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Earnings Review H1: Thanks To Tb’s, First Bank Earns In 6 Months, 31% More Than What It Earned In The Whole Of 2011



First Bank has been under pressure to boost earnings and bottom line this year following their less than impressive 2011 financials which put them below competitors like GTB and Zenith Bank in terms of earnings per share. The Bank may have responded resoundly as it announced earnings of about N182b for the first half of this year.


First Bank grew its revenue by 25.65% to N182.3b when compared to the same period last year. Interest Income which represents its core business grew 19.81% to N137b in the first half of this year alone. Net Interest Income was N108b indicating a 79% net interest margin down 5% from the prior period last year. However Net Interest Income rose 13.12%. The bank was also able to grow its income from commission and fees from N24b i,n H1 2001 to N36.9b for this period. The Banks impressive showing on income probably reflects higher lending cost (including fees) to Government and increase in commissions as they leverage on their large deposit base. All of this has ensured the bank posted a comfortable Operating Income of N144b, 28.8% increase from the prior period last year.



The banks expenses topped N89b for the first half of the year, eating up 61% of its operating income for the period. Its expenses however, itched up slightly higher by 2.16% compared to the prior year. Despite this, operating profit rose 125% to N54.8b a result that should impress shareholders and investors alike. Operating profit as a percentage of operating income was 30.1% much more than the 21.8% obtained in H1 2011. It also shows the banks intention to beat 2011 full year percentage of 19.3%.

Profit After Tax

Just like the operating profit, profit after tax more than doubled to N46b meaning that the bank has already surpassed the N35b or so it made in the whole of 2011 in the first half of this year alone. At this rate, only misfortune can stop the bank from beating expectations and record earnings growth at the end of this year. It is important to note that Return on Equity, a metric which I believe should be above 15% to ensure real value for money was 12% for H1 alone. Impressive compared to the 5.9% of H1 2011. The banks looks set to surpass the 13% it posted the whole of last year as I expect them to hit 20% at the end of this year.

Bottom Line

First Bank quite frankly has no reason to perform below any bank in Nigeria, considering its size, experience and reach. Last year, the bank was bogged down by huge cost and write downs despite surpassing its peers in revenue and deposits. The banks seems to be on the verge of mending this short comings and may well be on the path of consistent earning growth. From what I have read, the bank has doubled efforts at increasing its deposits. For example increasing its ATM user base to attract higher incremental revenue from commission and fees. As the bank explained that they  “have 88% of viable customer transactions being performed on alternative channels”. A statement I interprete as meaning that their customers transact the most on other banks ATM platforms. Despite all this, one must admit the bank’s reliance on government borrowings to boost revenues. The bank admits this much saying its revenue growth was largely “driven by growth in interest income from treasury bills and investment securities and to a lesser extent, income from loans and advances”. Investments in Government treasury bills and investment securities increased 127%. Nevertheless the bank’s share price is still remarkably cheap trading at just over 5x its trailing earnings. Compare that to back in 2007 banks when Banks were trading between 20Xto  30X their earnings.

FIRST BANK 27/72011 – 24/7/2012

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First Bank currently trades at N11.8 up 47% from its opening this year but still down from its one year high of N12 even though it crossed N12 about a week ago. I see this stock crossing and remaining over the N20 mark a year from now. For example a P.E ratio of 10x alone will simply double its current price and if this years earning is anything to go by. First Bank is a buy for me in the short term as I watch closely the quality of its loans and how efficiently it uses its large deposits.



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Correction 30/7/2012: “Returns on Earnings” has been corrected to “Returns on Equity”. Sorry for the mix up

Ugo Obi-chukwu "Ugodre" is a chartered accountant with over 16 years experience in financial management, corporate finance and financial analysis. He is also a retail investor and a personal finance advocate with over a decade experience investing in the Nigerian stock market.Ugo is the founder/Publisher of Nairametrics and blogs regularly on the website.



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    CBN “Naira 4 Dollar Scheme” Explained

    What the CBN’s Naira 4 Dollar scheme means for your money.




    In what appears to be an attempt to incentivize dollar remittances by all means possible, the Central Bank of Nigeria (CBN) released a circular to Deposit Money Banks (DMBs), International Money Transfer Operators (IMTO), and the General Public, advising that remittances paid into a bank account will attract an additional credit alert for every USD$1 received!

    Yes, you read that correctly. The CBN will facilitate a special additional credit alert of N5 for every USD$1 received. In other words,

    • if someone sends you $10,000, you get an additional special credit alert for N50,000.
    • If someone sends you $100,000, you get an additional special credit alert for N500,000.

    Who is eligible?

    To be eligible, the diaspora remittances need to be processed and received from one of the registered IMTOs and funds received into a Bank account operated by the DMBs. (So, if you are receiving funds via Crypto sorry you are not eligible).

    Additionally, the circular says this “incentive runs from Monday 8th March 2021 to Saturday 8th May 2021″. So, if you have plans to receive dollars, you can plan accordingly.

    The circular is not clear how exactly the commercial banks will know which account to pay the extra special credits into. Although, that may be a question diaspora funds recipients will need to ask their DMB accounts officers to clarify for them.

    How will this be funded?

    The circular notes that the “CBN shall through commercial banks, pay to recipients the N5 incentive for every USD$1”. In other words, it is the CBN funding the cost of this special extra credit.

    • One would argue that given the costs of alternative incentives to attract dollars such as the special OMO window for FPI, this may be a cheaper alternative for the CBN.
    • But we will need to see the volume of expected remittance to be certain of that. Nigeria attracts about $5billion per quarter in remittances and only trails oil in terms of foreign earnings.

    Why this matter to Nigerians?

    Following the collapse of US Dollar inflows into the country, the CBN initially tried to balance its current account deficits and avoid an official devaluation by tackling FOREX demand (Think ban of 41 items, etc).

    Finally, this short-term Naira-4-Dollar scheme will not be called an official Naira Devaluation. But a question is what do we call the new short-term price of N412.50 + N5.00? Maybe we can call it Naira Modulation.


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    Nigerian Breweries leveraging, but stacking cash through rising input costs

    The marathon continues for Nigerian Breweries with its 2020 financials.



    Humanity might need more booze to survive the increasingly daunting intricacies of life, but Nigerian Breweries 2020 financial statement is proof that even the best can get caught up in the reality of changing business lifecycles.

    Nigerian Breweries Plc had floored the market providing both alcoholic and non-alcoholic premium quality beverages across the nation. But with brands like Star lager beer launched as far back as 1949, Gulder lager beer launched in 1970, and even the family-friendly Maltina introduced as far back as 1976, it is only natural that both the old and new generation competition gives them a run for their market share.

    Much like other old money companies, Nigerian Breweries has done its bit to remain relevant in the industry from creating new variants of existing favoured brands to paying dividends consistently annually for the past few years. Yet within the same period, the company’s financial statements have been a testament to its streamlined market share and reducing profits. The marathon continues with its 2020 financials. The industry giant may as well be setting itself up for a debt quagmire peradventure its projections do not match the true reality of events.

    READ: How COVID-19 has changed Nigeria’s consumer goods & industrial markets –KPMG

    2020 financials: A tale of higher costs & larger debts

    2020’s unfavourable financial/ business environment led to the increase in the prices of raw materials and disruptions in logistics for many Nigerian-domiciled businesses including Nigerian Breweries. Raw materials and consumables witnessed a 17% increase despite the marginal growth in revenue.

    While the group’s 2020 results revealed a 4.35% increase in revenue from N323 billion in the prior year to around N337 billion, these gains were curtailed by a higher-than-par increase in cost of sales which had risen by 13.9%, from the N191.8 billion expended in 2019 to N218.4 billion as its 2020 financials reveal and interest rates going way up.

    READ: Flour Mills and its diverse challenges

    The company’s lower operating expenses were not enough to salvage the disruption caused by the raging interest expense following increased charges paid on bank loans and overdraft facilities as well as the significant increase in overall debt. Between 2019 and 2020 alone, long term loans and borrowings increased by 974% from N4.8 billion to as much as N51.8 billion. Even trade and other long term payables increased by 35%.

    In its financials, the company noted that it has revolving credit facilities with five Nigerian banks to finance its working capital. The approved limit of the loan with each of the banks range from ₦6 billion to ₦15 billion (total of ₦66 billion) and each of the agreements had been signed in 2016 with a tenor of five years. The Company had also obtained Capital and Working capital finance from the BoI in 2019.

    READ: Manufacturing sector in Nigeria and the reality of a “new normal”

    It is no news that the company is involved in diversified lease arrangements. Following reclassifications made in 2019 to some of its lease assets, the 2020 asset base also witnessed significant increase in Right of Use Assets which increased by 288%% from N11.1 billion to N42.9 billion. Yet, the fact that in one year, interest expense on Lease Liabilities rose from N19.7 million in 2019 and to a whopping N4.171 billion shows that the company is taking way more debt than its books require.

    But what’s it using all the cash for?

    Beyond rising material costs, borrowing costs have been huge and the annual interest payment by virtue of these loans make the possibility of higher profits for the company a mirage. That said, the overall increase in total liabilities might not have been such a bad idea if the funds were being used to increase revenue and profits. But having a huge chunk of all that money in cash creates a different kind of challenge. Cash and bank values in its statement of financial position significantly increased by 377% from N6.4 billion in 2019 to N30.4 billion in 2020.

    Is the cash being held to mitigate possible challenges of the volatile economy or are they being used to pay dividends? Even at a share price of N52 per share, the company’s price-to-book value sits at 2.5816, testament of its dire overvaluation. Consequently, there is an ardent need for the company to come up with newer ways to attract the wider market and keep its book in the green with a little less external funding.

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