First Bank’s excellent result in Q1 2022, affirmation of a successful rebound

A week after the publication of the first quarter 2022 financial results of the country’s oldest bank, First Bank Nigeria Limited, analyzes of the bank’s impressive performance, described as an affirmation of its successful rebound, are still dominating discussions in the media. , writing Adedayo Ayuba

After whetting the appetite of its stakeholders, including shareholders, customers and regulators, with its impressive performance in its 2021 annual results, First Bank Nigeria Limited, the banking arm of FBN Holdings Plc, has affirmed its return to solid profitability with a repeat performance in its first quarter 2022 results.

Most efficient bank
Investors in the bank were busy counting their gains from the bountiful returns of last year’s results when the bank released its first quarter performance with all the signs of a bank poised to reclaim its leadership position in the country’s banking sector.

Perhaps one of the clues to the bank’s robust turnaround was its ranking as the nation’s top Tier 1 bank with the smallest cost-to-income ratio.
In a ranking by Nairametrics, for example, First Bank ranked number one among the banks reviewed when it comes to cost-to-revenue ratio. First Bank recorded the largest decrease in its cost/income ratio in the first quarter of 2022, falling from 79.5% recorded in the first quarter of 2021 to 67.03% during the reporting period.

The cost-to-revenue ratio is a key financial metric, which shows a company’s costs as a proportion of its revenue. This helps give investors a clear view of how efficiently a bank is run. Specifically, it shows the amount of input the bank needs to generate N1 of output.
In particular, the lower this ratio, the more the bank will be profitable, productive and competitive. Here are the banks with the lowest cost/revenue ratio

Q1 2022 results
Analysts said FirstBbank’s results for the first quarter of the year justified the growing confidence of its stakeholders, especially shareholders who praise management for a job well done. It was a good show in virtually all of its performance metrics, a development they attributed to NPL improvements that restored investor confidence. And success with NPL means asset quality is bound to increase.

During the reporting period, First Bank 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, up 42.1 percent from the N51.3 billion generated in the same period of 2021, while non-interest income interest 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 Q1 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%.
An analysis of the bank’s performance drawn from the group’s results in the first quarter of 2022 showed that its exposure to bad debts has decreased significantly as the amount set aside for impairment charges fell from N13.175 billion to Q1 2021 to N8.75 billion in Q1 2022.

Adeduntan: Our goal of profitability, a permanent thing
To show that the impressive performance was no accident, FirstBank Group Chief Executive Dr Adesola Adeduntan expressed the bank’s management’s determination to use the current strong performance to make its pursuit of profitability a thing. permed.

He said: “At FirstBank, we have always been woven into the fabric of this nation with a full-service commercial banking offering catering to all segments of the economy. We believe that we are now in a good position to translate

this unique potential for generating revenue into improved bottom line results.
“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, reorganized risk management, robust technology and innovative service offerings.

The bank’s CEO also spoke about the development of its risk management capabilities, saying, “Our gross income is also up 33.0% year-on-year to N170.4 billion and net interest income up 42.1% year-on-year to N72.9 billion. In addition, our enhanced risk management capabilities allow us to mitigate any negative headwinds that may materialize given the current macroeconomic pressures.

Adeduntan underscored the bank’s management’s determination to explore the potential of First Bank’s vast network in consolidating the current impressive streaks.
“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.

Shareholder approval
Some bank shareholders praised management for successfully shedding the burden of non-performing loans and solidifying last year’s modest performance gains, as evidenced by first-quarter results.

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.

Speaking on behalf of a wide range of bank shareholders, the founder and pioneering national coordinator of the Association of Independent Shareholders, Chief Sunny Nwosu, said First Bank management deserved praise for bringing the bank to profitability and a clean loan portfolio.

He believes that the ability of FBN Holdings, the parent company, to significantly reduce exposure to non-performing loans to 6.1% has shown that the bank has closed the door on future delinquent debtors, a development which he says, consolidate the bank.

Nwosu said many shareholders were initially pleasantly surprised by the performance of the full 2021 results, saying the first quarter 2022 results were a confirmation of the bank’s drive to take its leading position in the banking industry. from the country.

“Given all the provisions they had made over the past two years and that they came out clean shows that it is not a bad result and for them to have agreed to pay 35 kobo of dividend to shareholders This is encouraging because most shareholders were unaware that the company was going to pay anything, especially with all the challenges going on in the economy.

“We are indeed delighted that they have been able to reduce non-performing loans, which means they will have more money to do business with and I am sure they will be more careful this time around when it is. ‘will act to provide loans,” Nwosu said.

Leverage determined leadership
Analysts have argued that the turnaround in First Bank’s fortunes did not happen overnight, explaining that it took the determination of committed management led by Dr Adeduntan to restore the bank’s culture excellence and professionalism.

For example, it was observed that the current management has contributed to building stakeholder confidence in the financial viability of the bank. Analysts are quick to point to the bank’s steady improvements in its ratio and non-performing loan (NPL) position.

For example, in June 2020, when improvements were seen in the bank’s NPL ratio, the NPL ratio 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%.

For a bank burdened with non-performing loans, it was a great relief to shareholders and regulators that, for the first time in a long time, First Bank’s NPL fell to 6.1%, significant progress for the bank relative to other Tier 1 banks and the regulatory threshold of 5.0%.
Analysts also attributed the significant decline in NPL rates from 40 in 2016 to 6.5% in 2021, to a new culture of corporate governance currently in place in the group which has successfully revamped the management capabilities of business risks.

Maintain a fairly manageable NPL ratio
Interestingly, amid the enormous pressure on Nigerian banks from the prevailing sluggish economy, what First Bank management did was to diversify its loan portfolios and maintain a ratio of fairly manageable non-performing loans (NPLs).

Indeed, the percentage of non-performing loans in Nigeria reflects the health of the banking system. A higher percentage of these loans shows that banks are struggling to collect interest and principal on their loans. This can lead to lower profits for banks in Nigeria and possibly bank closures.
First Bank recorded the highest NPL ratio in four years with 24.7% in 2018, which fell to 9.9%, 7.7%, 7.2% in 2019, 2020 and 6.1% in the 2021 annual results.

Shawanda H. Saldana