FIRST BANK HOLDINGS Plc: Strong growth at the top line level

 First Bank is the Nigeria’s oldest and largest bank with 117 years of operational history in Africa’s most populous country.

The bank commenced operations in Nigeria on 31 March 1894 as a branch of the Bank of British West Africa Limited, and was incorporated as a primary limited liability company in Nigeria in 1969.

It was converted to a public company in 1970 and its shares were quoted on the Nigeria Stock Exchange.

 

During the 2005 banking consolidation, First Bank acquired two banks: MBC International Bank Ltd and FBN Merchant Bankers Ltd.

The bank is pursing growth plans in sub-Saharan Africa, and recently acquired 100 percent equity interest in the West Africa operations of International Commercial Bank (ICB) Group.

First Bank was one of the banks to adopt the holding company structure in 2012 following the recent CBN regulation on non-core subsidiaries.
The bank has the largest footprint in the country with 767 branches whilst total assets and deposits stand at N4 trillion and N2.75 trillion as at June 2014; affirming its position as the biggest bank by total assets.

Financial Performance for June 2014

It has been a challenging business environment for Nigeria lenders as they struggle with the systematic risks that have been slowing growth potentials.

For the first six months through June 2014, FBHN Holdings gross revenue increased by 7.79 percent year on year (YOY) to N211.46 billion from N196.17 billion in the corresponding period of HY 2013.

Despite the CBN tightening policy, the bank’s interest income increased by 9.36 percent to N164.85 billion in HY 2014 as against N150.74 billion while net interest income moved by 2.15 percent to N115.16 billion.

Lenders have been bemoaning the CBN’s hike in cash reserve on deposit (CRR) from 50 percent to 75 percent a policy they say is ballooning costs thus hindering growth.

“Our financial performance was impacted largely due to revised banking charges, whilst the increase in the cash reserve ratio (CRR) impacted our overall performance,” said Bello Maccido, Chief executive officer FBNH in a note released earlier in the year.

Based on business Day analysis, cost to income ratio increased to 69.44 percent in the period under review from 60.10 percent the preceding year as AMCON charge continues to swell costs.

Additionally, operating expenses were up by 14.34 percent to N102.85 billion as against N89.95 billion as at the end of June 2013.

The Asset Management Corporation Cost (AMCON) charge was increased to 0.5 percent from 0.3 percent of total assets. Such regulatory induced costs some industry analysts say is bleeding profits of most lenders.

As results of costs pressures, pre- tax profit fell by 11.96 percent to N48.25 billion compared to N54.81 billion as at June 2013.

Profit after tax (PAT) in the period under review decreased by 19.34 percent to N37.18 billion compared to N46.10 billion in the preceding year.
Return on average equity ROAE was 13.01 percent in the review period while return on average assets ROAA stood at 1.56 percent.

Total assets increased by 3.37 percent to N4 trillion in HY 2014 compared to N3.87 trillion in the preceding year.

The bank is aggressive about lending as loan to deposit ratio spiked to 66.54 percent in HY 2014 from 60.55 percent as at HY 2013.

Loans to Customers were up by 3.95 percent to N1.84 trillion in HY 2014 as against N1.76 billion the preceding year.

It must be noted that the Nigerian lender is increasingly extending loans to the corporate (Oil & Gas downstream, Oil & Gas services, Commercial Property and Hotel & Leisure) and retail customers.

The banks is relentlessly working on creating strong natural synergies with a view to reducing risk and improving its quality of earnings as it has acquired ICB banks across four West African countries.