H1:2023 FBNH Earnings Note | Impressive Performance Rode on Fair Value Gains
In its recently released unaudited H1:2023 financial result, FBNH’s Gross Earnings grew massively by 82.68% YoY to NGN656.38bn. The impressive topline performance rode on significant increases in both interest income (+69.33% YoY to NGN383.29bn) and non-interest income (+105.41% YoY to NGN273.09bn). Elsewhere, Operating Expenses remained elevated, growing by 24.53% YoY to NGN231.56bn in H1:2023, and this was a result of surging personnel cost (+17.93% YoY to NGN65.22bn), regulatory cost (+18.40% YoY to NGN62.12bn) and advertising and corporate promotions (+174.99% YoY to NGN14.29bn). Profit Before Tax (PBT) and Profit After Tax (PAT) grew significantly by 213.83% YoY and 230.80% YoY to NGN206.26bn and NGN187.24bn respectively. Consequently, Net Profit Margin jumped to 28.53% in the period from 15.75% in H1:2022.
Furthermore, its Q2:2023 standalone income statement revealed a significant jump in Gross Earnings (+125.23% YoY to NGN396.87bn) attributable to a surge in non-interest income (+225.76% YoY to NGN193.19bn) and a commendable increase in interest income (+74.22% YoY to NGN203.68bn). The surge in non-interest income rode on a massive jump in net gains from financial instruments at FVTPL (NGN231.79bn), reflecting the sizeable FX gains induced by the recent FX liberalization policy. Consequently, PBT and PAT grew strongly by 414.14% YoY and 467.68% YoY to NGN150.16bn and NGN137.15bn respectively in Q2:2023.
Considering its prospect for the remaining part of the year, we believe the Bank still has some upside potential, riding on our expectation of improved margins. We have therefore revised our target price to NGN24.62. At its current close price of NGN20.50 as of 26th July 2023, this translates to an upside prospect of 20%. Thus, we put a “STRONG BUY” rating on the stock.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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