FBN Holdings earns N293.3b




FBN Holdings Plc yesterday announced its unaudited results for the six months ended  June 30, 2018 with gross earnings of N293.3 billion. The earnings rose 1.6 per cent year-on-year when compared with last year’s figures.

The company’s profit before tax rose 9.1 per cent to N38.9 billion, as against 2017 figure N35.6 billion while profit after tax stood at N33.5 billion, up 13.7 per cent when compared with N29.5 billion in 2017.

Its total assets stood at N5.3 trillion, up 1.3 per cent year-to-date while customer deposits rose 4.1 per cent to N3.3 trillion, s against N3.1 trillion in 2017.

FirstBank indicated its intention to call the 8.25 per cent $300 million FBN Finance Company B.V. Subordinated callable note due in 2020. The bank opened a digital laboratory as part of its strategy to drive innovation in the digital banking space.

Commenting on the results, its Group Managing Director, UK Eke, said: “FBNHoldings continues to make steady progress towards delivering on its strategic targets. This has been demonstrated with a 13.7 per cent  y-o-y increase in profit after tax, 21.4 per cent y-o-y growth in non-interest and 15.4 per cent y-o-y decline in impairment charge. Clearly, the Group is on its way to delivering its promises on asset quality, enhancing revenue generating capacity through non-interest income and driving further efficiencies.”

As we ramp up initiatives to grow interest income, we remain focused on the implementation of key initiatives across our subsidiaries and further strengthen our businesses towards delivering sustainable performance as well as optimising returns to our shareholders.

Commenting on the results, the Managing Director/CEO of FirstBank and its Subsidiaries, Adesola Adeduntan, said: “The Commercial Banking Group reported a relatively strong set of results and I am pleased to report consistent improvement towards our strategic objectives. This is reflected in a strong 28.5 per cent y-o-y increase in non-interest income, 15.5 per cent y-o-y reduction in the impairment charge and a marginal increase of 0.9 per cent y-o-y in operating expenses, despite the high inflationary environment.”

Akwa Ibom state governor have raise alarm over the reduction in its state allocation by the Federal Account Allocation Committee (FAAC).

Akwa Ibom state governor have raise alarm over the reduction in its state allocation by the Federal Account Allocation Committee (FAAC).

This was disclosed by Udom Emmanuel, the governor of Akwa Ibom state in a tweet dated Tuesday, 31 July 2018.

“They have dropped the allocation of my state by N6.8 billion, all in the name of politics, that is what is going on,” Udoma tweeted.

Meanwhile, attempt by BusinessDay to obtain the totally amount allocated to the various states in July 2018 proved abortive, considering the FAAC report scheduled to be publish by the National Bureau of Statistics (NBS) on 20th of July 2018 was delayed and as at the time of this report was yet to be reported by NBS.

When BusinessDay contacted the Nation’s Bureau for the July FAAC figures it said “we are still working on them. It will be published within next week.”

Although the net amount shared to the Land of promise in May of 2018 stood at N4.6 billion, as compiled from the NBS FAAC report fro that month.

While according to the figure released by FBNQuest Capital, the revenue available for sharing by the Federal, States and Local Governments in July declined by N32billion.

Thus, it said N669 billion (from May revenues) was distributed by FAAC to all tiers of government, compared to the N701billion shared in May.

The research arm of FBN Holdings said officials from the federal ministry of finance shared even less information than usual after the meeting of the committee.

Meanwhile, FAAC’s disbursement of funds for the month of June to the three tiers of governments was delayed due to disagreement over the contributions to the federation account by revenue generating agencies including the Nigeria National Petroleum Corporation (NNPC).

If not for the delay which distorted June pay out, at this point in the month, the sharing details of the distribution of June revenues would have been the addressing matter.

However, on the reason why FAAC made a pay out for the month of July, even though the underlying disagreement has not been resolved, FBNQuest said it was only made because of the hardship caused by the delay.

“Notably over the payment of salaries to government employees at all tiers, as most state governments are struggling to pay their personnel with regular monthly FAAC distributions.”

According to Kemi Adeosun, the Minister of Finance, the implication of the deadlock was that some states could face delay in payment of workers’ salaries.

“Also in my capacity as the Chairman of FAAC, I briefed the Governors on the deadlock that we have got currently in the Federation Account and explained what happened.

A seeming resistance to easing

A seeming resistance to easing                                        

We comment today on the personal statements arising from the last meeting of the monetary policy committee (MPC) because their release has been timely. We also wanted to see the input from the several new members, and to look for clues as to whether the committee is likely to ease when it next meets on 21 and 22 May. We had expected a modest rate cut when it met in early April, based upon the disinflation over 12 months and the expectations (including our own) that more was to come.                                                                    

  • We learn from one statement that house estimates had the headline rate at the “lower double-digit mark” by July. Our own forecasts have the rate then at around 11.0% y/y, driven by positive base effects.
  • When the committee meets later this month, it will have access to the March and April inflation reports. That said, the statements do not give the message that the MPC is eager to ease its stance. There are several mentions of the reference range for inflation of between 6% and 9% y/y as if to say that it is far off on the horizon. Another common thread is the warning of election-related fiscal irresponsibility later this year.
  • At times, members appear almost in denial. So we read that the rate of decline had been “relatively sluggish and sticky” whereas the cumulative fall over the three months to February was 156bps. (It has since accelerated.)
  • We found a consensus that Nigeria needed positive real interest rates to lock in foreign investors, and encourage savings and investment generally. As at February, the policy rate of 14.00% was then 30bps below prevailing inflation.
  • If we use the measure of market rates (such as FGN bond yields), however, investors have taken aggressive positions and not waited for declining inflation to deliver positive rates in real terms.
  • On growth, one member felt that the recovery was “broad-based” although the general feeling was that oil had delivered the exit from recession. Several members singled out the clashes between farmers and herdsmen as a barrier to recovery (and continuing disinflation).
  • The committee was faced with a “trilemma” according to one member (tighten, hold or ease). It did not ease for fear of the impact on inflation, the current account, exchange-rate stability and offshore portfolio flows. To our way of thinking, a rush for the door is not our greatest concern, particularly with UK Brent crude oil settled into a new range above US$70/b. Yields on naira debt instruments still compare favourably with almost all EM competitors.

Tensions in the Middle East have pushed the spot price for UK Brent crude above US$70/b, and given a boost to the feelgood factor in Nigeria.

Crude oil demand/supply hard to call


Tensions in the Middle East have pushed the spot price for UK Brent crude above US$70/b, and given a boost to the feelgood factor in Nigeria. They have also masked the debate over the global demand and supply balance, or what we could term the competing claims of the US shale oil industry, and of OPEC with Russia and its other allies. The industry media tends to favour the claims of shale, and can cite data showing that the US has overtaken Saudi in production and is not far behind Russia.


  • US exports of crude and petroleum products increased by 1.7 mbpd in the 12 months to December 2017, to 7.3 mbpd. Pipelines proposed or under construction between West Texas and the Gulf of Mexico would raise export capacity by a further 2.1 mbpd.
  • The Permian Basin is the star performer in the shale industry for its rising productivity based upon technological advances. This has allowed successful operators to live with the reluctance of banks and equity investors to fund their expansion (due to generally mediocre returns). An increase in remote operations (from Houston) and a near-doubling of sand used per well are two of the advances.
  • At the same time, we recognize OPEC’s production restraint in conjunction with its allies (amounting to 1.8 mbpd through to December) and the resilience of the Saudi-Russian pact. Such agreements cover about 15 countries, and are a challenge to implement. It would be a serious test of discipline if market conditions warranted a deepening or extension of the accord. Tensions in the Middle East have a habit of coming to the rescue.
  • The financial recovery of the conventional oil majors is an obvious positive for underexplored oil provinces (such as Nigeria). Total, BP and Shell all announced a solid improvement in earnings in Q4 2017. Share buybacks, dividend increases and healthy cash generation were common themes.
  • We will get a measure of investor appetite for African energy assets from the proposed IPO next month in London by Vivo Energy. The company is 55% owned by the oil trading house Vitol, and owns fuel stations and retail outlets in 15 African countries. It should be valued at about US$3bn.
  • The appetite for specifically Nigerian assets will be tested by the sale of Petrobras Africa. The company is 50% owned by the Brazilian oil player and 40% by a Brazilian bank. Alongside interests in Angola and other African countries, it has stakes in two offshore blocks with producing fields, Agbami (operated by Chevron) and Akpo (Total). Industry sources conservatively value the Nigerian assets at US$2bn. Bidding could be intense.

Lagos shines bright at the Business Council for International Understanding last week at the IMF/World Bank spring meetings in Washington DC.

Lagos shines bright at the Business Council for International Understanding last week at the IMF/World Bank spring meetings in Washington DC.

We attended a briefing at the Business Council for International Understanding last week at the IMF/World Bank spring meetings in Washington DC. Nigeria was the focus and Lagos stood out as the poster child. The briefing was well attended by Lagos State government officials including the governor. Last year GDP for Lagos State stood at US$92.9bn (data drawn from the state’s own statistics). The population is currently estimated at 24.8 million with a rapidly growing middle class, pointing towards a huge consumption market. The keynote speaker, Governor Ambode, gave useful insights into investment opportunities within Nigeria’s commercial hub.

· Based on data from the UN, as quoted by the governor, Lagos receives 80 visiting individuals per hour. As such, he disclosed that transportation features on the priority list of his administration’s agenda. There are ongoing conversations geared towards developing integrated multi-modal transport systems (roads and waterways).

· Power supply shortages remain a key issue not just for Lagos but the country in general. However, to encourage business activities generally as well as manufacturing within the state, a few energy projects have been initiated. The governor discussed Island Power, a US$16m power project expected to generate 9.7MW.

· Investment opportunities within the tourism sector also cropped up and delegates seemed enthusiastic. Lagos State is culturally rich, and has not fully capitalised on converting this positive into tourist attractions. Rather than a replica of Disney World, the authorities and/or the private sector could develop a tourist center that captures the state’s cultural characteristics.

· Lagos is one of the country’s largest markets for agro-products, and we learnt during the briefing from a senior Uber executive that the company is currently developing an app for tomato transportation into Lagos. Tomato distribution across the country is challenging: it is often said that half of locally produced tomatoes rot before getting to end-users.

· The Lekki free trade zone was also covered at the briefing. Incentives are available to increase investors’ appetite. These include: zero-tax on rental income during the pioneer period; zero-duty on the purchase of power generation equipment; and one-stop approval for all permits, operation licenses and incorporation papers.

· Lagos State has consistently achieved the highest internally generated revenue/total revenue ratio over the past few years. Based on the most recent CBN data, in 2015 the ratio stood at 69%, compared with 53% and 50% for Enugu and Ogun respectively.

· The Lagos State government is to be applauded for its efforts to attract investment into the country. However, for Nigeria to achieve inclusive growth, all other state governments need to identify their comparative advantage, develop it, and create favourable conditions for local and offshore investors.

FBNQuest FI-FX Daily Watch 06 April 2018

FBNQuest FI-FX Daily Watch 06 April 2018

Opening market liquidity on Thursday was N716bn (positive), boosted by a substantial OMO maturiy. Interbank rates closed within a range of 4%-9%. At an OMO auction yesterday, the CBN raised N759bn from the sale of 91-day and 245-day paper at lower stop rates of 12.50% and 14.30% respectively. On the secondary market for NTBs, there was an uptick in yields for selected maturities.

The FGN bond market was fairly active, and yields picked up for most maturities across the curve. The Eurobond market saw healthy demand for the sovereigns, for which yields narrowed.

The CBN’s daily fx intervention was again US$0.5m at N305.10. Turnover at the NAFEX soared from US$170m on Wednesday to US$572m. Indicative rates ranged from N315 to N361. The USD rose to a three-week high against the JPY on Thursday. Additionally, equity markets jumped as fears eased of a trade war between China and the US after Washington expressed a willingness to negotiate.

11 PLC (11) reports Q4 2017 results.

Event: 11 PLC (11) reports Q4 2017 results

Implications: Positive reaction by the market likely

Positives: Q4 sales and PBT both up 66% y/y and 22% y/y to N37.0bn and N4.3bn respectively

Negatives: Limited

Last week, 11 PLC published Q4 2017 results which showed that sales were up 66% y/y to N37.0bn while PBT grew by 22% y/y to N4.3bn. A -364bp y/y gross margin contraction and a -17% y/y decline in other operating income were not enough to offset benefits coming through from the strong topline growth. 11’s sales held up surprisingly, unlike in prior quarters when petroleum product shortages occurred. We believe the new ownership/management deserve most of the credit. Below the PBT line, there were no one-off expenses during the quarter, similar to Q2 and Q3. Perhaps, this suggests that there are likely no more significant acquisition-related costs. PAT came in flattish y/y. Sequentially, while sales were up 16% q/q, PBT and PAT both grew by 37-38% q/q. In addition to topline growth, a 20% q/q growth in the other operating income line provided support for the improved q/q trend.

The Q4 PBT beat our N2.9bn estimate by 49%. The variance was driven by positive surprises on the sales and other operating income lines. 11’s full year PBT of N13.4bn also beat consensus PBT estimate of N10.9bn. Hence, we expect upward revisions to consensus 2018 estimates and a positive reaction by the market to these numbers. 11 proposed a dividend of N8.00 (ahead of our forecast of N5.5); this works out to a dividend yield of 4.3%. 11 shares have shed -4.5% ytd compared with the ASI’s +8.5% gain.

We rate the stock Neutral. Our estimates are under review.

11 PLC Q4 2017 results vs. FBNQuest Capital Research estimates (N millions)

FBNQuest FI-FX Daily Watch 06 April 2018

Opening market liquidity on Wednesday was N684bn (positive). Interbank rates closed within a range of 2%-8%. There was a primary market auction of NTBs yesterday. For the usual 91-day, 182-day and 364-day bills on offer, the CBN set lower stop rates of 11.75%, 12.70% and 13.04% respectively. On the secondary market for NTBs, yields trended downwards for selected maturities.

The FGN bond market was fairly active, and yields narrowed at the very short end of the curve. The MPC met and voted unanimously to leave all its policy parameters unchanged.

The CBN’s daily fx intervention was again US$0.5m at N305.10. Turnover at the NAFEX window declined from US$283m on Tuesday to US$170m. Indicative rates ranged from N358 to N362. Gold prices eased from a one-week high, but still remained up on Wednesday, as the USD dipped against the JPY after China retaliated against a US move to slap tariffs on US$50bn worth of its imports.