A herd of finance and economic experts say the repeat of the impressive performance of First Bank in the first quarter did not only show the consistency in its rebound, but also demonstrated the fact that the lender’s recovery is real.
This is based on the significant cut in First Bank’s impairment charges (which translates into a clean loan book) in its first quarter (Q1), 2022 results, after it successfully brought down its non-performing loan to 6.1 per cent in 2021 full year performance.
Finance experts describe an impairment charge as a process used by businesses to write off or cancel worthless assets/goodwill. These are assets whose value drops or is lost completely, rendering them completely worthless.
An analysis of the bank’s performance gleaned from the group’s Q1, 2022 results showed that its exposure to bad loans has substantially reduced given the fact that the amount set aside as impairment charges has come down from N13.175 billion in the first quarter of 2021 to N8.75billion in Q1 2022.
In the period under review, First Bank of Nigeria Limited recorded gross earnings of N170.4 billion, up by 33 per cent as against N128.1 billion in the previous year.
The bank’s net interest income was put at N72.9 billion, a 42.1 per cent increase from N51.3 billion generated in the same period of 2021, while non-interest income was N58.8 billion, up by 21.7 per cent from the 2021 figure.
Profit After Tax for the first quarter of 2022 was N31 billion, whereas N16.3 billion was the figure declared for Q1, 2021. The bank declared total assets of N8.8 trillion, a 3.5 per cent rise from N8.5 trillion in the preceding year.
To show the bank was in a serious business of lending, its customers’ loans and advances (net) totaled N2.999 trillion, up by 5.8 per cent, year-to-date as of December 2021, which was put at N2.835 trillion, while customers’ deposits were N5.9 trillion, as against N5.6 trillion in the first quarter of 2021, a 5.4 per cent increase.
In June 2020, improvements were noted in the bank’s NPL ratio, which stood at 8.8 per cent. By March 2021, this figure had impressively dwindled to 7.9 per cent, and going by the 2021 results, the figure only stood at 6.1 per cent.
Non-performing loans, or NPLs, are bank loans that are subject to late repayment or are unlikely to be repaid by the borrower. The inability of borrowers to pay back their loans was aggravated during the financial crisis and the subsequent recessions.
Analysts from Financial Derivatives Company (FDC) in their corporate focus over the weekend stated, “First Bank delighted investors with a pleasant surprise when it announced stellar results confirming that its turnaround strategy pinned on the pillars of innovation, resilience and digging deep is working.
“As a result of First Bank’s restructuring exercise, the bank reported a huge sum of N141 billion as loan recovery from previously written off Atlantic Energy Ltd loan in 2021. This exercise bolstered a 100 per cent bottom-line growth in the period under review.”
According to the analysts, this stellar performance is attributable to robust loan portfolio, effective cost structure and increased digital services.
Dr Abiodun Adedipe, an analyst, said the low NPLs recorded in the banking sector is an indication that banks are ready to prevent a slip.
He said, “Several regulatory requirements were introduced by the CBN to help banks keep a clean record as regards their loan books while also not stopping them from offering loans.”
“The NPLs, at 4.94 per cent, will not last for long and banks must sit up to prevent a dip.”
For a bank that was almost brought to its knees by the burden of non-performing loans, it came as a great relief to both the shareholders and the regulatory authorities that for the first time in a long while, FirstBank’s NPLs came down to 6.1 per cent, a significant progress for the bank when compared to other Tier 1 banks and the regulatory threshold of 5.0 per cent.
Tier-1 banks comprising five lenders maintained an average of 5.1 percent NPL ratios in the first half of 2021, records from the CBN showed.
First Bank of Nigeria recorded the highest NPL ratio of 7.1 per cent last year, which was higher than 5.0 per cent regulatory threshold. This was followed by GTCO (6.0 per cent), Zenith Bank (4.5 per cent), Access Bank Plc (4.3 per cent), and UBA which has 3.5 per cent NPL ratio.
For the shareholders of the Nigerian top lender, First Bank of Nigeria Limited, it is a season of celebration and a period to shower praises on the board and management of the bank for successfully working its way back into reckoning, after a long period of operational challenges mostly blamed on rising cases of non-performing loans.
The shareholders, who joined other stakeholders of the bank and its parent company, FBN Holdings Plc., in appraising its first-quarter 2022 results made public last week, said it is a great relief that the organisation has put the issue of non-performing loans behind it.
According to them, the outstanding results for the bank’s full-year 2021 is an appetiser to the first-quarter 2022 results and that the repeat of impressive results for the first quarter did not only show the consistency of its restructuring but that it demonstrated the fact that the recovery is real.
Chief Executive Officer of FirstBank Group, Dr Adesola Adeduntan, who expressed the determination of the bank to aim higher said, “At FirstBank, we have historically been interwoven with the fabric of this nation with a full-service commercial banking offering catering to every segment of the economy.
“Our first-quarter results demonstrate that we have commenced our journey of quantum profitability leap in earnest with profit before tax doubling to N34.1 billion as the bank begins to reap the dividends of the successful restructuring of its balance sheet, revamped risk management, robust technology and innovative service offerings.
“Looking ahead, we will continue to maximise all opportunities presented by our large network and support our customers with innovative value-adding solutions through these uncertain times while investing in strengthening our digital banking offerings to deliver a better customer experience.”
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