FSDH Initial Reaction: FBNH 3Q21 results

Image Credit: FBNH

December 8, 2021/FSDH Research

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8 December 2021
FBN Holdings profits tumble in 3Q21

Key Performance Highlights:

  • FBN Holdings filed its 3Q21 results on 6th December with a 4.7% YoY decrease in gross earnings to N136.0 billion compared to N142.8 billion in the prior-year quarter. The bank reported a 12.1% decline in gross earnings on a QoQ basis as well. This was due to the sustained low yield environment resulting in compression of margins as the macroeconomic environment continues to pose challenges in the business. However, the bank’s interest income grew by 9.8% YoY from N90.3 billion in 3Q20 to N99.1 billion in 3Q21. The interest expense also increased by 38.6% to N40.0 billion. The impairment charges continued to decline in 3Q21, decreasing by 68.2% YoY to N5.1 billion in 3Q21. As a result, the Net Interest Income after Impairment expanded by 18.9% YoY to N54.0 billion from N45.4 billion in 3Q20.
     
  • Net fee and commission income jumped 8.7% YoY to N28.5 billion, powered by a 9.1% YoY growth in Fee and commission income, offset by a more than proportionate 10.6% YoY rise in Fee and Commission expense due to increased ATM and other charges of other banks. The fee and commission income increased mainly on the back of growth in Credit-related fees (up 62.1% YoY), Letters of credit commissions and fees (up 49.6% YoY), and Electronic banking fees (up 21.5% YoY). The bank’s foreign exchange income increased 64.5% to N2.2 billion. The net gains on the sale of investment securities were N51 million, versus N14.9 billion in 3Q20. However, the gains from the fair value of financial assets reported at fair value through profit or loss (FVTPL) came in at N7.2 billion, versus N411.0 million in 3Q20. The dividend income remained at the same level of around N1.6 billion in 3Q21. The company recorded an other operating loss of N12.1 billion in 3Q21 versus an income of N808 million in 3Q20.
     
  • The bank’s personnel cost increased 14.0% YoY to N28.1 billion in 3Q21; however, the depreciation charges were lower by 22.8% YoY. Moreover, the company’s operating expenses rose 6.5% YoY to N41.6 billion. Resultantly, the operating profit decreased 48.8% YoY to N13.7 billion in 3Q21. FBN Holdings posted a Profit Before Tax of N13.5 billion for 3Q21, compared to N27.0 billion, in the corresponding period of 2020. During the quarter, the company reported a loss from discontinued operations of N15 million versus an N19 million loss in the prior-year quarter. Resultantly, the profit for the year was reported at N8.6 billion, a 64.0% YoY fall compared to 3Q20. The bank reported earnings per share of N0.07, an 86.8% fall compared to N0.52 in the prior-year quarter.
     
  • In segmental break-up, Commercial Banking and Business Group’s revenue declined 3.6% YoY to N395.0 billion in 9M21, while Merchant Banking and Asset Management Business Group revenue improved 13.8% YoY to N31.3 billion in 9M21. Other revenue decreased by 65.3% YoY to N713 million in 9M21.

Market Reaction: The investor reaction to the weak performance was negative as FBN holdings stock closed 1.71% lower versus a marginal 0.02% gain for the All-Share Index (7/12). Nonetheless, the stock price has jumped more than 50% since September 27. The majority of the share price gains were made in the first 15 days of October, when the share price kept rising until it reached N12.70 on October 15.

FBN Holdings Earnings Highlights 3Q21


Source: Company Financials, FSDH

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