FirstHoldCo: Strong Top-Line Growth, But Profitability Tells a Cautionary Tale
FirstHoldCo has released its Half-Year (H1) 2025 financial results, revealing a mixed bag of earnings momentum and profitability concerns. On the surface, the numbers paint a picture of resilience and growth in a high-interest-rate environment, but a deeper dive exposes critical pressures that weigh on future earnings.
Amid an economy defined by elevated interest rates and inflationary pressure, the financial holding company posted N1.7 trillion in gross earnings, up 16.8% year-on-year, driven largely by robust interest income. However, despite this impressive top-line expansion, net profit declined by 20% YoY to N290 billion, underscoring rising operational inefficiencies and growing credit risk in the loan book.
The N904.8 billion net interest income, representing a 75.7% jump, was the financial engine behind FirstHoldCo’s strong gross earnings. This stellar growth came as a result of Nigeria’s aggressive monetary tightening, which has pushed benchmark interest rates to multiyear highs. The bank benefitted from wide interest margins lending at significantly higher rates while maintaining relatively lower deposit costs.
This dynamic allowed FirstHoldCo to capitalise on borrowers’ increased cost of funds, particularly in its corporate and SME lending segments. However, while net interest margins soared, the sustainability of this advantage depends largely on the trajectory of monetary policy in the second half of the year.
Despite strong interest earnings, FirstHoldCo’s net profit fell by 20%, revealing deeper concerns about cost containment, credit quality, and income diversity.
Key profitability pressure include:
Loan impairment charges as credit risks rose particularly in sectors vulnerable to inflation and FX volatility — FirstHoldCo took on higher provisions. This significantly eroded the profit cushion created by strong lending margins.
Weak non-interest income on trading gains, commissions, and other fee-based income segments underperformed, dragging down revenue diversification. This remains a structural challenge for Nigerian banks heavily reliant on interest income.
Rising operating costs alongside Inflationary pressures, regulatory compliance costs, and expansion-related expenses (especially in digital banking infrastructure and regional operations) pushed up operating expenses, squeezing profit margins.
Looking forward, FirstHoldCo’s earnings prospects remain moderately positive, particularly if the Central Bank maintains high interest rates into H2 2025. However, the company faces important headwinds:
Interest rate risk with likely reversal or moderation of rates could shrink interest margins rapidly.
Asset Quality Deterioration among rising impairments may signal a riskier loan portfolio and potentially constrained credit appetite going forward.
Non-interest income deficit of the bank must urgently improve its performance in fee-based segments to diversify income streams and smooth earnings volatility.
At a current market price of N32.25 per share, FirstHoldCo trades at a moderate valuation considering its earnings power and risk exposure. While the earnings drop is concerning, the strong core income performance and macro tailwinds from high rates suggest the bank remains well-positioned for a rebound, provided it reins in costs and improves credit quality.
Valuation and Investment Recommendation for FirstHoldCo is a case of “ACCUMULATE”
Why Accumulate?
Strong interest income continues to positioned it to benefit from extended high-rate cycle.
Resilient market position has continued to lead the financial services group, FirstHoldCo maintains a diversified portfolio across banking, insurance, and pensions.
Room for profit recovery cost assist in optimisation and better risk management, profit growth resumption in H2 or FY2026.
Caution for Investors:
Profit pressures cannot be ignored — the firm needs to fix rising impairments and build up non-interest income.
Monitor inflation and regulatory changes that may affect operating costs and loan performance.
Revenue growth is not always equal to profitability growth. FirstHoldCo’s H1 2025 results highlight the importance of looking beyond the top line. While the earnings surge is encouraging, rising costs and shrinking profit margins are clear red flags.
Still, given its solid fundamentals, strong franchise value, and potential earnings upside in a sustained high-interest-rate environment, investors with a medium to long-term outlook can consider accumulating positions at current levels with the aim of target price (12M Forward Estimate) of N38.00 – N41.00. #FirstHoldCo: Strong Top-Line Growth, But Profitability Tells a Cautionary Tale#
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