First Bank no longer number one

In the FBNH Plc third quarter result ended September 2013 released on Tuesday, the group posted strong gross earnings of  N290.8b, but once again came short of close rivals in key performance index of profitability.

In the post-Sanusi reform era, three banks have evolved as clear front runners - Zenith Bank, Guaranty Trust Bank and First Bank of Nigeria Plc. Incidentally, with the advantages of its long years of banking relationships with businesses and individuals across the country, First Bank has continued to lead the industry in gross earnings but has struggled to translate the advantage into higher-than-rivals' profitability.

In key indices of profitability and value creation, the banking behemoth has for some years lagged behind both Zenith Bank and GTBank. Its latest result (Q3 2013) still fell short of its two closest rivals with about N10 billion, as both Zenith and GTB returned post-tax profit of N69 billion as against FBNH's N59 billion.

FBNH posted, gross earnings of N290.8 billion in its Q3 result, up11.4% year-on-year (Sep 2012: N261.0 billion); but net interest income came in at  N172.4 billion, showing just marginal 0.4% year-on-year growth (Sep 2012: N171.8 billion).  Non-interest revenue stood at N51.6 billion, up 9.4%year-on-year (Sep 2012: N47.2 billion). It also announced an operating income of N224.1 billion, up 2.3% year-on-year (Sep 2012: N219.0 billion),  Impairment charge for credit losses of N15.7 billion (Sep 2012: N9.8 billion) and profit before tax of N70.1 billion, relative to N75.7 billion as at September 2012.

A  further analysis of the FBNH results shows that total assets grew by 8 per cent to N3.7 trillion  quarter-on-quarter (Jun 2013: N3.4 trillion) and up 14.6% year-to-date (Dec 2012: N3.2 trillion), while total customer deposits at N2.8 trillion, meant an increase of 9.6% quarter-on-quarter (Jun 2013: N2.6trillion) and 16.6% year to date (Dec 2012: N2.4trillion)

Also, total customer loans and advances (net) grew by 5.8 per cent to  N1.6trillionquarter-on-quarter (Jun 2013: N1.5 trillion) and 4.5% year to date (Dec 2012: N1.5trillion).

In comparison, Zenith Bank achieved  profit after tax of N69 billion with a relatively less gross earnings of N255 billion for the nine months ended September 30, 2013, an indication of some festering cost challenges for the FBNH.

Zenith Bank's unaudited results showed net interest income rose by 16 per cent to N138 billion, from N199 billion in 2012. Profit before tax grew by 10.4 per cent from N75 billion to N83 billion, while profit after tax rose by 8.9 per cent to N69 billion as against N64 billion in 2012.

Zenith Bank recorded a 15 per cent growth in the loans and advances portfolio, which stood at N1.108 trillion as at the end of the third quarter, compared with N964 billion  in the corresponding  period of last year and N1 trillion last June. The current loan portfolio indicates that the bank gave out N108 billion within three months.

A further analysis of the nine months results of Zenith Bank showed that deposits rose by 18 per cent, from N1.723 trillion to N2.033 trillion. Total assets stood at N2.853 trillion as against N2.458 trillion.

But it is GTBank's result highlights First Bank's situation even more clearly. With gross earnings which are just a little more than half of the FBNH's, GTBank is able to wrench better pre-a nd post-tax profitability.

GTbBank  posted a profit before tax of N82.36 billion for the nine months ended September 30, 2013, which is a 7.12 per cent increase over N76.89 billion recorded in the corresponding period of 2012. The bank earned N69.24 billion post-tax profit  as against the N63.734 billion earned in the comparable period of 2012.

Also its gross earnings rose to N181.96 billion from N166.48 billion the previous year.

A further analysis of the results showed that the bank's total assets stood at N1.875 trillion in the review period, compared to the N1.73 trillion it stood as at December 2012. Also, its customers' deposit increased to N1.271 trillion in the period under review, compared to N1.148 trillion as at the end of December 2012.

Also, GTBank's earnings per share increased to N2.44, from N2.25.

This pattern is building up over time. In the first half results of the three bank, First Bank still struggled to establish a clear lead  even when it has far better gross earnings of the three. The bank posted gross earnings of N194.88 billion in the second quarter, which is an increase of 7.7% over the N180.94 billion figure in the corresponding period last year. This is a stable growth from the gross income of N99.47 billion posted in the first quarter.

But on profitability, the bank posted a net profit of N46.10 billion, which is marginally up from N45.35 billion in the corresponding period last year. It is however a continuing growth from the N24.44 billion after tax profit reported at the end of the first quarter.

Clearly, the bank struggled to establish clear leadership in profitability profile despite its undiminished lead in garnering earnings.  Zenith 's N45.42 billion post tax profit for the first half is not far off mark from the figure posted by FBNH in the same quarter.

Zenith Bank declared  profit before tax of N54.1 billion for the six-month period ended June 30, 2013, compared to N50 billion it posted in the corresponding period of 2012. It achieved this from the N151 billion gross earnings it reported in the first half of 2012 to N171 billion in the same period in 2013.

However, its cost to income ratio reduced from 57.2 per cent to 53.3 per cent.

But GTBank was a clear leader in the first half with a post-tax profit of N49.0 billion achieved from a pretax profit of N57.36 billion.

The bank also announced a profit after tax of N49.01 billion as against N45.55 billion recorded in the same period of last year.

The bank recorded earnings per share of N1.73kobo, an improvement of over N1.59 kobo recorded in the same period of 2012. It also recorded interest income of N92.00 billion, whereas N83.18 billion was recorded in the first six months of last year. The half-year results include gross earnings of N124.2 billion, total assets of N1, 860.49 billion and total deposits of N1, 272.10 billion.

The bank also posted loans to deposits ratio of 70.70%, while non-performing loans to total loans of 3.41% was recorded in the first half.

Overall, the FBNH 's cost to income ratio (CIR) of 62.2% (Sep 2012: 60.6%)is too high. Whereas we observed increased operational Efficiency in the first quarter, with CIR inching downwards to sub

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60% levels in Q1'13 (to 57% from 62%
in FY'12), the trend reversed with CIR returning to 63% in H1'13 and remained in that range (at 62 per cent) in the third quarter.

It should work on cutting down operating expenses and reinforcing its efficiency ratios. The ultimate goal of every business