The loss of a major revenue growth driver and profit-building income line persisted for First Holdco Plc in the second quarter, and the declining profit of the financial group has extended to the half-year, as anticipated from the first-quarter signals.
Group after-tax profit declined again in the second quarter, and the bank closed the half-year operations with an after-tax profit of N289.8 billion from over N365 billion in the same period last year.
Net gains from financial instruments, which were a major source of the group’s elevated revenue figures over the preceding two years, remained on the other side of net losses for the second quarter.
The half-year interim financial report of the multinational financial group shows a top-up of net losses from financial instruments from N47.9 billion in the first quarter to N53.7 billion at half-year.
The numbers continue to reverse from record-level net gains from financial instruments in the region of N681 billion in 2023 and another N550 billion in 2024. The bank had closed half-year operations last year with net gains on financial instruments of over N432 billion.
The slowdown in the build-up of net losses in the second quarter, however, helped to reinforce revenue growth, though profit continued to decline. Gross earnings increased by 33 per cent year-on-year to N913.7 billion in the second quarter from a drop of 11 per cent to less than N725 billion in the first quarter.
Group profit, however, dropped by 24.5 per cent year-on-year to N118.7 billion for the second quarter, accelerating from a drop of 17.8 per cent to N171 billion in the first quarter. The half-year profit of N289.8 billion is therefore a 20.7 per cent decline year-on-year from over N365 billion in the same period in 2024.
The rapid drop in profit in the second quarter, unlike the first, reflects a relapse into net foreign exchange losses in the second quarter from the net gains recorded in the first quarter, as well as a resurgence of bad loan losses.
Against net exchange gains of N80.5 billion at the end of March 2025, net losses of close to N7 billion were reported for the second quarter, lowering the half-year net gains to N73.5 billion.
The turning of the tide in respect of massive exchange losses seen in the preceding two years therefore failed to be sustained in the second quarter, albeit a sharp drop from N66.5 billion net exchange losses in the second quarter of last year.
A drop of 104 per cent in net gains on financial instruments to net losses of N5.7 billion year-on-year in the second quarter was less than compensated by a 90 per cent drop in net foreign exchange losses over the same period.
This is where the difference in the bank’s cost-income imbalance for this year hinges: while net gains on financial instruments were huge enough to overturn net foreign exchange losses in the previous years, now exchange gains are quite insufficient to remedy the losses on financial assets.
Reinforcing the downside forces on earnings is other operating income that fell by over 81 per cent year-on-year to N6 billion in the second quarter. The half-year figure of N13 billion still represents a drop of over 65 per cent from the corresponding figure of about N38 billion in 2024.
However, net gains on the sale of investment securities recovered from a huge drop in the first quarter to N7.3 billion in the second quarter. Yet, the half-year figure of under N7.5 billion represents a 37 per cent decline year-on-year. It is nevertheless an upturn from a net loss of N48 billion at the end of 2024.
Two major cost increases added to the downswings in incomes, shrinking margins and undermining profit capacity in the second quarter. One is the net impairment charge on financial assets, which soared from N37 billion in the first quarter and 190 per cent year-on-year to N148 billion in the second quarter. The half-year figure of N185.4 billion is close to double the corresponding figure of under N93 billion last year.
We had tagged the decline in loan impairment charges in the preceding quarter ‘a temporary relief that appears unsustainable’, warning that “loan losses are expected to build up in the year on the bank’s net customer lending portfolio of N9.20 trillion and rising”.
Rising credit losses remain the critical point to watch in First Holdco in 2025: how their incursion on constrained earnings would define the bottom line.
The second cost increase that undercut profit delivery in the second quarter is income tax expense, which grew two and a half times year-on-year to over N53 billion for the quarter, accounting for 73.6 per cent of the half-year income tax expense of N72.4 billion.
Overall, the cost-income combination of First Holdco worsened in the second quarter as greater revenue delivered a smaller profit figure than in the first quarter. The net profit margin declined from 23 per cent in the first quarter to 13 per cent in the second, working out to 17.5 per cent at half-year.
The bank faces an inverse relationship between foreign exchange gains this year and losses on financial assets, culminating in a negative impact on profit. Added to this major downside force are rapidly growing credit losses, the combined effect of which has squeezed profit margin to the lowest mark in three years.
These functions constitute the critical points to watch on First Holdco in the interim – whether they increase margins and profit delivery or worsen, keeping profit on the decline to make a down year.
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