FirstBank pays N56bn to Firstmonie agents as commission in 4 years
With the impressive financial performance recorded in the 2021 financial year which was sustained in the first nine months of this year, 9M’2022, FirstBank Nigeria Limited has signaled its firm return to profitability growth and industry leadership, confirmed by improved credit ratings and international recognitions.
Building on the double digit performance growth recorded in the full financial year ended 2021, the bank, which is the commercial banking arm of FBN Holding Plc, first nine months of this year, 9M’2022, recorded 27.5 per cent growth in gross earnings, 142.1 per cent growth in profit after tax, driven by 10.1 per cent growth in total assets, buoyed by 13.2 per cent increase in Customers Deposits as well as a 24.5 per cent increase in Loans and Advances to Customers.
Sustained Growth Phase
Dr. Adesola Adeduntan, Managing Director/Chief Executive Officer, FirstBank Nigeria Limited, explained that the sustained growth in performance indices was the outcome of years of strategic restructuring of the Bank’s balance sheet and operations, adding that the results also a signal that, “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.
“The performance of the Commercial Banking Group for the nine months ended September 30, 2022, has again shown that the Group is making progress in the pursuit of its ‘Quantum Profitability Leap’ agenda. The improved profitability during the period under review further reinforces the Bank’s commitment to its growth aspirations despite the challenging market conditions.
Our gross earnings are up 27.5% year-on-year, y-o-y, to ¦ 512.9 billion, and net interest income up 55.7 % y-o-y to N248.5 billion respectively. On the back of the impressive growth recorded in our top line, our profit before tax recorded another strong growth of 119.1% y-o-y to ¦ 96.4 billion, whilst profit after tax also grew impressively by 142.1% y-o-y to ¦ 85.7 billion as the Bank continues to reap the benefits of the changes to our business model in addition to revamping of our risk management and control architecture.
We continue to record progress in driving down our non-performing loan ratio, which has now come down to 4.86% at the end of the third quarter, within the regulatory limit of 5%. This is the first time since 2015 that we would be within the regulatory limit, and we achieved this ahead of our initial target of Q4 2022.
Ratings Upgrades
FirstBank’s transition to sustained growth in performance indices, prompted two global rating agencies, Moody’s Investors Services and Fitch Ratings to upgrade the credit ratings of the bank and that of FBN Holdings, the parent company.
Citing improved asset quality, healthy profitability, improved capitalisation, stable funding base, strong franchise as well as resolution of governance irregularities, Fitch Ratings, in September, upgraded upgraded FBN Holdings Plc’s (FBNH) and First Bank of Nigeria Ltd’s (FBN) Long-Term Issuer Default Ratings (IDRs) to ‘B’ from ‘B-’.
Fitch has also upgraded their Viability Ratings (VR) to ‘b’ from ‘b-’, adding that The Outlooks are Stable
According to Fitch, “FBN is the third-largest bank in Nigeria, representing 11% of domestic banking-system assets at end-2021. A strong franchise supports a stable funding profile and a low cost of funding. Revenue diversification is strong, with noninterest income representing 48% of operating income in 2021.
“Improved Asset Quality: FBN’s impaired loans (Stage 3 loans under IFRS 9) ratio has declined significantly to 5.6% at end-1H22 from a peak of 25% at end-2018 as a result of sizeable write-offs, successful restructurings and recoveries and, more recently, the flattering effect of strong loan growth. Stage 2 loans remain significant (15% of gross loans at end-1H22) but Fitch expects these to decline as oil and gas exposures return to performing status. Specific loan loss allowance coverage of impaired loans (49% at end1H22) is acceptable in view of its collateral levels.
“FBNH delivers healthy profitability, as indicated by an operating return on risk-weighted assets (RWAs) averaging 2.6% over the past four years (4% in 2021, underpinned by large recoveries on a previously written-off loan). Earnings benefit from a low cost of funding and strong non-interest income but are constrained by a high cost-to-income ratio (74% in 2021) and significant loan impairment charges (LICs) in recent years.
“ FBNH’s FCC ratio (19.1% at end-1H22) has been on an upward trend in recent years, as a result of strong internal capital generation, which has been influenced by a modest dividend payout ratio. Impaired loans net of specific loan loss allowances has declined as a share of FCC in recent years to a moderate 12% at end-1H22. Pre-impairment operating profit is sizeable (an annualized 5.1% of average gross loans in 1H22), providing a reasonable buffer to absorb LICs without affecting capital”.
Prior to the rating upgrade by Fitch, Moody’s Investors Services, in addition to affirming FirstBank’s B2 long term deposit ratings, upgraded the bank’s outlook from ‘Negative’ to ‘Stable’, citing improving asset quality, resilient pre-provision profitability and robust liquidity metrics.
Announcing the upgrade in December last year, Moody’s said: “ “The affirmation of First Bank’s B2 long-term deposit ratings reflect the affirmation of the bank’s b3 BCA and Moody’s ongoing expectation of a high probability of government support, leading to one notch of uplift from the BCA.
“First Bank’s b3 BCA reflects the bank’s improving asset quality, resilient pre-provision profitability and robust liquidity metrics. These strengths are moderated by the bank’s still-high level of problem loans and modest capital buffers as indicated by its nominal leverage metrics.
“The stable outlook reflects the stable outlook on Nigeria’s government issuer rating. First Bank has a large exposure to sovereign securities at 268% of its tangible common equity as of June 2021.”
Leadership rankings
In addition to the rating upgrade by these global rating agencies, FirstBank’s return to the path of sustained growth, has also catapulted the bank back to its premier leadership position in the Nigerian banking industry.
This was confirmed by the Top 100 African Bank Rankings 2022 recently released by The Banker Magazine from the stables of Financial Times which shows FirstBank leading the Nigerian table in four areas, the highest achieved by any Nigerian bank,
The rankings, based on the end of year 31 December 2021 audited financials of all banks in the Top 100, reveal FirstBank’s ranking as number one in Nigeria in terms of Overall Performance, Profitability, efficiency and Return on Risk.
Also confirming the FirstBank’s rebound to industry leadership is the Euromoney Market Leaders 2022 award, where the bank was crowned Market Leader (tier-1 recognition) in Corporate and Social Responsibility (CSR); Market Leader (tier -1 recognition) in Environmental, Social and Governance (ESG); Highly Regarded in Corporate Banking and Digital Solutions; and Notable in Small and Medium Enterprises.
Citing the impressive performance of the FirstBank for the basis of the award, the Euromoney Market Leaders 2022 panel said: “Despite a difficult operating environment in Nigeria in 2020-21, the bank had a successful period, with year-on-year growth of 30.3% in revenues and 77.9% in profit before taxes.
“The bank also increased its number of customer accounts by six million, reaching 36 million at the end of 2021, and achieved modest growth of 500,000 in the number of active card users when compared with 2020, increasing to 11.7 million in 2021.
“The bank has been focused on digital transformation for some time and this was evident in the reporting period. It processed more than 178 million electronic transactions monthly and grew the number of customers on its digital channels to more than 18 million in 2021.”
Commitment to Implementing its ESG Agenda
FirstBank is constantly working to deliver short and long-term value for our stakeholders by building a solid Environmental, Social and Governance (ESG) culture and continuously engaging with and communicating its activities to them. It is in this way that the Bank creates mutually beneficial business opportunities and outcomes for its stakeholders.
FirstBank’s long-term approach to sustainability includes minimizing its direct and indirect impact on the environment. This has informed its efforts at conserving energy to reduce global warming by reducing our CO2 emissions, as well as conserving resources
With a standard Environmental Social and Governance Management System in place, FirstBank has been employing international best practice tools to manage risks in the lending process. For example, in H1 2022, over 2.2 trillion-naira worth of transactions were screened for ESG risks.
As part of its Climate initiative, FirstBank is partnering with National Conservation Foundation on the Green Recovery Nigeria (GRN) – an initiative which includes driving afforestation and reforestation. Forest resources provide employment for 2 million people and tree planting is one of the most effective ways of tackling climate change caused by greenhouse ga.
FirstBank community development initiatives are anchored on its strategic pillar of Education, Health and Welfare. The FirstBank Corporate Responsibility & Sustainability (CR&S) week is a dedicated week that offers employees opportunities to give their time and resources to defined causes in line with FirstBank’s CR&S strategic approach.
The Week’s activities are an aspect of FirstBank’s Employee Giving and Volunteering Programme, which was instituted with the aim of encouraging employees to give back to the community as well as inculcate in them the integral corporate culture of giving.
FirstBank held the maiden edition of the CR&S Week in 2017 with a focus mainly on the Start Performing Acts of Random Kindness (SPARK) initiative. The initiative focuses on creating and reinforcing the attitude of going beyond just meeting the material needs of people, who are unable to help themselves, to showing compassion, empathy and civility. In 2022 CR&S week, the achievements include 30,000 underprivileged lives including women touched; 7million people reached with a kindness message and 421 took a kindness pledge partnering with over 80 NGOs and charities in over eight countries across Sub -Saharan Africa and UK.
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