FBN Holdings Plc has made a strong starting for the 2022 financial year with profit jumping 107 per cent year-on-year to N32 billion in the first quarter. This is sustaining a top record growth of 70 per cent in net profit to roughly N150 billion the bank posted in 2021.
Growing revenue and improving profit margin have been the newfound operating strength of the bank in the earnings field since last year. The first-quarter earnings reports of the bank at the end of March 2022 show that gross income grew by over 32 per cent year-on-year to N180.5 billion over the period, representing an additional revenue of N44 billion.
The bank broke free last year from stagnated revenue growth since 2017 with a leap of 28 per cent in gross earnings to N757.6 billion. That registered the strongest revenue improvement that FBN Holdings has seen since 2013.
The elevated earnings position for the bank is being maintained so far for the second year, even accelerating with good prospects for registering the strongest revenue growth in more than a decade this financial year.
Driving the high growth in revenue this year is the bank’s principal earnings line – interest income, which is on the upswing for the first time in four years. Interest earnings advanced by almost 40 per cent year on year to stand at over N109 billion in the first quarter.
This marks a turning point for FBN Holdings from a sustained decline in interest earnings every year since 2018. The bank closed the 2021 operations with a 4 per cent decline in interest income to N369 billion, the lowest interest earnings in seven years.
The upturn in interest income this year has changed the revenue structure of the bank with interest earnings leading to an increase in gross earnings for the first time in many years. With all-around growth in all the three components of interest earnings, interest income rose nearly twice ahead of the 22 per cent growth in gross earnings in the first quarter.
Lending to other banks yielded the biggest increase in interest earnings with about three times jump to over N11 billion. Interest earnings from investment securities followed with an increase of 59 per cent to N23.7 billion while lending to customers yielded over N74 billion in interest earnings, representing an increase of 24.4 per cent at the end of the first quarter.
Non-interest income grew by 22 per cent over the same period to N71 billion for the first quarter. With the much stronger growth in interest income, the contribution of non-interest earnings to gross income dropped from an all-time high of 48 per cent at the end of last year to 39 per cent in the first quarter.
The growth driver for non-interest revenue is net gains from financial instruments, which jumped more than four and half times to the region of N15 billion in the first quarter. It is followed by other operating income, which grew more than four times year on year to over N2 billion.
Other favourable developments followed the upswing in interest earnings, which include a drop in net impairment charges on financial assets in the first quarter. Net loan impairment charges dropped by about 34 per cent to N8.7 billion year-on-year at the end of March 2022.
A lingering challenge for the bank is the rising cost of funds ahead of interest income. Interest expenses rose by 43 per cent to N36.6 billion in the first quarter, beating the increase of less than 40 per cent in interest income. The challenge is likely to intensify in the year in reflection of the Central Bank’s upward review of benchmark interest rates.
Renewed strength in growing revenue and cost-saving from loan impairment expenses were the critical force for the outstanding growth in profit that FBN Holdings recorded in the first quarter. The favourable combination is a marked improvement in net profit margin – from 11.4 per cent in the same period last year to 17.9 per cent at the end of the first quarter of 2022.
The bank closed the first quarter with earnings per share of 89 kobos, rising from 43 kobos per share in the same period last year. It paid a cash dividend of 35 kobos per share for its 2021 operations.
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