FBN Holdings Fast-Tracks Earnings In Q2, Lifts Profit 96%

FBN Holdings Plc fast-tracked earnings growth in the second quarter and achieved an exceptional growth of 96 per cent in after-tax profit for the quarter. The profit figure of N22.5 billion for the second quarter accounts for 59 per cent of the closing profit of N38 billion for the half-year ended June 2021.

The highly successful outing for the bank in the second quarter addressed the game-changing factors we identified on FBN Holdings at the end of the first quarter. These are revenue growth, cost-saving from interest expenses and cutting loan impairment charges.

The outcome is that the bank’s earnings story has changed from a 39 per cent profit drop in the first quarter to a 7 per cent improvement year-on-year at the end of half-year operations.

The bank also steered a turnaround from a 14.4 per cent drop in revenue in the first quarter to record an increase of 13 per cent in gross earnings quarter-on-quarter in the second quarter. It closed the half-year operations with a marginal decline of 1.4 per cent in gross income to N292 billion.

The gain in revenue was further supported with an improvement in profit margin in the second quarter, improving the year-on-year ratio from 11 per cent in the first quarter to 13 per cent at the end of June 2021. A good combination of revenue improvement and a gain in profit margin explains the big profit leap the bank recorded in the second quarter.

The upbeat in revenue in the second quarter came from non-interest income, which was led by net gains from financial instruments of over N19 billion for the quarter against a net loss of N1 billion in the same quarter last year.

Also, other operating income advanced from less than N1 million to N14.6 billion over the same period. The low points for the bank are a drop of over 72 per cent in net gains on the sale of investment securities quarter-on-quarter and a foreign exchange loss of over N2 billion over the same period.

The closing numbers for the half-year operations show gross earnings of over N292 billion for FBN Holdings at the end of June 2021. Revenue growth rebounded in the second quarter with non-interest earnings accounting exclusively for the 13 per cent increase for the quarter.

Interest income remains a weak point in revenue performance, closing the half-year operations with a drop of over 22 per cent to N161 billion. An increase of 47 per cent in non-interest revenue year-on-year to N131 billion levelled up the drop in interest income to a slight decline in gross income.

Interest expenses increased slightly quarter-on-quarter in the second quarter but the half-year figure of over N57 billion still represents a considerable drop of about 25 per cent year-on-year. Net interest income went down by 21 per cent to less than N104 billion, reflecting the drop in interest earnings.

A positive development on the side of cost in the second quarter is a drop of 46 per cent in loan impairment charges, reversing a jump by 35.6 per cent in the first quarter. With that, the half-year loan impairment charge of N24.5 billion represents a 20 per cent drop year-on-year. The bank is again back on the course keeping credit losses declining for the fifth year running.

Despite the drop in loan impairment expenses, net interest income after the charges still dropped by 21 per cent to N79 million at the end of half-year. The strong growth in non-interest income provided the remedy that raised operating profit by 9 per cent year-on-year to N45 billion.

The summary of the bank’s operations at the end of half-year is a combination of a gain in revenue and increased cost-saving, which has propped up the profit margin. The development has set the bank back on the course of recovery and growth, which it has maintained over the past five years.

FBN Holdings closed the half-year operations with a balance sheet size of over N8 trillion, representing an increase of 4 per cent over the closing total assets figure of N7.7 trillion in 2020.

This consists mainly of customer loans and advances of N2.5 trillion, investment securities of N1.8 trillion and cash and bank balances of N1.6 trillion.

The assets are funded largely by customer deposits of N5 trillion, due to banks of over N1 trillion, other liabilities of N592 billion and borrowings of N464 billion. It also boosts the equity cushion of N772 billion.