FBN Holdings grows assets by N3.6trn at H1, nets N187bn

FBN Holdings Plc expanded the balance sheet by N3.6 trillion or 34 percent at the end of half-year operations over the closing figure last year to hit N14.2 trillion at the end of June 2023. The figure is already more than twice the N1.65 billion increase in asset base the bank recorded for the entire 2022 financial year.

The expansion, which amounts to significant uploading of critical earning assets, swelled earning capacity of the bank holding company with after-tax profit multiplying more than three times year-on-year to N187.2 billion.

The bank’s half-year interim financial report at the end of June 2023 shows that windfall from net gains on financial instruments in the second quarter provided the spur for revenue and profit growths over the period.

Loans and advances to customers, the bank’s largest earnings asset, grew by N1.5 trillion over the six-month period or 38.9 percent to close at N5.3 trillion at half year.

Investment securities, the second largest asset class of the bank, grew by N633 billion or 27.3 percent over the same period to close at roughly N3 trillion at the end of June 2023.

The asset expansion is however led by financial assets, which swelled by 144.7 percent to close at N681.4 billion. That is followed by other assets, which doubled at 100.7 percent to N748.8 billion at half year.

The asset expansion fired off an upsurge in asset turnover – the ability to convert assets into revenue. On year-on-year reading, the bank’s total assets grew by 48.8 percent from the closing figure of N9.5 trillion in June last year. Over the same period, gross earnings rose by 82.7 percent to N656.4 billion.

A big boost in both revenue and profit happened in the second quarter – which has increased growth momentum and brightened the bank’s earnings outlook for the year.

The second quarter produced N397.2 billion or 60.5 percent of the half year gross earnings figure. It also accounted for N137.2 billion or 73.2 percent of the after tax profit figure at half year.

The highpoint of the bank’s earnings story in the second quarter is a record leap from net loss of N3.5 billion on financial instruments in the same quarter last year to net gains of N231.8 billion in the second quarter ended June 2023.

The figure absorbed a net loss on financial instruments of over N2 billion in the first quarter and accounted exclusively for the N229.7 billion net gains on financial assets the bank reported at half year.

Another major event in the second quarter is a huge foreign exchange loss of N101.4 billion against an exchange gain of N10.8 billion in the same quarter last year.

Other challenges include rising cost of funds and surging loan losses that are consuming growing proportions of revenue. Interest expenses grew by 112.5 percent in the second quarter to N78.2 billion, beating an increase of 74.2 percent in interest income to N203.7 billion for the quarter.

Loan impairment expenses jumped almost four times to N40.7 billion in the second quarter, accounting for a major part of the half year figure of N57.6 billion.

The inflow from net gains on financial instruments powered the bank’s income statement, jerking up operating profit more than five times over the review period to almost N150 billion while after tax profit for the quarter jumped more than five and half times from N24.2 billion in the same quarter last year.

The bank’s half year position reflects the persisting challenge of interest expenses growing well ahead of interest income at 98.7 percent to about N146 billion compared to 69.3 percent to N383.3 billion.

Loan impairment charges grew more than two and half times year-on-year from N21.7 billion to N57.6 billion over the review period.

Net foreign exchange loss of N98.4 billion at the end of half year took the place of a net gain of N16.5 billion in the same period last year. This was however more than countered by the massive net foreign exchange gains of N229.7 billion at half year, advancing from just N11.3 billion in the same period in 2022.

Operating cost moderated and permitted an outstanding growth in operating profit from N65.9 billion in the same period last year to over N206 billion at half year. Profit after tax similarly surged upward from N56.6 billion to N187.2 billion over the same period.

The bank stretched out profit margin from 15.7 percent at half year in 2022 and from 19.3 percent at the end of the first quarter to 28.5 percent at half year – which is unmatched any time in more than a decade.