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FBN Holdings Reports 82% FY Profit Drop

By Ololade Julianah,Lagos

FBN Holdings on Tuesday submitted its full year financial result ended December 31, 2015 and the first quarter result ended March 31, 2016 to the management and stockbrokers of The Nigerian Stock Exchange (NSE).

In its full year 2015 result, the group’s profit after tax dropped to N15.1 billion, down 82.0 per cent from N84.0 billion reported in the corresponding period of 2014, profit before tax also went down by 77.1 per cent from N94.1 billion to N21.5 billion, while the bank’s non-performing loan ratio shot up to 18 per cent in 2015 from 3 per cent the previous year-in nominal terms the bad loans increased by 445 per cent year on year..

Gross earnings increased by 4.9 per cent to N505.2 billion from N481.8 billion, driven by a 9.3 per cent growth in interest income to N396.2 billion; supported by growth in increased interest income on loans to customers by 8.2 per cent year-on-year as well as higher volumes in treasury activities.

Net interest income also rose by 8.7 per cent from N234.9 billion to N265.0 billion, operating income stood at N364.4 billion, up 2.3 per cent year-on-year from N356.2 billion, impairment charge for credit losses grew to N119.3 billion from N25.9 billion, while operating expenses dropped to N223.6 billion from N236.8 billion.

In its 2016 first quarter unaudited result, FBN Holdings’ gross earnings went down by 15.2 per cent to N107.5 billion from N126.8 billion, net interest income was N63.9 billion, up 7.2 per cent year-on-year from N59.6 billion, non interest income went down to N21.89 billion, down 25.2 per cent from N29.3 billion, while operating income of dropped to N85.8 billion from N88.8 billion, depreciating by 3.4 per cent.

Impairment charge for credit losses which was N4.1 billion in the comparable period of 2015 went down to N12.8 billion, operating expenses also went down to N50.96 billion from N57.8 billion, profit before tax slipped to N22.1 billion, down 18.2 per cent from N26.9 billion, profit after tax also went down by 8.3 per cent from N22.6 billion from N20.7 billion.

Commenting on the results, the Group Managing Director of FBN Holdings, Urum Kalu Eke, said: “This has been a very difficult time in the history of our institution. Despite the tough macroeconomic and regulatory backdrop during the year, our underlying business remains strong as reflected in the gross earnings growth of 4.9 per cent to N505.2 billion – clearly a leading position in the industry. Furthermore, the Holding company platform has provided support in mitigating the impact of credit losses and the vulnerabilities experienced by our Commercial Banking business.

“In coming periods, our primary focus is to drive efficiency and operational excellence across all operating companies. Key initiatives in achieving this, as we eliminate the value eroding factors and seek to reposition the Group towards a new growth path, include: enhanced focus on moderating risk appetite, risk management practices and culture; disciplined cost containment; asset optimisation; and, synergy realisation.

“We will be sustaining the drive to improve cross sell initiatives, improve performance and returns from our subsidiaries to provide diversified and sustainable revenue for the group. Whilst acknowledging the challenges facing the group; we are committed to achieving our set tasks. Amongst those, one priority stands out above all else – the need to restore shareholder value whilst building long-term sustainability into our businesses”.

The results, according to analysts, were not a surprise given the increasingly clear impact of the oil price crash on the banking sector in Africa’s top crude producer.

That impact is particularly pronounced for those among Nigeria’s 22 licensed commercial banks with heavy exposure to domestic oil and gas companies that bought oilfields from majors like Shell when the price of oil was above $100 per barrel.

First Bank is the most heavily exposed, with 47 per cent of its loan book comprised of oil and gas debt, according to Lagos-based investment bank Afrinvest.

Though, the bank and other banks have restructured their loans since the oil price crash began in mid 2014, the pain is not likely to ease quickly.

“FBN’s asset quality problems are not necessarily simply just a cyclical pick-up in NPLs story but importantly also driven by legacy corporate mis-governance issues which new management is now trying to fix”, said Adesoji Solanke of Renaissance Capital in Lagos.

“The clean-up happening there could take some time, implying weaker returns for longer”, Solanke added