First Bank Plc released its 2012 9 months unaudited accounts with revenue soaring 5% year on year to N267.6b. This apparently is the most any bank has been able to churn out in 9 months this year. The closest being Zenith Bank with N229billion. Their Gross earnings is largely made up of Interest Income of N205b, and Income from commission and fees of over N60b. Their Interest Income alone was more than all the Gross Earnings GTB posted for the same period.
But if income is where their strength lies, cost is probably where their weakness reside. Interest expense for example rose 43.5% to N45b chalking off 22% of Interest income. The bank will end up with an operating income of N210b , which is about 78% of Gross Earnings and only came behind GTB 81% as the likes of Zenith, Access Bank and UBA all had 71%,71% and 72% respectively. The Bank’s operating expenses of N133.3b (a 23% rise year on year) sliced off over 63% of operating income. Again, when compared to their peers the figure seem even more untenable. Zenith, the bank with the next highest operating expense was N92b and 2.7x the N49b GT Bank spent on operating expenses. At N49b, operating expenses only sliced off 40% of GTB’s operating income.
First Bank did end up posting an impressive pre-tax earnings of N75b, a figure that puts them as the most profitable bank in the first 9 months of the year. But even at that returns on equity of 16% is only slightly above inflation. For investors who only care about returns then N75b in pre-rax profit don’t really mean much if it only translates to 16% ROE when compared to GTB at 25% or Dangote Sugar at 20% or even Guinness at over 30% (FY 2012). But those must be the most conservative of investors. First Bank still represents an immense buying opportunity and on that will continue to grow earnings as it leverages on its size. The bank has promised to build even more branches to expand its retail business. It already has the most deposits with over N2.3tr in deposit liabilities from customers only growing by 18% a growth rate only surpassed by UBA.
First Bank 2012 9 months unaudited accounts is posted on the website of the NSE