SAT 31 JULY, 2021-theGBJournal- FBNH released its H1-21 financial report Friday, which showed that the Holdco recorded growth in bottom-line.
Earnings were supported by growth in non-core income as core income recorded a decline relative to the prior year’s corresponding period. Notwithstanding the growth in non-interest income, the Holdco recorded a decline in interest expense, which provided another layer of support to the growth in bottom-line.
Consequently, the Holdco recorded an EPS from continuing operations of NGN1.05 (+5.0% vs H1-20). After accounting for income from discontinued operations in the prior year, EPS contracted by 22.2% y/y.
Interest income declined by 22.4% y/y to NGN161.02 billion as income from loans and advances to customers and investment securities declined by 6.2% and 56.3% y/y, respectively.
However, the decline across these lines masked the growth in income from loans and advances to banks (+53.4% y/y). This was generally in line with our expectations, given relatively lower yields on loans and investment securities.
Interest expense declined significantly by 24.9% y/y to NGN18.01 billion, on the back of substantial declines across most lines save for interest-bearing loans and borrowed funds – this did not surprise us as the company issued a new USD350.00 million Eurobond and took on more borrowings.
Interest expense on deposits from customers (-41.5% y/y to NGN30.82 billion) was the major contributor to the decline in interest expense. On the other hand, the expense on interest-bearing borrowings increased significantly (+175.6% y/y to NGN11.95 billion) in line with the expansion in the interest-bearing liabilities. Consequently, net interest income declined by +20.9% y/y to NGN103.82 billion.
Contrastingly, non-interest income grew significantly by 48.1% y/y to NGN118.67 billion, driven by the growth in fees and commissions (+22.7% y/y to NGN57.37 billion) and net gains on investment securities (+30.4% y/y to NGN43.84 billion). The growth across these income lines was enough to offset the decline in funded income and operating income growth (+9.5% y/y) after accounting for loan loss expenses (-20.0% y/y to NGN24.52 billion).
Operating expenses settled higher by 9.6% y/y, as all major contributory lines spiked – personnel expenses (+3.4% y/y to NGN51.24 billion), AMCON levy (+35.4% y/y to NGN30.68 billion), and NDIC premium (+9.4% y/y to NGN6.81 billion). However, given the similar magnitude of increase in operating income, cost-to-income ratio (after accounting for LLEs) stayed flat at 77.1%.
Supported by the growth in non-funded income amidst the decline in interest expense, profit before tax grew by 9.2% y/y to NGN45.24 billion. Likewise, PAT settled 6.9% higher y/y at NGN38.09 billion, despite the higher income tax expense (+23.9% y/y).
The bank’s performance was strong during the period and in line with general expectations. We expect stronger growth in funded income over 2021FY as risk asset creation ramps up and the bank reinvest asset maturities at current yields.
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