EUR 48.04 For Business Accounts Only

FBN HOLDINGS PLC - Earnings bow as NPLs hit record high

• ​FBNH released its FY’15 and Q1’14 results reporting mixed performances across the periods. Although we had anticipated a dismal performance in FY’15 following previous quarters’ run rate and the earlier profit warning by management, the full year earnings still came in significantly below Vetiva and Consensus estimates. Whilst Gross Earnings was up 5% y/y and 2% ahead of our estimate (supported by the modest 9% y/y in Interest Income), PAT (N15.1 billion) was down 82% y/y vs. Vetiva: N45.2 billion and Consensus: N47.3 billion estimates. However, Q1’16 performance came in much better than previous quarters. Although PAT was down 8% y/y to N20.7 billion, the bottom line came in 55% ahead of our N13.3 billion estimate despite the significant top line pressure (Gross Earnings down 15%). Whilst loan loss provision (N12.7 billion) came in higher than our N10.5 billion estimate with Q1’16 NPL ratio of 21.5% and annualized CoR of 2.8%, cost containment continues to support bottom line as Interest Expense and OPEX moderated 45% and 12% respectively. 
• We have updated our model and revised our forecast to reflect the mixed performance across the two periods. Whilst we remain wary of rising default with historic NPL ratio and forecast a CoR of 2.6% for FY’16, we take solace in the improved efficiency observed over the last two quarters and expect this to support bottom line in FY’16. Hence, we estimate a N65.9 billion PAT for FY’16, translating to an EPS of N1.84. With our dividend payout estimate of 25% (FY’15: 36%), we forecast a DPS of N0.46 for FY’16 (FY’15: N0.15). Overall, we revise our Target Price (TP) to N9.32 (Previous: N8.86).