{"id":2375,"date":"2024-02-08T12:47:05","date_gmt":"2024-02-08T12:47:05","guid":{"rendered":"https:\/\/vetivaresearch.com\/?p=2375"},"modified":"2024-02-11T08:11:28","modified_gmt":"2024-02-11T08:11:28","slug":"propelling-loan-growth-amidst-regulatory-shifts","status":"publish","type":"post","link":"https:\/\/vetivaresearch.com\/?p=2375","title":{"rendered":"FBN HOLDINGS PLC UNAUDITED FY’23 EARNINGS – Propelling loan growth amidst regulatory shifts"},"content":{"rendered":"

Analyst: Olumide Sole*
Target price:\u00a0\u20a629.00
<\/strong><\/b>Rating: HOLD<\/p>\n

FBNH released its Q4\u201923 results, showing a 106% y\/y jump in Gross earnings to \u20a6532 billion (Vetiva: \u20a6371 billion). As with other banks, the strong growth was due to a 56% y\/y rise in Interest Income to \u20a6281 billion (Vetiva: \u20a6286 billion), owing to the expansion of the bank\u2019s loan book by 68% y\/y amid elevated interest rates. Similarly, the bank\u2019s Non-Interest Revenue (NIR) grew by 243% y\/y to \u20a6239 billion (Vetiva: \u20a673 billion), on the back of material FX revaluation gains of \u20a6180 billion.<\/p>\n

Meanwhile, Interest Expense grew by 94% y\/y to \u20a6131 billion (Vetiva: \u20a6132 billion), resulting in Net Interest Income of \u20a6152 billion (+34% y\/y), 1% below our estimate of \u20a6154 billion.<\/p>\n

On the cost front, impairments on loan losses grew by 270% y\/y to \u20a6118 billion. Meanwhile, Opex grew 83% y\/y to \u20a6182 billion and the bank\u2019s cost-to-income ratio came in at 49% in FY\u201923 (FY\u201922: 62%). Overall, the bank reported a PBT of \u20a692 billion (+76% y\/y), while PAT was 65% higher y\/y at \u20a674 billion.<\/p>\n

CBN\u2019s revised CRR management to incentivize loan book growth<\/strong><\/p>\n

Sequel to the recent circular, where the Central Bank of Nigeria (CBN) introduced a policy requiring a 50% Cash Reserve Ratio (CRR) debits of lending shortfall on Nigerian banks, our analysis of the policy in respect to the bank revealed that the new CRR debits of 50% will worsen the effective CRR of the bank which prints at 33.6% in FY\u201923, if the bank does not shore up its LDR. Therefore, we opine that this could potentially incentivize the bank to meet the regulatory minimum LDR of 65% (FY\u201923: 61%) in 2024, which would in turn improve loan book growth and core banking income. That said, we expect Interest Income to grow by 44% y\/y to \u20a61.3 trillion, owing to loan book expansion and expectation of higher interest rates.<\/p>\n

Similarly, our projection for Interest Expense stands at \u20a6618 billion (Previous: \u20a6544 billion), thereby resulting in Net Interest Income of \u20a6707 billion (+33% y\/y).<\/p>\n

Net Open Position (NOP) limit to impact FX revaluation gains<\/strong><\/p>\n

Last week, the CBN released a circular requiring banks to close their long FCY NOP or limit their short FCY NOP to 20% of Shareholders Fund (SF) on or before February 1, 2024. Meanwhile, our analysis revealed that FX revaluation gains contribution to NIR was 65%, which implies that FX revaluation gains had a significant impact on 2023 results. In 2024, we expect FX revaluation gains of \u20a6193 billion in Q1\u201924 to propel NIR; however, we do not expect to see significant FX revaluation gains\/losses in subsequent quarters due to the deadline of the CBN guideline which is effective February 1, 2024.<\/p>\n

TP revised upward to \u20a629.00 (Previous: \u20a623.00)<\/strong><\/p>\n

Looking ahead, we increase our PBT and PAT forecast to \u20a6539 billion (Previous: 407 billion) and \u20a6462 billion (Previous: \u20a6350 billion) respectively. Therefore, we revise our 12-month Target Price (TP) upward to \u20a629.00 and recommend a HOLD.<\/p>\n

\t\t\t\/*! elementor – v3.16.0 – 17-10-2023 *\/
\n.elementor-widget-image{text-align:center}.elementor-widget-image a{display:inline-block}.elementor-widget-image a img[src$=”.svg”]{width:48px}.elementor-widget-image img{vertical-align:middle;display:inline-block}\t\t\t\t\t\t\t\t\t\t\t\t\"\"
\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"
\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"
\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"\"<\/p>\n","protected":false},"excerpt":{"rendered":"

Analyst: Olumide Sole*Target price:\u00a0\u20a629.00Rating: HOLD FBNH released its Q4\u201923 results, showing a 106% y\/y jump in Gross earnings to \u20a6532 billion (Vetiva: \u20a6371 billion). As with other banks, the strong growth was due to a 56% y\/y rise in Interest Income to \u20a6281 billion (Vetiva: \u20a6286 billion), owing to the expansion of the bank\u2019s loan […]\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"pmpro_default_level":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2375","post","type-post","status-publish","format-standard","hentry","category-uncategorized","pmpro-has-access"],"_links":{"self":[{"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=\/wp\/v2\/posts\/2375","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2375"}],"version-history":[{"count":8,"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=\/wp\/v2\/posts\/2375\/revisions"}],"predecessor-version":[{"id":2405,"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=\/wp\/v2\/posts\/2375\/revisions\/2405"}],"wp:attachment":[{"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2375"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2375"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vetivaresearch.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2375"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}