FBN Holdings Plc H1 2017 Earnings Presentation – Key Takeaways

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FBN Holdings Plc held its H1’17 Investors and Analyst Conference Call Earnings Presentation. Proshare NG participated along with leading market analysts and professionals.

The management of the bank stated that the bank did very well in H1 2017 despite challenges and acknowledged that there are hurdles to cross. Gradual economic recovery was witnessed in H1 2017 with increased foreign currency interventions. Inflation continues to decline while yields on investment securities was relatively stable at high levels and its positive for the bank.

A very important regulatory development that occurred in Q2 2017 is the issuance of a revised guideline on investment for Pension Fund Assets which now allows PFAs to invest in equities of Bank holding companies and is considered favourable to FBNH being an HoldCo. Also, the introduction of a special FX window for investors, exporters and end-users to deepen the FX market which has helped to improve dollar liquidity within the system.

The bank’s earnings generating capacity remained very strong with 7.8% YoY growth recorded in gross earnings while reduction was recorded in impairment charge following improvement in asset quality. Also, the structure of the bank’s funding base remained strong with stable deposits at competitive rates.

Cost to income ratio adjusted for FX revaluation gain closed at 54.7% in H1 2017 from 59.7% in H1 ’16. The ratio reflected a normalised performance from the one-off foreign exchange revaluation gains of the previous period. The bank’s cost optimisation initiatives continued to gain traction but partly offset by the currency devaluation and high inflationary environment

In a nutshell, below are the key takeaways from the H1 2017 earnings presentation made by the bank’s management;

• The key drivers of the rising OPEX of the bank are (1) Exchange rate and (2) Inflation.

• The bank’s 2017-2019 strategic outlook will continue to focus on rebuilding the group for enhanced shareholder value through the right people, right process and technology.

• The bank plans to achieve single digit NPL ratio by 2019.

• The bank expects to achieve enhanced revenue generation; and

• Plans to reduce cost of risk to less than 2% and improve return on equity to 20% by 2019.

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