As financial market analysts continue to digest the 2021 financial results of the FirstBank Limited, which they say reflect the return of the banking conglomerate to its leadership position, Festus Akanbi writes that the regime of strong fundamentals which the robust performance represents is in tandem with the ongoing restructuring being midwifed by the current board and management of the company
The
Nigerian investing community was held spellbound earlier in the week when FBN
Holdings Plc released its much-awaited 2021 financial statements to the public,
showing a stellar performance, especially in its banking subsidiary, First Bank
of Nigeria Limited, which is said to be indicative of its strong recovery from
its hitherto dwindling financial position.
Banking
and capital market analysts, in their immediate reactions, said the impressive
results signpost a regime of strong fundamentals after a period of
restructuring by the leadership of its current management and board.
The
Scorecard.
To
mitigate the effect of the low-interest rate on investment securities and
revenue generation, the bank was said to have intensified deposit mobilisation
and funding strategy to support enhanced loan growth at optimised rates leading
to a 5.7% increase in interest
expense to N140.8 billion as against N133.2 billion in December
2020.
During
the period, non-interest
revenue grew by 96.1% to N364.6 billion as against N185.9
billion in the preceding year on the back of increased fees and commission
income, treasury activities, and other operating income.
According
to a report by Nairametrics, in its bid to further enhance its revenue
generation capacity, First Pension Custodian Limited, a subsidiary of First
Bank of Nigeria Limited, entered into a definitive agreement with Access Bank
Plc for the planned acquisition of the entire share capital of Access Pension
Fund Custodian Limited held by Access Bank Plc. This, according to the
management of the bank will further boost its market share in the industry, aid
revenue diversification, and support annuity income.
The
bank says it will continue to create quality loans with a focus on retail
lending driven by technology as it continues to grow non-interest income to
further diversify revenue.
To show for the relentless efforts of the board and
management of the bank, deposits from customers increased by 19.5% y-o-y to
N5.9 trillion (Dec 2020: N4.9 trillion) reaffirming the bank’s strong market
access and robust funding base.
A statement from the bank said, “Our investment in
agent banking, digitalisation, and deployment of digital platforms which our
customers have adopted, improved customer penetration and deepened our solid
retail franchise. This continues to provide us with access to stable funding,
reducing our cost of fund ratio to 2.1% (Dec 2020: 2.3%) while supporting the
float of our current and savings account at 91.2% (First Bank of Nigeria).”
In the same vein, total assets grew 16.2% y-o-y to
N8.9trillion as against N7.7trillion in 2020, driven by a 30.0% y-o-y increase
in customer loans and 26.3% increase y-o-y in investment securities. Cash and
balances with Central Banks, loans to banks & customers, and investment
securities constitute 87.2% of total assets (Dec 2020: 83.4%).
“With a cleaner balance sheet and resilient
earnings-generating capacity, FirstBank (Nigeria) was able to accrete capital
buffers from organic earnings. Hence, despite the increase in loans and
advances, Capital Adequacy Ratio (CAR) remained steady, marginally increasing
to 17.4% (Dec 2020: 17.0%),” the report said.
Meanwhile, the audited
report for the group indicated an impressive double-digit growth in the top
line and the bottom line. Gross earnings rose from N590.66 billion in 2020 to
N757.30 billion in 2021. Profit before tax doubled by 99.1 per cent to N166.66
billion in 2021 as against N83.7 billion in 2020. Profit after tax grew by 68.4
per cent from N75.6 billion to N151.079 billion. Earnings per share thus increased
from N2.45 in 2021 to N4.17 in 2021.
Its balance sheet also
gives cause for joy to its stakeholders as its total assets rose from N7.69
trillion in 2020 to N8.93 trillion in 2021. Customers’ deposits grew to N5.85
trillion in 2021 as against N4.9 trillion in 2020. Loans and advances to
customers also improved from N2.21 trillion to N2.88 trillion. With total
liabilities rising from N6.92 trillion to N8.05 trillion, shareholders’ funds
increased from N765.17 billion in 2020 to N879.86 billion in 2021.
A quick analysis of the
performance shows a progressive trajectory that has portrayed First Bank as an
organisation that has recovered from past episodic challenges that led to a change
of baton at its board level.
Analysts are quick to point
at the recent restructuring exercise in the organisation as the launchpad for
the excellent balance sheet operations which translated into a 30.3 per cent
rise in its gross earnings, while total assets and customer deposits rose by
15.9 per cent and 19.5 per cent respectively.
The audited report also
confirmed Mr. Femi Otedola as the largest individual shareholder of the group,
with total direct and indirect shareholdings of 7.57 per cent.
Fall
in NPLs, Boost to Profitability
For
a bank that was almost brought to its knees by the burden of non-performing
loans, it came as a great relief to both the shareholders and the regulatory
authorities that for the first time in a long while, First Bank’s NPLs came
down to 6.1 per cent, significant progress for the bank when compared to other
Tier 1 banks and the regulatory threshold of 5.0per cent.
Analysts also attributed the significant
fall in the NPL rates from 40 in 2016 to 6.5 per cent in 2021, to a new culture
of corporate governance currently in place in the group and which has
successfully revamped the company’s risk management capabilities.
According
to the bank, the recent turnaround and improvement in the non-performing loans have
been a major boost in FirstBank's quest to improve profitability and reinforce
its leadership in the financial services industry in Nigeria.
Analysts
said with the impressive results for its 2021 operations, the board and
management of FBN have proven to the investing community that the company is
ready to take its leadership role in the nation’s banking sector and that the
years of locusts have been put behind the institution.
A
Transition to Sustained Growth
In
their view, First Bank, with these impressive results has demonstrated the fact
that is transitioning into a sustained growth phase and delivering performance
commensurate with the size of its business capabilities of its people.
And
for the shareholders of the company, it was a harvest time with N12.56 billion
set aside as divided, about 8.3 percent of the total net earnings recorded in
2021.
A
capital market analyst, Mr. David Edobor explained that the major
transformation in First Bank, as evident in its mouth-watering performance
should be attributed to the doggedness and determination of the new leadership
of the bank. His view was corroborated by a source from the company who
explained that the performance was driven by a relentless focus on the needs of
customers and improving the competitiveness of the bank’s offerings.
“We
have sharpened our “Go to Market” approach to better leverage the opportunities
which our large scale provides, in addition to becoming more relevant to our
clients by improving our value propositions.”
Over
the years, FirstBank has been able to grow customer accounts from about 10
million in 2015 to over 36 million (including digital wallets). It also became
the second-largest issuer of cards in Africa with over 11.8million issued
cards, onboard over 18.6 million active customers on First Bank digital banking
platforms.
New
Hands, New Culture of Excellence
Market watchers said
although some of the impressive figures represented the performance of the bank
before the coming of the current leadership, analysts said the good news coming
from the organisation will greatly challenge the incumbent board and management
to push the frontier of excellent performance in the company.
It would be recalled that the
bank was able to stabilise after a leadership tussle at the board level.
However, with the triumph of Adeduntan and his return to his post, the foremost
bank has been recording stellar performances.
Part
of the changes was the emergence of the chairman of Geregu Power Plc, Femi
Otedola as the highest single shareholder of the company.
An elated Chief Executive
Officer of First Bank, the banking arm of the holding company, Dr. Adesola
Adeduntan, described the success of the commercial banking business as the
beginning of the transition into a sustained growth phase.
He said, “Following years
of strategic restructuring of the Bank’s balance sheet and operations, the
Commercial Banking business is beginning to transition into a sustained growth
phase delivering performance commensurate to the size of our business and
capabilities of our people. Profit before tax is up 77.9%, gross earnings
30.3%, total assets 15.9%, and customer deposits up 19.5%.”
This performance, according
to him, was driven by a relentless focus on the needs of customers and
improving the competitiveness of the bank’s offerings. “We have sharpened our
‘Go To Market’ approach to better leverage the opportunities which our large
scale provides in addition to becoming more relevant to our clients by
improving our value propositions.
“This performance is also
in line with the Bank’s Quantum Profitability Leap agenda which seeks to ensure
that we fully maximise the revenue-generating capacity of our business to boost
the bottom line and fulfil the expectations of all stakeholders in the
business,” Adeduntan stated.
FirstBank engages in
the business of commercial banking and has many subsidiaries that focus on international
commercial banking, trusteeship, capital markets, pension fund custodianship,
mortgage financing, insurance brokerage, and management of SMIEIS fund
investments, small-scale banking, and bureau de change activities.
Culled
from ThisDay
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