First Bank grows profit in Q3, gears up for further gross earnings

First Bank [FBN Holdings] is expected to maintain a continuing growth in profit for the fourth year running in the 2013 financial year. The company sustained revenue growth during the third quarter and prospects are good for posting one of the highest gross earnings in the banking industry in 2013.

The company posted a net profit of N58.66 billion at the end of the third quarter against the corresponding figure in the preceding year and full year net profit is estimated at N81.5 billion for FBN Holdings for the 2013 operations. This will be an increase of 7.8% over the net profit figure of N75.57 billion the bank posted in 2012. The bank had grown after tax profit by 65.5% in 2012 and has maintained profit growth every year since 2010.

Although there is an industry-wide slowdown in profit growth per interim reports in the 2013 financial year as Asset Management Corporation of Nigeria (AMCON) debits reduced profit margins of banks generally, First Bank nevertheless remains one of the top banks by profit at the end of the third quarter.

The company performed well in terms of revenue growth in the third quarter. It raised gross income by about 13% to N294.6 billion at the end of the third quarter. Full year expectation indicates gross earnings in the region of N397 billion for FBN Holdings in 2013. This will be an improvement of 7.5% over the full year revenue figure in 2012. It had grown gross earnings by about 25% in 2012.

Gross income remains dominated by interest income but growth is led by foreign exchange earnings, which grew by 830.4%; gains on securities, which rose by 541%; and other operating income, which advanced by 140% during the review period. Insurance premium rose by 91.1% and dividend income went up by 65% during the same period.

However, revenue from net fees and commissions income declined above 11% during the period. Interest expenses rose by about 59% to N66.73 billion at the end of the third quarter compared to an improvement of about 12% in interest income during the same period. The proportion of interest income claimed by interest expenses rose from 19.6% in the corresponding period in 2012 to 28% at the end of the third quarter. This is in line with the increased cost of funds in the economy generally, as the monetary policy of the Central Bank of Nigeria (CBN) remained stringent.

Significant cost savings happened in respect of operating expenses, which increased moderately at 5.0% to N139.39 billion compared to the increase of 13% in gross income. Operating cost margin therefore went down from 50.8% in the third quarter of 2012 to 47.3% in September 2013. Revenue saved here helped to keep profit margin within the top industry range.

The bank earned N1.80 per share at the end of the third quarter and earnings per share is estimated at N2.50 for FBN Holdings for the 2013 financial year. This will be an increase from the earnings per share of N2.32 it realized in 2012.

The bank paid a dividend of N1.0 per share at the end of its 2012 operations, which is a pay-out ratio of 43%. Based on the last pay-out ratio, a minimum dividend of N1.08 is expected from FBN Holdings from its 2013 operations. The bank's dividends records have continued to improve from 60 kobo in 2010 and 85 kobo in 2011.

The bank's dividend policy has largely ensured good profit retentions with which it builds up the reserve account. It has rebuilt retained earnings to the tune of N102 billion at the end of the third quarter, a strategy which permits regular dividends to shareholders throughout all operating seasons.