FBN Holdings: A relatively good year





Our analysis of FBN Holdings’ newly released 2017 results shows that it enjoyed an acceptable level of profitability during the course of the year. It was able to step up the level of its core banking operations, and generally recorded better profitability ratios than it did in the erstwhile years.

With a profit for the year that was higher than that of the prior year, the bank was able to pay shareholders a higher level of dividend than it did in the preceding year.


Core operations

The 2017 FY was an excellent year for FBN Holdings, as it was able to expand its core banking operations during the course of the year, as well as stepped up its non-core banking businesses. It therefore had a better gross earnings of N595.4 billion in 2017, up from N581.8 billion in 2016. The growth recorded was however quite slight, at 2.3 per cent.

It however had a lower interest margin of 70.7 per cent, lower than 75.1 per cent in the prior year, and this was not indicative of a better efficiency in the core business of lending and borrowing. This lower net interest margin was perpetuated perhaps because of a closing gap between average lending rate and average interest rate. Average lending rate increased over the preceding year’s (to 17.1 per cent from 19.0 per cent) while average deposit interest rate increased to 3.6 per cent from 3.2 per cent. This means that the bank charged its lenders a lower interest rate, but paid its depositors a higher interest. It is worthy of note that during the course of the year, the bank gave out a higher level of loans and advances, and also received more deposits from customers.

Profit for the year, at N56.4 billion, was a whopping 146.3 per cent more than the N22.9 billion profit recorded in the preceding year.

Earnings per share, was predictably higher than that of the prior year, closing at 121 kobo, as compared to 39 kobo before. Dividend per share also improved to 25 kobo in 2017 from 20 kobo in 2016.


Profitability ratios

The bank recorded mostly better results in respect to profitability in 2017. With a higher revenue as well as a higher profit, the bank was first able to record a profit margin that was better than that of 2016. At 9.5 per cent, the bank’s profit margin was higher than the 3.9 per cent recorded in the prior year but is still to be commended. What this means is that for every N100 earned by the bank in the course of the year, N9.50 made it to the profit position, as compared to N3.90 for the year preceding 2017.

The bank was however able to squeeze as much profit as was possible from assets, as assets deployed earned slightly more in 2017 than it did in 2016. Return on assets (ROA) for the year stood at 1.1 per cent in 2017, as compared to 0.5 per cent in 2016. While this ROA is not as high as those of the bank’s contemporaries, the improvement it was able to record of itself is commendable.

For the 2016 financial year, FBN Holdings deployed equity valued at N678.2 billion and for every N100 equity deployed, the bank made an after-tax profit of N5.90, a progression over the profit of N2.10 made in 2015.

Employing fewer employees in 2017 than in the previous year, earnings per employee improved to N68.1 million on the average, up from N62.9 million in 2016.


Other ratios

The bank did not have a better capital adequacy standing in 2017 than it did in 2016, but is still doing well in its primary business of giving out loans. FBN Holdings’s capital adequacy in 2017 was 16.3 per cent, lower than 25.9 per cent in the prior year. This result is still higher than the 16 per cent rate mandated for Systemically Important Banks by the CBN.

For the 2017 financial year, the bank recorded a lower proportion of loans classified as non-performing when compared to the prior year’s. The 21.5 per cent result was lower than 24.4 per cent result recorded in the preceding year, and overshot the Central Bank’s regulatory threshold of 3.66 per cent.

The bank had a debt to equity ratio of 6.7, meaning that it is using N6.70 of liabilities in addition to each N1.00 of stockholders equity. In other words, the bank is using N7.70 of total capital for every N1.00 of equity capital, lower than the N8.10 it did in the erstwhile year.


Sustainable growth

FBN Holdings paid shareholders a higher level of dividend in 2017 than it did in 2016. Shareholders received a total dividend of 25 kobo, higher than 20 kobo in the prior year. Retention ratio was 0.77 times, as compared with 0.41 times in the prior year.

Assets/equity ratio was higher that of the prior year while asset turnover was almost on par with that of the prior year. Analysis shows that sustainable growth for 2017 was 6.4 per cent, higher than 1.6 per cent before, and this translates to mean that the bank’s growth ceiling, utilizing only its own source of funding for growth, improved. Meanwhile, actual growth was only 2.3 per cent, lower than that of the preceding year. For 2017, the actual growth was lower than sustainable growth, meaning that FBN Holdings grew below its ceiling.


Stock value

Our analysis shows that FBN Holdings’ stock is undervalued. Currently trading at N12.50 (as at May 4 2018), it is one of the higher priced stocks on the banking sub sector of NSE, but its net assets per share was N18.89 and this was higher than the current market price of N12.50, hence our diagnosis of undervaluation.

Also, book value at N678 billion is higher than the size of current market capitalisation which stands at N449 billion.

The stock is however not low priced enough that it is easily accessible by all kinds of investors. As it is one that pays dividend on a regular basis, we recommend a buy for those who can afford it.


Unique strategies

FBN Holdings Plc. is the non-operating financial holding company of one of the largest banking and financial services organisations in Africa. A truly diversified financial services Group that offers a broad range of products and services, including commercial banking, merchant banking and asset management and insurance to millions of customers. FBN Holdings oversees business groups that collaborate to deliver innovative financial solutions. Such business groups include First Bank of Nigeria Limited (FirstBank), a commercial bank with operations in 12 countries; FBN Quest Merchant Bank Limited, FBN Quest Capital Limited, FBN Quest Trustees Limited, FBN Quest Capital Asset Management Limited, FBN Quest Funds Limited and FBN Quest Securities Limited, all of which collectively handle the Merchant Banking and Asset Management business of FBN Holdings.

The Insurance business comprises FBN Insurance Limited, FBN General Insurance Limited and FBN Insurance Brokers Limited. The business group offers life and general insurance services, as well as brokerage services.

The bank and the non-bank subsidiaries of the holding company operate in Nigeria, as well as through overseas branches, subsidiaries and representative offices.




This has been a good year for FBN Holdings. It remains to be seen if the 2018 financial year will end on the same note.

*Source: FBN Holdings’s 2017 financial report

*The Nigerian Stock Exchange

Nbillion 2017 Percentage change 2016
Turnover 595.4 2.3 581.8
Profit pre tax 56.4 146.3 22.9
After tax profit 40 227.9 12.2
Total assets 5236.5 10.5 4736.8
Equity 678.2 16.4 582.6
Liabilities 4558.3 9.7 4154.2
Deposits 3808.6 21.2 3141.3
Loans and advances 2744.1 28.8 2130.5
Earnings per share 121 210.3 39
Dividend per share 25 25.0 20
Core operations 2017 2016
Turnover growth rate 2.3 15.7
Profit growth rate 146.3 6.0
Average lending rate (%) 17.1 19.0
Average interest rate 3.6 3.2
Net interest margin (%) 70.7 75.1
Profitability ratios
Profit margin (%) 9.5 3.9
Return on assets (%) 1.1 0.5
Return on equity (%) 5.9 2.1
Earnings per employee (Nm) 68.1 62.9
Other important ratios
% of classified loans 21.5 24.40
Capital adequacy 16.3 25.9
Debt to equity ratio 6.7 7.1
Actual Vs sustainable growth
Profit margin (%) 9.5 3.9
Retention ratio 0.77 0.41
Asset turnover (times) 0.11 0.12
Assets/Equity (times) 7.72 8.13
Sustainable growth 6.4 1.6
Actual growth 2.3 15.7


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