FBN Holdings Plc (Nigeria) – FY 2021 and Q1 2022 results conference call transcript

By Published On: July 13th, 2022Categories: Corporate announcement, Transcripts

Tolu Oluwole
Head, Investor Relations

Good day, ladies, and gentlemen, and welcome to the FBNHoldings Full Year 2021 and Q1 2022 Financial Results Conference Call. Thank you for taking the time to join this call today and for your continuous interest in FBNHoldings. My name is Tolu Oluwole.

Following an overview by the Group Managing Director of FBNHoldings, an interactive Q&A session will be available.

But just before I hand over to the Group Managing Director, I would like to go through the typical conference call protocols. First of all, participants are encouraged to please use the raise-hand functionality to ask questions and microphones will be unmuted once called upon to speak. For efficiency of this process, we’ll take the questions in two or three batches before responding. After asking questions, microphones must always be muted except when speaking, this is to avoid interference during the call and to make the call clear. Questions can also be submitted to the Q&A section of the platform, which will be looked at intermittently.

That said, I would like to hand over the call to the Group Managing Director of FBN Holdings Plc, Mr. Nnamdi Okonkwo. Please go ahead, sir.

Nnamdi Okonkwo
Group Managing Director

Thank you, Tolu. Good afternoon, ladies, and gentlemen. My name is Nnamdi Okonkwo, the Group Managing Director. I welcome you to today’s presentation, which covers the audited financial statements for the year ended 2021 and unaudited Q1 numbers for 2022. I’m pleased to meet all of you in this new role, I’ve known most of you in my previous role.

I will now introduce my colleagues on this call with me. I have Dr. Adesola Adeduntan, CEO of FirstBank; Kayode Akinkugbe, CEO of FBNQuest Merchant Bank; Segun Alebiosu, Executive Director and CRO FirstBank; Ini Ebong, Executive Director and Head of Treasury and International Banking; Wale Ariyibi, CFO of FBNHoldings; Patrick Iyamabo, CFO of FirstBank; and finally, Tolu Oluwole, the Head of Investor Relations.

First of all, on behalf of my colleagues, we would like to apologise for the delay in releasing our audited numbers. This was caused by the late completion of audit work in one of our subsidiaries. This is an isolated case and not likely to repeat. First, if you look at the operating environment, unlike in 2020, which was partly affected by COVID-19, 2021 in addition to COVID was hit by a new set of macro impacts. Despite the foregoing, our Group delivered a strong financial performance in 2021. Thus, reflecting our resilience and our ability to navigate a challenged market hampered by unfavourable conditions.

Looking at 2022, I would say, we are off to a good start in spite of the global events at play at the moment. As we all know, the global space now, has experienced the supply chain disruptions, elevated inflation, rising crude oil prices, these have all combined to make business difficult for most organisations. Now to mitigate these challenges, we keep our eyes on our strategies to ensure we traverse through this corridor. Therefore, we are hopeful that we’ll deliver another set of strong numbers in 2022.

I will now summarize the presentation by focusing on certain slides, after which I’ll open the floor for Q&A. I’ll start with slide number 4. I’m glad to say that at NGN166 billion, which is a growth of 99.1%, this is the highest PBT performance in the history of our institution. These numbers were driven by increases in commissions and fees income, treasury activities and other income.

Non-interest income grew by 96.1%, that is NGN364.6 billion. Our balance sheet repair is more or less largely completed as demonstrated by our NPL numbers. Our NPL numbers reduced, which is now at 6.1% from where it used to be in the previous year. Our coverage ratio has increased to 62.2%.

Okay, preeminent financial inclusion business in the country, we have over 167,000 agents and monetizing our electronic banking franchise by growing revenue by 15.8%. Now we are not unmindful of the serious competition in this space, especially following the CBN license of PSB’s. However, we’ll keep fine tuning our strategies to ensure we sustain our growth trajectory.

Our capital buffers were further enhanced with a robust capital adequacy ratio of 17.4%. So, if you go to slide 5, I’ll just give some key highlights there. In 2022, we further demonstrated a strong sustainable performance by growing PBT by 93.2% to NGN36.5 billion in Q1. So, this is the strongest pre provision operating profit over impairment charges in years. Key to that growth is 37.9% increase in net interest revenue and 23% increase in non-interest income. We have seen sustained improvement in asset quality, like I said earlier, our NPL ratio had declined further to 6.0%, cost of risk down to 1.1%, our balance sheet is stronger with coverage ratio at 68.9%.

We now have a stronger franchise, customer accounts increased to 36.9 million from 30 million in Q1 of 2021. So, we are growing the customer numbers as well. We are ranked second in the Nigerian Consumer Digital Banking Satisfaction Index, by Augusto & Co., Best Bank Brand Nigeria Award by Global Brand that is FirstBank of Nigeria, Investment Bank of the Year in Nigeria by Business Day was won by FBNQuest Merchant Bank. On governance, we have largely addressed governance issues, and things are running normally now, I’ll be speaking more on that later. Now, we are focused on the future.

If you go to slide 6, you will notice that we have had Board changes, as you know in the year under review. Further, slide 6 reflects our independent and highly experienced Board with more than 280 years of experience. We have a well-diversified Board in a multitude of fields that span across not only banking but different sectors that evidently feed from each other and this diverse Board with strong professionals attest to FBNHoldings commitment to strengthening and sustaining good corporate governance.

I’ve been particularly impressed with the high quality of Executive Management we have across the entire Group, and I am confident about recapturing our position as a leading Financial Services Group. Indeed, when I was interviewed to join this Bank, I took a look at 2016 down to the present, I must say, there has been some serious improvement and a whole lot of mileage gained. So, that attest to the strength of our Management.

Slide 7 captures our strategic priorities which are centred on four main pillars. First, differentiating our capabilities, here we would like to expand our digital and retail product offering through integration and innovation. As I mentioned earlier, the digital market is highly competitive, and as a Group, we would like to ensure that we capitalise on every opportunity. Additionally, we are also focused on growing our annuity business and deepening our transactional banking transformation.

Second priority is growth and profitability, so we support revenue growth through new product offerings, balance sheet optimization, customer acquisitions. By taking a look at our Q1 numbers, you will see that we are already making good progress in this direction.

Number three, collaboration and partnership. So here we look to strengthen our Group collaboration, particularly within the financial services space with both fintech and big tech players. This ties in well with our plans for expanding our digital banking platform.

Number four, operational efficiency and capital. We will focus on improving efficiency through three key areas; one, branch and channel optimization that align with consumer shifts and reduce the cost-to-serve; two, to achieve this, we will focus on driving productivity improvements through innovation and technology tools. On capital, we are pleased with the current position and we are looking to further bolster the business, especially after the implementation of Basel III. So, we are conscious of that and looking forward to making sure that we are well positioned for implementation of Basel III when it comes.

In conclusion, I would like to say, barring any further unexpected events, 2022 looks like a solid year for us in the making. I would like to reiterate balance sheet repair, which has provided us the profit we are discussing today. I would also like to reiterate our stability, Q1 numbers in 2022 speaks to that. So, we are on a path of recovery, I believe that this journey is sustainable. Going forward, our focus will be to keep driving our revenues supported by transaction-led approach. We remain disciplined in executing our strategic initiatives in the coming years as earlier advised.

So, at this point, I will then open the floor for Q&A. I’ll pass on to Tolu who will guide us through that. So, Tolu, please go ahead.

Q&A Session

Tolu Oluwole – FBNHoldings

Thank you very much, GMD. So once again, I like to reiterate the conference protocols. Participants are encouraged to use the raise-hand function so we can see your hand to ask the question and then your microphone should be unmuted once called upon to speak. Again, just to reiterate, we will take two or three batches of questions before responding. Once you are about to speak, you can unmute your mic and when finished, please mute and then lower the hand.

Tolu Oluwole – FBNHoldings

There are a few questions here, which I will read out. Why the reduction in dividend per share if the Bank’s performance is that good? The second from Onome Ohwovoriole from MoneyAfrica says, please provide some colour on the recoveries made during full year 2021. Those are the two questions we have from th