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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

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.


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




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