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In this report, we analyze the recently released financial results of FBN Holding Plc for the first half of 2023 and give our opinion of what the full-year performance would look like considering present realities and we revise our target price expectations for its stock price for the end of the year.

Executive Summary

In its recently released unaudited H1:2023 financial result, FBNH’s Gross Earnings grew massively by 82.68% Year-on-Year (YoY) to NGN656.38bn. The impressive topline performance rode on significant increases in both interest income (+69.33% YoY to NGN383.29bn) and non-interest income (+105.41% YoY to NGN273.09bn). Elsewhere, Operating Expenses remained elevated, growing by 24.53% YoY to NGN231.56bn in H1:2023, and this was a result of surging personnel cost (+17.93% YoY to NGN65.22bn), regulatory cost (+18.40% YoY to NGN62.12bn) and advertising and corporate promotions (+174.99% YoY to NGN14.29bn). Profit Before Tax (PBT) and Profit After Tax (PAT) grew significantly by 213.83% YoY and 230.80% YoY to NGN206.26bn and NGN187.24bn respectively. Consequently, Net Profit Margin jumped to 28.53% in the period from 15.75% in H1:2022.

Furthermore, its Q2:2023 standalone income statement revealed a significant jump in Gross Earnings (+125.23% YoY to NGN396.87bn) attributable to a surge in non-interest income (+225.76% YoY to NGN193.19bn) and a commendable increase in interest income (+74.22% YoY to NGN203.68bn). The surge in non-interest income rode on a massive jump in net gains from financial instruments at FVTPL (NGN231.79bn), reflecting the sizeable FX gains induced by the recent FX liberalization policy. Consequently, PBT and PAT grew strongly by 414.14% YoY and 467.68% YoY to NGN150.16bn and NGN137.15bn respectively in Q2:2023.

Considering its prospect for the remaining part of the year, we believe the Bank still has some upside potential, riding on our expectation of improved margins. We have therefore revised our target price to NGN24.62. At its current close price of NGN20.50 as of 26th July 2023, this translates to an upside prospect of 20%. Thus, we put a “STRONG BUY” rating on the stock.

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