FBN Holdings Plc 2012 Earnings Reveal Tripple Rise In Pat...But Not Enough To Beat Its Peers

FBN Holdings Plc (owners of First Bank) released a double dose of earnings report last week (29/4/2013-3/5/2013) which included its 2012 audited accounts and the first quarter 2013 unaudited reports

2012 Audited Accounts

FBN Holdings posted Gross Earnings of N360billion a 31% rise when compared to 2011 (N273.8billion). Net Interest Income also rose 27.8% to N225billion just as income from commission and fees topped N62billion in the period under review. The bank posted a 150% operational profit of N93billion (2011: N37billion). Profit after tax at the end of the period was N75.6billion an over 306% increase from the prior year. Earnings per share rose from 60kobo t0 N2.33.

Highlights

Net Interest Income Margin dropped from 82% (2011) to 78% this year. Most banks in Nigeria had lower Interest margins and only Diamond Bank did better than First bank at 80%.
The Group (well, Bank) recorded N12.3billion in loan losses (2011: N38billion) making it N50billion in two years already. In addition in the first quarter of 2013 they recorded about N1.48billion in loan losses. When you consider that GT Bank recorded about N800m in loan losses for the whole of 2012 you realize how precarious their risk assets are.
The Group’s operating expenses of N192billion is only next to ETI’s N200billion and chalked of 68% of Operating Income or 53% of Gross Earnings (same with 2011). Too high and a common problem with Holdco’s as too many non-productive subsidiaries increase expenses.
Average tax rate came at about 18.3% slicing off N17billion of of Pre-Tax profits. Tax and loan losses contributed to its below peer PAT of N75billion. For example, whilst Zenith’s loan impairment as a percentage of Net Interest Income was 5.5% its tax rate was 1.4%. GTB loan impairment as a percentage of Net Interest Income was 0.6% its tax rate was 15.9%. First Bank was 5.5% in loan impairment as a percentage of Net Interest Income and 18.3% in tax rate.
Return on Average Equity was 18% for the bank, higher than inflation and slightly better than FGN bond rates. Unfortunately, it fell below the likes of GTB, Zenith, Access percentage of 34%, 23.5% and 20% respectively.
Operating profit for the first quarter of 2013 increased 26% to N31billion (pre-tax profits N30.4billion) an impressive return and currently higher than its peers did so far.
FBN Holding is a holding company for the bank and its other subsidiaries. However, the Bank is the highest contributor to bottom line.
The Bank as at the end of the first quarter of this year, had about N2.7tr in deposits and N1.9tr in net loans. During the past year, it grew loans and advances by 13% but is yet to add to that in the current year.
The company’s share price dropped 3% to N18.65 on announcement of the result but has since climbed back to N19.55 currently representing a 8.4x multiple on trailing twelve months earnings. Price to book ratio is 1.4x indicating the sluggish rise in market valuation.