…PBT expanded by a substantial 129.4% y/y to N362.24 billion and PAT settling 127.4% y/y higher at N310.01 billion
…The diversified financial services group reported Interest income growth of 66.3% y/y to N917.71 billion
…Interest expense surged by 105.5% y/y to N387.68 billion
FRI, FEB 02 2024-theGBJournal| FBN Holdings Plc, one of the largest financial services company in Africa, topped bottom-line earnings expectations for FY2023 to finish off a record year of profits.
The diversified financial services group reported Interest income growth of 66.3% y/y to N917.71 billion on Thursday, reflecting improved income from expanded loans and advances, and investment securities (due to the high yield environment).
Specifically, the group’s income from loans and advances to customers (+48.9% y/y to N600.83 billion) and investment securities (+195.2% y/y to N271.20 billion) offset the decline in income from loans and advances to banks (-19.1% y/y to N45.67 billion).
”The notable rise in income from loans and advances to customers may be ascribed to a combination of revalued foreign-currency denominated assets and robust risk asset creation (+68.0% y/y to N6.36 trillion) in the period under review,” says analysts at Cordros Research.
Similarly, interest expense surged by 105.5% y/y to N387.68 billion, fueled by higher cost on customer deposits (+126.0% y/y to NGN264.84 billion). The impact was exacerbated by a less favourable funding mix, with CASA settling lower at 76.2% in 2023FY, compared to 84.8% in 2022FY.
Additionally, the Holdco faced higher interest payments on deposits from other banks, which rose by 196.8% y/y to NGN66.62 billion, propelled by a substantial 71.3% y/y expansion in deposits from financial institutions, totaling NGN1.81 trillion.
Notably, non-interest income (NII) expanded markedly by 149.6% y/y to NGN566.99 billion, primarily triggered by the increased gains from investment securities (+1082.8% y/y to NGN722.39 billion), which effectively offset the net foreign exchange revaluation losses (-401.9x y/y to NGN375.88 billion) in the period.
Further out, operating expenses settled higher by 46.8% y/y to N534.34 billion undermined by the higher personnel expenses (+48.1% y/y to N173.89 billion), as well as the costs incurred on maintenance (+76.8% y/y to NGN75.94 billion) and advert and corporate promotions (+162.2% y/y to N31.81 billion).
Elsewhere, we highlight that AMCON levy (+26.0% y/y to N50.10 billion) and NDIC premium (+9.6% y/y to N29.34 billion) also advanced in the period.
Nevertheless, the faster growth in operating income (+71.8% y/y) led to a moderation in the Holdco’s cost-to-income ratio (after accounting for LLEs), resulting in a lower ratio of 59.6% relative to the 69.7% recorded in 2022FY.
Overall, profitability in 2023FY was robust, with PBT expanding by a substantial 129.4% y/y to N362.24 billion and PAT settling 127.4% y/y higher at N310.01 billion, despite the increased income tax expense (+141.9% y/y to N52.23 billion).
”The performance of the group for the year was quite remarkable, and supported by substantial income generated from both funded and non-funded income,” Cordros Research noted.
Meanwhile, the Bank’s earnings reports revealed a remarkable 128.3% y/y surge in EPS (2023FY: NGN8.56 vs 2022FY: NGN3.75).
The substantial increase in the Holdco’s earnings is attributable to a significant 10.8x growth in net gains from investment securities, further supported by growth in interest earned on investment securities (+195.2% y/y) and loans and advances to customers (+48.9% y/y).
Cordros anticipates that the growth in core income will persist, driven by thir expectations of a heightened interest rate environment.
”This outlook is expected to bolster the group’s performance through 2024E,” Cordros added.
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