How Income Growth Underpin FBN Holdings Stellar Performance 

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FBN Holdings Plc released its unaudited results for 2023 full year, revealing a remarkable 128.3% surge in EPS N8.56 against N3.75 in 2022.

The substantial increase in the Holdco’s earnings is attributable to a significant 10.8x growth in net gains from investment securities, further supported by growth in interest earned on investment securities and loans and advances to customers.

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Interest income grew by 66.3% to N917.71 billion, reflecting improved income from expanded loans and advances, and investment securities due to the high yield environment.

Specifically, the group’s income from loans and advances to customers and investment securities offset the decline in income from loans and advances to banks.

The notable rise in income from loans and advances to customers may be ascribed to a combination of revalued foreign-currency denominated assets and robust risk asset creation in the period under review.

Similarly, interest expense surged by 105.5% to N387.68 billion, fueled by higher cost on customer deposits. The impact was exacerbated by a less favourable funding mix, with CASA settling lower at 76.2% in 2023 full year, compared to 84.8% in 2022 full year.

Additionally, the Holdco faced higher interest payments on deposits from other banks, which rose by 196.8% to N66.62 billion, propelled by a substantial 71.3% expansion in deposits from financial institutions, totaling N1.81 trillion.

Notably, non-interest income (NII) expanded markedly by 149.6% to N566.99 billion, primarily triggered by the increased gains from investment securities to N722.39 billion, which effectively offset the net foreign exchange revaluation losses to N375.88 billion in the period.

Further out, operating expenses settled higher by 46.8% to N534.34 billion undermined by the higher personnel expenses to N173.89 billion, as well as the costs incurred on maintenance to N75.94 billion and advert and corporate promotions to N31.81 billion.

Elsewhere, they highlight that AMCON levy to N50.10 billion and NDIC premium to N29.34 billion) also advanced in the period.

Nevertheless, the faster growth in operating income led to a moderation in the Holdco’s cost-to-income ratio (after accounting for LLEs), resulting in a lower ratio of 59.6% relative to the 69.7% recorded in 2022 full year.

Overall, profitability in 2023 full year was robust, with profit before tax expanding by a substantial 129.4% to N362.24 billion and profit after tax settling 127.4% higher at N310.01 billion, despite the increased income tax expense to N52.23 billion.

The performance of the group for the year was quite remarkable, and supported by substantial income generated from both funded and non-funded income.

Looking ahead, analyst anticipate that the growth in core income will persist, driven by our expectations of a heightened interest rate environment.

This outlook is expected to bolster the group’s performance through 2024 earnings.

 

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