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**FBN Holdings 2021Q3: Time For Competitive Earnings, Profit, Pay Out**

Rating: HOLD

Current Market Price: N11.70

LDR (Q3-2021): 56.21%

Year High: N12.90

Year Low: N6.25

Fair Value: N10.51

Equity Analyst: Tunde Segun Jeariogbe

**Introduction**

- We have carefully observed the recently released nine-month financial numbers of FBN Holdings Plc for the period ended 30
^{th}September, 2021, compared same with figures released in the similar period of 2020 to establish growth and make recommendations accordingly. - The holding company posted a lower performance, compared to its corresponding result in 2020.
- Worst of all, the group posted far lower numbers in its Total Comprehensive Income for the period. A further review of the numbers shows that the Total Comprehensive Income dipped due to losses arising from Debt and equity instruments.
- See below for detailed analysis:

**Company figures**

- Gross Earnings for the nine-month is estimated at N427.03 billion slightly below the N439.33 billion estimated in the corresponding period of 2020.
- Interest Income also stood at N260.11 billion, 12.63% below the comparable period, from N297.71 billion in the comparable period.
- Meanwhile, Interest Expense stood at 7.45% below the comparable period, at N97.15 billion, against N104.97 in the previous year.
- As a result of the marginal difference in both Interest elements, the Net Interest Income dipped by 1,545% to N162.96 billion, down from N192.73 billion in the corresponding quarter.
- Operating Expenses is estimated at N208.88 billion, same as 9.25% above the N191.20 billion stated in its 2020 third quarter earnings numbers.
- Profit before Tax stood at N52.93 billion, down from the N63.28 billion achieved in 2020 nine-month financials.
- After making provisions for Tax Expenses, Profit reported for the period is N40.79 billion, representing 40.15% below the N68.15 billion reported in similar period of 2020.
- Impacted negatively by the Net Fair Value losses on Debt Instruments and Equity Instruments, the Total Comprehensive Income dipped by 93.78% to N4.52 billion, from the N72.80 billion stated in its 2020 third quarter report.

- Total Assets is currently valued at N8.50 trillion, an improvement over the previous estimate of N7.24 trillion.
- Total Liabilities, on the other hand, grew by 18.69% to N7.75 trillion, compared to the N6.53 trillion estimated in 2020 financial report.
- Thus, Net Assets improved by 5.83% at the current value of N753.45 billion against N712.05 billion in 2020 third quarter.
- Retained Earnings grew by 60.92% to N205.74 billion, as against N127.85 billion in the previous quarter.
- Total Deposit also improved over the comparable period to N6.65 trillion, against N5.74 trillion of 2020.
- Total Loans and Advances appreciated by 30.29% to the current N3.73 trillion, compared to the previous N2.86 trillion.

**Financial Strength/Solvency Ratios**

- We have estimated the Debt Ratio at 91.14%, against 90.17% in the corresponding quarter, implying an improved asset valuation over last year. Note that Total Deposits was added to the Liabilities figure used in the estimate.
- We also ascertained that the Total Debt for the period can replicate Equity 10.29 times, an improved position from the 9.17 times replicate estimated from 2020 third quarter statistics.
- Total Equity was estimated at 8.86% of the Asset Value at the end of the period, a lower position of 9.88% over the 9.83% estimated in the corresponding period.
- We have currently estimated a Beta value above the market Beta for FBNH. Note that at 1.01 beta value, it’s still below the industrial average of 1.11.

**Profitability Ratios**

- EBITDA is currently estimated at 48.81%, same as 8.63% drop from the previously estimate of 50.13% in 2020.
- Pre-Tax Margin stood at 12.40% down from the last estimate of 14.40% at the end of 2020 nine-month.
- Interest Expense posted for the period is same as 22.75% of the Estimated Gross Earnings figure; this is same as 4.78% drop from the previous quarter estimate.
- Return Achieved on Average Equity used through the period was estimated at 5.41%, far below the 9.75% return achieved in 2020.
- See below table for detailed profitability ratios and comparisons.

**Efficiency Ratios**

- Operating Expenses is estimated at 48.92% of the Gross Earnings Value estimated for the period. This is an improved from the 43.52% estimated from 2020 financials.
- Similarly, Gross Earnings was estimated to be 5.02% of Total Assets, this is 17.22% drop in efficiency when compared to estimates from the corresponding period of last year.
- Total Loan to Deposit Ratio achieved at the end of the quarter stood at 56.21%, up from the 49.95% achieved in 2020.

**Investment/Valuation Ratios**

- Profit on each unit of FBN Holdings Plc shares at the end of the quarter is estimated at N1.14, up from the previously estimated N1.90.
- Total Comprehensive Income per unit is estimated for N0.13 versus N2.03 in the corresponding period of 2020.
- Price to Earnings Ratio adjusted per quarter stood at 3.43x as against 1.34x in 2020
- The said earnings per share is same as 9.71% of the current market price of FBN Holdings Plc on the exchange when the result was released, and represents a far lower yield when compared to the previous quarter estimate.
- The current Book Value of FBN Holdings Plc is N20.99, same as 5.83% improvement from the N19.84 estimated at the end of the corresponding quarter.
- Confirming a seemingly under-priced position is the Price to Book Value ratio that was clearly below unity.

**Valuation**

Exploring our blend of valuation tools, we conservatively valued each units of FBNH shares at **N10.51**, thus, we rated it a **Hold.**