FBN HOLDINGS PLC H1'22 Earnings Release - H1 Profits surge 49% y/y

H1 profits surge 49% y/y                                                         

FBNH recently released its unaudited H1’22 results, reporting a 23% y/y jump in Gross earnings to ₦359.3 billion, 2% above our ₦352.7 billion estimate. The earnings beat came thanks to a 41% y/y rise in Interest Income to ₦226.4 billion, driven by a 36% y/y rise in income from loans and advances, which came in at ₦166.3 billion. Furthermore, the bank saw a 54% y/y rise in interest earned on investment securities, which totalled ₦48.8 billion, reflecting the stronger asset yields seen in Q2. Meanwhile, Net Interest Income was 47% higher y/y at ₦152.9 billion, despite a 28% increase in Interest Expense to ₦73.4 billion. On the other hand, the bank’s Non-Interest Revenue (NIR) only grew 2% y/y to ₦120.6 billion after e-banking income fell 11% y/y while other fees grew marginally.

Cost-wise, impairments on loan losses fell by 11% y/y to ₦21.7 billion, although Q2 impairments were up 48% from Q1 at ₦12.9 billion, despite non-performing loans (NPLs) moderating to 5.4% from 6.0% in Q1. Meanwhile, Opex grew 22% y/y to ₦185.9 billion amid a 71% increase in regulatory charges. The bank’s cost-to-income ratio moderated slightly to 68.0% for the period, 100bps lower than in H1’21. Overall, the bank’s PBT came in at ₦65.7 billion (+45% y/y), while PAT was 49% higher y/y at ₦56.6 billion.                                                

FY’22 profit projection lowered on Q2 moderation

FBNH’s Q2 performance was a return to normal for the bank after Q1’s outsized growth. Q2 profits moderated 26% q/q amid lower NIR (-14% q/q) and higher impairments. Interestingly, Opex was only up 2% q/q, suggesting that the bank may have gotten a handle on its costs. Therefore, we have adjusted our FY’22 projections to account for Q2 performance.

Firstly, we increased our Interest Income projection to ₦463.4 billion (Previous: ₦403.2 billion) based on a higher asset yield estimate of 6.1% (Previous: 5.6%). Our Interest Expense line has also been adjusted to ₦155.6 billion from ₦152.1 billion based on a full-year cost of funds estimate of 2% on a higher balance sheet projection of ₦9.9 trillion (Previous: ₦9.5 trillion).