  • Gross loans to customers rose 10.2% to N2.1 trillion. Asset quality, however, improved from 9.9% in December 2019 to 9.2% in March 2020.
  • All in, ROE improved to 15.3% versus 11.8% in Q1’19. On regulatory compliance, concerns abound as both CAR and liquidity ratio slipped towards border-line limits at 15.3% and 30.1% respectively.
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FBN Holdings - Earnings Impress But Regulatory Concerns Linger - Brand Spur

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