FBNHoldings Plc recently held its annual general meeting to present financial account to shareholders. In this report AMAKA IFEAKANDU looks at FBNHoldings outstanding performance and other strategies adopted to sustain its profitability in 2021 financial year.
The slow recovery of the nation’s economy following the outbreak of COVID -19 which hit the world economy in 2020 has continued to have negative impact on the growth of business in Nigeria. This situation affected every sector of the economy, including financial service sector.
But despite the high level economic disruptions , tough operating environment experienced in the country, the FBNHoldings Plc has remained focused on value addition and leveraged its human and financial resources to deliver remarkable returns to Its shareholders.
Performance
The group delivered higher topline revenues year-on-year closing the 2021 financial year with gross earnings of N757.3 billion, a 28.2 per cent growth driven by significant growth in Non-Interest Income of 96.1 per cent.
According to the group’s audited financial result, profit before tax rose by 99.1 per cent to N166.7 billion from N83.70 billion reported in the corresponding period of last year, while profit after tax rose by 68.37 per cent to N151.079 billion from N89.730 billion recorded in the comparative period of 2020.
In 2021, the group said it operated in a challenging environment pressured by high inflation and currency devaluation, the effect of which increased operating expenses by 14.2 per cent to N334.2 billion as against N292.5 billion reported in December 31, 2020.
Although 14.2 per cent is below the inflationary level of December 2020 that stood at 15.6 per cent, the regulatory cost also rose during the period, increasing by 23.2 per cent year-on-year.
Notwithstanding the inflationary push factors, operating income grew by 35.5 per cent to N592.8 billion from N437.6 billion reported in the preceding year, resulting in an improvement in cost to income ratio to 56.4 per cent from 66.8 per cent recorded in 2020.
It assured the investors that “going forward, we will sustain our focus towards improving efficiency by containing cost and increasing revenue,” adding that total assets grew by 16.2 per cent year-on-year to N8.9 trillion from N7.7 trillion in 2020.
Th management further said this was driven by a 30.0 per cent year-on-year increase in customer loans and 26.3 per cent increase year-on-year in investment securities.
Also, cash and balances with Central Banks, loans to banks & customers and investment securities constitute 87.2 per cent of total assets as against 83.4 per cent in the comparative period.
The group said deposit from customers which increased by 19.5 per cent year-on-year to N5.9 trillion from N4.9 trillion, reaffirmed strong market access and robust funding base.
“Our investment in agent banking, digitalisation and deployment of digital platforms which our customers have adopted, improved customer penetration and deepened our solid retail franchise. This continues to provide us with access to stable funding, reducing our cost of fund ratio to 2.1 per cent from 2.3 per cent reported in December 2020 while supporting the float of our current and savings account (CASA) at 91.2 per cent,” the group said.
Commercial Banking
Also, the group’s result showed that commercial banking subsidiary, FirstBank of Nigeria Limited contributed highest in the group performance, posting profit after tax of N117.8 billion as against N67.8 billion in 2020, representing 73.9 per cent growth.
Similarly, profit before tax grew by 77.9 per cent year on year to N130.9 billion from N73.6 billion in preceding year, gross earnings up by 30.3 per cent year on year to N716.8 billion from N550.3 billion in the preceding year, while total assets went up by 16.9 per cent to N8.5 trillion, from N7.4 trillion in 2020.
The bank said “this performance was driven by a relentless focus on the needs of customers and improving the competitiveness of our offerings. We have sharpened our ‘Go To Market’ approach to better leverage the opportunities which our large scale provides in addition to becoming more relevant to our clients by improving our value propositions.”
Merchant banking & Asset management
On the part of Merchant Banking and Asset Management section, the report showed that FBNQuest group gross earnings grew by 8.5 per cent to N42.5 billion while profit before tax declined by 17.3 per cent year-on-year to close at N9.8 billion. The group said its focus on annuity and fee income-driven businesses led to a growth of 14.6 per cent in non-interest revenue year-on-year.
However, net interest Income declined by 30.5 per cent year-on-year due to lower yields on assets and a higher cost of funds, and profitability was also impacted by a 20.7 per cent growth in operating expenses.
The management said “the Investment Management (IM) Group continues to
perform strongly, contributing 32.0 per cent of gross earnings.” In 2021 in particular, FBNQuest Asset Management said it contributed 14.4 per cent to gross earnings, adding that the IM group’s contribution to revenue is a 3.8-percentage point increase from the previous year.
Adeduntan, Okonkwo, Abdullahi on performance
Commenting on the performance of the group, Chief Executive Officer of FirstBank, Dr. Adesola Adeduntan said: “Following years of strategic restructuring of the Bank’s balance sheet and operations, the Commercial Banking business is beginning to transition into a sustained growth phase delivering performance commensurate to the size of our business and capabilities of our people.”
To mitigate the effect of the low interest rate on investment securities and revenue generation, he said, “we remained deliberate with our intensified deposit mobilization and funding strategy to support enhanced loan growth at optimised rates leading to a 5.7 per cent increase in interest expense to N140.8 billion from N133.2 billion reported in the comparative period.”
Addressing shareholders at the annual general meeting, Group Managing Director FBNHoldings Nnamdi Okonkwo said: “At the beginning of the financial year, the group set out to achieve three critical strategic priorities which include enhancing non-funded revenue generation capabilities by accelerating customer-led innovation, upscaling comparative adjacencies, and seizing new local and regional opportunities as they present themselves, drive technology-led efficiency by consolidating the gains from our digital offerings and extracting value from our digital ecosystem and accelerate digitisation of critical-to-business processes leveraging robotics and expansion of our digital-only propositions locally and across our regional subsidiaries.”
Speaking further,he said , “Our continued investments in next-generation technological capabilities continue to provide foundational support for our overarching digitisation strategy.
“In the last 12 months, the group has delivered digital alternatives to customers through self-service platforms, significantly reduced the cost-to serve of key customer segments, and ultimately enriched the customers’ experience across various digital touch points by leveraging our Digital innovation Laboratory and our strategic partnerships in the Fintech space.
“At the operational level, our machine learning and robotic capabilities have been instrumental in eliminating non-revenue accreting and repetitive tasks, thereby creating the opportunity for more members of staff to pursue more productive revenue-generating activities for the group.”
Group Chairman of FBNHoldings Plc, Alhaji Ahmad Abdullahi said: “We have remained at the forefront and continued to champion the CBN’s financial inclusion agenda with an agent banking network of over 167,0001 agents located in 772 of the 774 local governments in Nigeria.
“Our unique multi-business delivery model places us in a vantage position to leverage the inherent synergies between Strategic Business Units to create unparalleled value across sectors and customer segments domestically, regionally, and internationally. One of the outcomes of these collaborative efforts is the generation of N20.8 billion in 2021, purely from the conversion of synergistic opportunities within the Group.
“Indeed, total synergy revenues have grown by 21 per cent in the last eight years, on a compounded annual growth basis from N5.5 billion since 2014. We have activated additional policies and processes to enhance the group’s capabilities to generate incremental revenues from cross-entities collaboration across regions leveraging the African Continental Free Trade Area (AfCFTA) agreement. These successes have been enabled by our most valuable assets, our staff, without whom we would not have achieved these feats.”
“The changes and restructuring within the group in recent years were informed by our singular ambition of returning to the premier position in the financial services sector across Nigeria and Sub Sahara Africa (SSA). Technology will continue to disrupt how we develop and deliver financial services.
“With the growing acceptance and popularity of digital banks, the bank and financial institutions of the future are those that will leverage technology and group ecosystem to deliver a seamless customer experience.
“As a forward-looking financial services group, we have made and continue to make significant investments in the technology that will drive our growth and successes and enable us to face the challenging competitive environment with confidence.
“Our extensive platforms, large customer base, solid franchise, and scale of services make the FBNHoldings a partner of choice for Fintechs who are naturally inclined to connect with institutions with the right network for growth.
We remain determined to stay ahead of the innovation curve and will continue to leverage our innovation hub to develop next-generation solutions that will help the Group remain top-of-mind and deliver second-to-none customer service across our traditional and virtual networks,” Abdullahi further said.
In all , the group said it “remains committed to enhancing its financial performance, growing market share, nurturing our human capital and leveraging digital technology to serve our customers better. We will continue to explore opportunities to optimise
our operations in order to increase customer satisfaction and grow annuity income as we look to maximum productivity in 2022.”
