FBN Holdings Lifts Profit 124% Despite Credit Losses’ Upsurge in Q3

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FBN Holdings Plc lifted after-tax profit by 123.5 percent year-on-year to over N91 billion at the end of the third quarter operations in September 2022, marking a strong acceleration from 47 percent profit improvement at the half year. This is despite an upsurge in loan loss expenses at 85 percent quarter-on-quarter to N15 billion in the third quarter.

 

The bank’s interim financial report for the third quarter ended September 2022 shows that the financial institution lost a critical advantage of declining loan loss expenses it held for the half year. This is a key point we placed on the watch in the half-year performance review of the bank “…whether interest and loan impairment expenses would stay moderated, interest earnings upturn sustained and non-interest income push back to positive growth”.

 

Net credit loss expenses had dropped by 23 percent year-on-year to N10.4 billion at the end of half-year operations, providing a big cost-saving area for the bank. The major increase in the third quarter has changed the course of loan loss expenses from declining to increase year-on-year.

 

The bank’s management however countered the increase in credit loss expenses with accelerated growth in revenue in the third quarter. This was led by interest earnings, which grew by 45 per cent quarter-on-quarter to N144 billion, representing an increase of N45 billion.

 

Interest expenses slowed down at an increase of 18.6 per cent quarter-on-quarter to N47.4 billion for the third quarter. This enabled a leap of over 63 percent in net interest income to N96.6 billion for the quarter.

 

The gain in earnings and the slowdown in cost produced a favourable balance of cost and income for the bank at the end of the third quarter. Interest earnings stepped up from 40.5 percent growth at half year to 42.4 percent growth year-on-year at the end of the third quarter to stand at N370.4 billion.

 

On the other hand, interest expenses decelerated from a 28.4 per cent increase at half year to 24.4 percent to close at N120.8 billion at the end of September 2022. Net interest income accelerated from 47 per cent growth at half year to 53 per cent advance year-on-year, amounting to N249.5 billion at the end of the third quarter.

 

Despite the build-up of loan losses in the third quarter, the nine-month position still shows a moderated increase of 5.4 per cent to N36.7 billion. This compares to a major increase of over 48 per cent in loan impairment losses for the bank to roughly N92 billion in the 2021 financial year.

 

Net interest income after impairment charges grew by 66 per cent year-on-year to about N213 billion, reflecting the slowdown in net loan loss expenses.

 

Operating expenses slowed down from 22 per cent growth at half year to a 15 per cent increase year-on-year to stand at N264 billion at the end of the third quarter. This is against an accelerated growth in gross earnings from 22.4 per cent at half year to 26.5 per cent to N547 at the end of the third quarter.

 

Some pressure on earnings came from a foreign exchange loss of over N14 billion in the third quarter, which drained off much of the N16.5 billion foreign exchange income at the half year. Also, a net loss of N3.5 billion on financial instruments at half year still caused a drop of 26 per cent on the income line to less than N22 billion at the end of the third quarter.

 

The operating cost margin went down from 53 per cent in the same period last year to 48 per cent at the end of the third quarter. This enabled an increase in net profit margin from 9 per cent in the same period last year and from 15.7 per cent at half year to 16.7 per cent at the end of September 2022.

 

FBN Holdings ended the third quarter operations with earnings per share of N2.51, up from N1.12 in the same period in 2021.