FBN Holdings Records N226bn Impairment Charges, N17.1bn Profit After Tax

FBN Holdings Plc yesterday released its full year results for the year ended December 31, 2016, recording impairment charges of N226 billion, which was 38 per cent of the gross earnings reported by the group for the year.

The bank’s non-performing loan (NPL) ratio also deteriorated to 24.4 per cent in 2016, compared with 18.1 per cent in 2015.

The company’s NPL ratio was 19.4 percentage points above the regulatory maximum of five per cent and 9.6 percentage points above the industry NPL ratio of 14 per cent at the end of 2016.

The huge provisioning also made FBN Holdings to end the year with a paltry N17.1 billion profit after tax (PAT), which showed a net profit margin of 2.9 per cent.

According to the audited results, FBN Holdings posted gross earnings of N581.8billion in 2016, up 15.7 per cent from N505.7 billion in 2015. Netinterest income grew by 14.8 per cent from N265.2 billion to N304.4 billion, while non-interest income grew faster by 68.9 per cent from N97.9 billion to N165.5 billion.

Similarly, operating income rose by 29.4 per cent from N363 billion to N469.9 billion. However, impairment charges surged by 90 per cent to N226 billion in 2016, from N118.8 billion in 2015.

Consequently, FBN Holdings posted a profit before tax of N22.9 billion, up 6.3 per cent from N21.6 billion recorded in 2015, while PAT stood at N17.1 billion, indicating a growth of 10.3 per cent from N15.5 billion in 2015.

Customer deposits grew to N3.1 trillion from N3.0 trillion in 2015, while loans and advances increased to N2.1 trillion, compared to N1.8 trillion in 2015.

FBN Holdings ended the year with total assets of N4.7 trillion, up by 13.7 per cent as against N4.2 trillion in 2015. But the directors did not recommend any dividend as the company appears to the retaining its earnings.

Commenting on the results, the Managing Director, FBN Holdings, UK Eke said: “2016 has been a year characterised by significant uncertainty in the operating environment.”

“Deterioration in asset quality, he added was “largely driven by the translation effect of the foreign currency portfolio due to the naira devaluation as well as one-off exceptional credit charge from legacy exposures in subsidiaries”.

“Credit losses are predominately driven by the oil and gas sector exposures and to a lesser extent real estate/residential mortgages, general commerce and the general sectors.

“As a result, cost of risk increased to 10.4 per cent , (Dec 2015: 5.7 per cent), while NPL ratio closed at 24.4 percent (Dec 2015: 18.1 per cent).

“We have remained focused on remediation and recovery activities towards declassifying non-performing accounts and driving asset quality improvements. In line with this, we have made significant progress on remediation and recovery of NPLs in the last nine months.

One of the three major accounts contributing to the NPL has been fully restructured and will be reclassified as a performing loan in 2017 in line with IFRS guideline, while asset realization is at advanced stage on the second material NPL.

Resolution on Atlantic Energy has taken longer than expected but despite the delays we are confident in achieving a positive outcome in the near future,” he added.

Despite this, Ekeh said FBN Holdings delivered a solid performance while focusing on addressing the pre-existing issues in the loan book which resulted in the current loan loss.

“This performance has been achieved through ongoing initiatives in driving efficiency across the various businesses, transforming the risk management and control environment, containing cost, as well as enhancing revenue generation from the banking and non-banking subsidiaries.

“We expect an improved economic environment through 2017 and are confident that the foundations we have put in place will drive improved financial performance and consequently enhance shareholder returns,” he said.