FBN Holdings’ foreign exchange losses swell to N350bn at full-year

FBN Holdings Plc moved against the trend of monumental foreign exchange (FX) gains, particularly among banking majors with substantial offshore assets in 2023 and closed the year on the other side of a whooping net FX loss of over N350 billion.

The final quarter delivered N253.7 billion of the net FX losses, swelling up from N96.7 billion figure at the end of the third quarter (Q3) and a deep plunge from net FX gains of N22.4 billion at the end of 2022.

The numbers are contained in the unaudited financial report of the bank holding company at the end of December 2023.

The report shows that the bank’s own windfall came from net gains on financial instruments — big enough to level up the impact of the FX losses and enable a 127.6 percent lifting of the bottom line to N309.9 billion for the year.

The final quarter rolled in net gains on financial instruments of N435.2 billion, 26 times the corresponding figure of N16.8 billion in the same period in 2022 and about 64 percent of the full-year figure of N681.2 billion.

The net gains on financial instruments for the year is about 18 times the closing figure of N38.6 billion in the preceding financial year and provided the central plank for the much-elevated earnings story of FBN Holdings in 2023.

Other upside functions in the bank’s earnings performance in the year include a leap of 66.3 percent in interest income to N917.7 billion — the strongest growth in interest earnings for the bank in many years.

Also, net fee and commission income rose by 45.6 percent to N171.8 billion at full-year — breaking out from flat growth in 2022 to the strongest increase the bank has seen in many years.

Two major cost increases made significant incursions into the revenue gains, which are interest expenses and net impairment charges for credit losses.

Interest expenses grew well ahead of interest earnings at 105.5 percent to N387.7 billion, compared to the 66.3 percent increase. Net interest income, therefore, grew at a slower pace of 45.9 percent to N530 billion at the end of the year.

The net impairment charge for loan losses rose by 192.1 percent in the year to N200.4 billion, compared to a drop of 25.2 percent to N68.6 billion in 2022. This is the most rapid expansion in bad lending charges the bank has recorded since 2015.

The high rise in credit losses lowered the margin of increase in net interest income after the loan loss expenses to 11.9 percent to N329.6 billion at the end of the year.

Non-interest earnings provided the spur for the much-elevated bottom line of the bank in the 2023 financial year. They made the difference between the 11.9 percent increase in interest income net of loan loss charges and a major advance of 129.4 percent in operating profit to N361.8 billion at full-year.

Supporting the strong growth in operating profit is a significant cost saving from operating expenses, which grew by 46.8 percent to N534.3 billion compared to an increase of 88.5 percent in gross earnings to over N1.5 trillion at the end of the year.

Operating cost margin went down from 45.2 percent in 2022 to 35 percent in 2023. This means the bank used a significantly reduced average operating cost of 35 kobo to generate the naira of its revenue.

FBN Holdings ended the 2023 operations with a pre-tax profit of N362.2 billion, up from N157.9 billion in 2022. Tax expenses plus a marginal loss from discontinued operations, lowered the bottom line to N309.9 billion against N136.2 billion in 2022.

Net profit margin stretched out from 16.7 percent at the end of 2022 to 20.4 percent for the 2023 full-year — the highest in 10 years.

The bank expanded the balance sheet by N6.3 trillion or 60 percent to N16.9 trillion at the end of the 2023 operations — the most rapid increase in asset base in many years.