Why analysts are signaling that First Bank’s takeover is real
A gaggle of financial and economic experts say the repeat of First Bank’s impressive first-quarter performance not only showed the consistency of its rebound, but also demonstrated the fact that the lender’s recovery is real.
This is based on First Bank’s significant reduction in impairment charges (resulting in a clean loan portfolio) in its Q1 2022 results, after successfully reducing its non-performing loan to 6.1% in 2021 all year performance.
Financial experts describe an impairment charge as a process companies use to write off or write off worthless assets/goodwill. These are assets that fall in value or are completely lost, rendering them completely worthless.
An analysis of the bank’s performance drawn from the group’s first quarter 2022 results showed that its exposure to bad debts has decreased significantly as the amount set aside for impairment charges fell from N13.175 billion in the first quarter of 2021 to 8.75 billion naira in the first quarter of 2022.
During the reporting period, First Bank of Nigeria Limited recorded a gross profit of N170.4 billion, up 33% from N128.1 billion the previous year.
The bank’s net interest income was estimated at N72.9 billion, an increase of 42.1 percent from the N51.3 billion generated in the same period of 2021, while Non-interest income was N58.8 billion, up 21.7% from the 2021 figure.
Profit after tax for the first quarter of 2022 was N31 billion, while N16.3 billion was the reported figure for the first quarter of 2021. The bank reported total assets of N8.8 trillion, an increase of 3.5% from 8.5 trillion naira in the previous year.
To show that the bank was in serious lending business, loans and advances (net) from its customers totaled N2.999 trillion, up 5.8% since the start of the year in December 2021, this which was estimated at 2,835 naira. billion, while customer deposits were 5.9 trillion naira, compared to 5.6 trillion naira in the first quarter of 2021, an increase of 5.4%.
In June 2020, improvements were seen in the bank’s NPL ratio, which stood at 8.8%. By March 2021, that figure had dropped impressively to 7.9%, and based on the 2021 results, the figure was just 6.1%.
Non-Performing Loans, or NPLs, are bank loans that are either late in repayment or unlikely to be repaid by the borrower. The inability of borrowers to repay their loans worsened during the financial crisis and subsequent recessions.
Financial Derivatives Company (FDC) analysts in their focus on business over the weekend said: “First Bank delighted investors with a pleasant surprise when it announced exceptional results confirming that its recovery strategy based on the pillars of innovation, resilience and deepening works.
“Following the First Bank restructuring exercise, the bank declared a whopping N141 billion as loan recovery on a previously canceled loan from Atlantic Energy Ltd in 2021. This exercise reinforced a 100% growth in net profit during the reporting period. ”
Analysts attribute this strong performance to a strong loan portfolio, efficient cost structure and increased digital services.
Dr. Abiodun Adedipe, an analyst, said the low NPLs recorded in the banking sector are an indication that banks are ready to prevent a slippage.
He said: “Several regulatory requirements have been introduced by the CBN to help banks maintain a clean record with respect to their loan books while not preventing them from offering loans.”
“The NPLs, at 4.94%, won’t last long and banks need to sit back to avoid a drop.”
For a bank nearly brought to its knees by the burden of non-performing loans, it was a great relief to shareholders and regulators that, for the first time in a long time, FirstBank’s NPLs fell to 6.1 percent. percent, a significant improvement for the bank relative to other Tier 1 banks and the regulatory threshold of 5.0 percent.
Tier 1 banks comprising five lenders maintained an average NPL ratios of 5.1% in the first half of 2021, according to CBN records.
First Bank of Nigeria recorded the highest NPL ratio of 7.1% last year, which was above the regulatory threshold of 5.0%. This is followed by GTCO (6.0%), Zenith Bank (4.5%), Access Bank Plc (4.3%) and UBA, which has an NPL ratio of 3.5%.
For shareholders of Nigeria’s leading lender, First Bank of Nigeria Limited, it is a season of celebration and a time to praise the bank’s board and management for successfully getting back into the account, after a long period of operation challenges mainly attributed to the increase in cases of non-performing loans.
Shareholders, who joined other stakeholders from the bank and its parent company, FBN Holdings Plc., in assessing its first-quarter 2022 results released last week, said it was a big relief. that the organization has raised the question of the ready non-performers behind it.
According to them, the bank’s excellent results for the year 2021 are a taste of the results of the first quarter of 2022 and that the repetition of impressive results for the first quarter has not only shown the consistency of its restructuring but that it demonstrated the fact that the recovery is real.
FirstBank Group Chief Executive, Dr Adesola Adeduntan, who expressed the bank’s determination to aim higher, said: “At FirstBank, we have always been closely tied to the fabric of this nation with a service-oriented commercial banking offering. complete meeting all segments. economy.
“Our first quarter results demonstrate that we are in earnest on our quantum leap journey in profitability with pre-tax profit doubling to N34.1 billion as the bank begins to reap the dividends from the successful restructuring of its balance sheet, risk management overhaul, robust technology and innovative service offerings.
“Looking forward, we will continue to maximize all opportunities presented by our extensive network and support our customers with innovative, value-added solutions during these uncertain times while investing in strengthening our digital banking offerings to deliver a better experience. customer.”
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