• Hopes To Recover Chunks Of NPLs

FBN Holdings Plc, on Thursday presented its audited results for the full year ended December 31, 2016 to the Nigerian investment community, with gross earnings rising almost at the same pace as net profit for the period, even as the directors have recommended a dividend of N7.179bn or 20 kobo per share for approval at the annual general meeting slated for Friday, May 19, 2017 in Lagos. The dividend is to be paid, subjected to approval at the AGM on May 22 to those whose names appear in the register of members from May 8 to 12 (both date inclusive).
According to the result, gross earnings rose 15.7% to N581.8bn, compared to N502.7bn in the 2015 full year; out of which net-interest income formed the bulk with N304.4bn, up 14.8% from previous year’s N265.2bn; while non-interest income rose by a significant 68.9% from N97.9bn to N165.5bn.
The group’s operating income rose by 29.4% to N469.9bn from N363.1bn; the bulk of which was negatively impacted by the N226bn impairment charge for credit losses, which was almost double the N118.8bn reported in 2015; while Non-Performing Loan ratio stood at 24.4%, from 18.1% in previous year.
The growth in impairment charge was driven, according to the group’s statement, “largely driven by the translation effect of the foreign currency portfolio due to the Naira devaluation as well as one-off exceptional credit charge from legacy exposures in subsidiaries.”
Apart from forex losses, the statement also said the credit loss was predominately “driven by the oil and gas sector exposures and to a lesser extent real estate/residential mortgages, general commerce and the general sectors,” following which cost of risk increased significantly to 10.4%, from the previous 5.7%.
The group however assured that focus has remained “on remediation and recovery activities towards declassifying non-performing accounts and driving asset quality improvements. In line with this, we have made significant progress on remediation and recovery of NPLs in the last nine months. One of the three major accounts contributing to the NPL has been fully restructured and will be reclassified as a performing loan in 2017 in line with IFRS guideline, while asset realization is at advanced stage on the second material NPL.”
Operating expenses was down slightly to N220.9bn from N222.7bn; just as profit before tax limped by 6.3% to N22.9bn, compared with the previous N21.6bn; while profit after tax stood at N17.1bn from N15.5bn. The net profit, translated to 39 kobo earnings per share, as against the previous year’s 43 kobo; while net profit margin, which measures the management’s efficiency, in the period under review (how much of each Naira earned was converted to profit), stood at 2.93%, down from 3.08% in 2015, while the best of the industry’s recorded NPM of 32.31%, which was down from 34.28%.
While the total assets rose by 13.7% to N4.7tr from N4.2tr; customer deposits increased to N3.1tr from N3tr; with net customer loans and advances at N2.1tr, up from up 14.7% from N1.8tr in the 2015 financial year.
Some other key ratios included the post-tax return on average assets of 0.4%, same as previous year; net-interest margin of 8.8%, as against the previous 8.1%; cost to income ratio of 47%, from 61.3%.
Commenting on the numbers, Urum Kalu Eke, FBN Holdings’ Group Managing Director described the 2016 financial year as one “characterised by significant uncertainty in the operating environment.”
That notwithstanding, he said the group “delivered a solid performance while focusing on addressing the pre-existing issues in the loan book which resulted in the current loan loss. This performance has been achieved through ongoing initiatives in driving efficiency across the various businesses, transforming the risk management and control environment, containing cost, as well as enhancing revenue generation from the banking and non-banking subsidiaries.
“We expect an improved economic environment through 2017 and are confident that the foundations we have put in place will drive improved financial performance and consequently enhance shareholder returns.”
Still on NPL, the group further assured that “resolution on Atlantic Energy has taken longer than expected but despite the delays we are confident in achieving a positive outcome in the near future.”