FBNHoldings Hits N664bn after Unusual Trade Volume
Nnamdi Okonkwo, GMD

FBNHoldings Hits N664bn after Unusual Trade Volume

Is FBNH eyeing N1 trillion market valuation? Impossible is nothing – there are two banks in that club already. At the close of a trading session on Wednesday, the financial service boutique surged passed N664 billion following a weird trading transaction volume worth about N1.7 billion in a single day.

Apart from the recent boom in the stock market, FBNH had started making an uptrend before the suspension of Godwin Emefiele as the Central Bank of Nigeria (CBN) governor which has turned to become a major catalyst driving the momentum in the stock market.

At the close of business, FBN Holdings Plc has crossed yet another line and maybe eyeing N700 billion before the week runs out as banking stocks started enjoying fresh rerating in the local bourse.

The sentiment has not only been positive but strong at the same time. Yesterday, stock market data showed that the banking index rose by 6.2% and FBNH was the highest-traded stock in the category.

The unusual trading volume of more than 89 million shares exchanged at N1.65 billion pushed the market price upward by 3.35% to N18.50 from N17.90 per share.  Market analysts hope to see more coming as the equities space rises. Some stocks that started earlier uptrend have hit the overbought threshold. 

MarketForces Africa gathered that market sentiment remains a core driver for FBNH’s resurgence from just N250 billion in market valuation to the current level without unique breakthrough financial services products or earnings.

A similar fundamental for a local lender ring-fenced by the apex bank and earning downturn in 2022.  In 2021, FBNH Plc raised its earnings bar as it doubled down on earnings performance amidst debt recovery. The group’s 3-year balance sheet repairing efforts pushed its profitability to an all-time high in the year.

However, market analysts told MarketForces Africa that the sustainability of the group’s improved performance will be tested in the financial year 2022. It was, and the group failed to hold the position.

In its audited report for 2022, Holdco’s profitability was pressured, with profit-before-tax declining by 5.3% year-on-year to N157.90 billion and profit-after-tax settled 9.8% lower at N136.31 billion, amid the higher income tax expense.  

However, it made a quick recovery in the first quarter of 2023, signaling it has the ability to outperform analysts’ expectations.  Then the naira liberalisation comes.  FBNH was not rated by CardinalStone Securities among the local lenders with strong net foreign exchange positions that could push profitability performance upward.

“Our analysis has shown that the Tier-1 banks are on course to book massive gains due to their long dollar position. These revaluation gains would boost the bottom line and partly offset any weakening of capital ratios due to foreign currency-weighted assets”, according to the investment banking firm update.

In its net open position list, Access Bank has a net fx position worth $1.663 billion, GTCO $1.468 billion, Zenith $1.384 billion, and UBA $796 million. The elephant is dancing smoothly and when it crossed N700 billion in market valuation, it would have raised a significant year-to-date return of 80% and that’s impressive for value hunting investors.

In 2021, FBNH achieved a 99.1% jump in pre-tax profits to N166.7 billion, aided by the recovery of bad debt loans from its customers during the period. Analysts told MarketForces Africa that a pre-tax profit of N166.7 billion achieved is a new earnings record for the group operation that must be maintained going forward.

Recall the management had embarked on a balance sheet cleaning programme that has set the group on the path of recovering its brand identity among competing brands and increased rivalry with peers.

A total sum of N141 billion was recovered, according to the audited statement which included bad debt of Atlantic Energy which had been written off due to a low probability of recovery after the client defaulted. In 2021, FBNH Plc’s profit after tax surged 68.4% to N151.1 billion.

Due to its inability to sustain the new earnings level in 2022, Holdco reported a 10.3% year-on-year decline in earnings per share due to pressures on profitability. Its audited result showed that EPS settled at N3.74 from N4.17. 

The decrease in the group’s earnings was attributed to the lower income generated from the non-core income amid the impact of the loss allowance taken on its total investment securities holdings issued by the Government of Ghana. 

Eventually, the board proposed a final dividend of N0.50 from 35 kobo paid when its profit performance spiked in 2021.#FBNHoldings Hits N664bn after Unusual Trade Volume Nigerian Treasury Bills Yield Rises to 7%