Macro economy challenges: FBNH, Diamond Bank, Union Bank, FCMB suffer N5.79bn drop in profit



First Bank of Nigeria Holdings Plc (FBN Holdings), Diamond Bank Plc, First City Monument Bank Plc (FCMB) and Union Bank of Nigeria Plc have suffered a total N5.79 billion drop in their first quarter of 2017 profits.

The above four Deposit Money Banks (DMBs) profit moved from N32.8 billion in first quarter of 2016 to N27.1 billion  in first quarter of 2017, representing a decline of N5.79 billion or 17.6 per cent.

FBN Holdings recorded the highest drop of about 22.1 percent in profit to N16 billion as against N20.7 billion in first quarter of 2016, followed by Diamond  Bank that suffered a decline  of  16.5 per cent in profit from N5.76 billion in first quarter of 2016 to N4.8 billion in first quarter of 2017.

Commenting on the results, the Group Managing Director, FBN Holdings Plc, UK Eke, said, “We are making good strides on the initiatives we have instituted across our businesses, fundamentally on risk management framework to forestall asset quality deterioration and we remain focused on the various  remedial and recovery activities. “Similarly, we are seeing enhanced revenue from the banking and nonbanking subsidiaries in line with our strategy of enhancing revenue generation capacity and deepening collaboration across the Group. “The increasing earnings contribution from the non-banking businesses have cushioned the overall impact of the challenges faced by the Commercial Banking franchise, further reinforcing the inherent strength of our holding company.

Overall, we remain resolute in our commitment to reposition the Group towards enhanced shareholder value,” he said.

The other two DMBs, Union Bank of Nigeria and FCMB profit in first quarter of 2017 dropped by 4.2 per cent and 3.9 per cent from N4.7 billion and N1.6 billion to N4.5 billion and N1.58 billion in first quarter of 2017 respectively.

Commenting on Union Bank’s first quarter results, Chief Executive Officer, Mr. Emeka Emuwa, said, “2017 will be a very busy year for our Bank, with our 100th anniversary celebrations running through the year and the launch of our N50 billion rights issue in the second quarter.

“The Bank continues to focus on liability generation which translated to a 24per cent increase in Gross Earnings to N33.8billion at the Group level, compared to N27.3billion in the same period of 2016. Notwithstanding reduced customer purchasing power, our enhanced customer value proposition and energised brand continue to drive our Customer Deposits up, with a six per cent increase to N695.2billion from N658.4billion as at December 2016. Non-interest income from e-business channels grew by 66per cent against Q1 2016 as a result of increased customer adoption of our alternate channels.

“Expectedly, due to inflationary impact on operating expenses, Profit Before Tax for the quarter declined marginally by three per cent to N4.7billion from N4.9billion in Q1 2016. We remain confident that we are on track to meet our growth and revenue objectives for 2017.

“In Q2, we are focused on launching a successful rights issue which will be critical to executing our short and medium term business priorities.

Discussing the first quarter numbers, Chief Financial Officer, Oyinkan Adewale, said, “Improved foreign exchange availability allowed the Bank streamline its loan book, bringing the foreign currency loan book down to 49per cent of Gross Loans, compared to 53pper cent at December 2016.

‘’With six per cent increase in deposits and three per cent  drop in loans, we were able to bring the Loans to Deposit Ratio to 75per cent, from 81per cent at December 2016.

‘’The three per cent drop in Gross Loans in the quarter is responsible for the marginal increase in our NPL ratio from 6.69per cent December 2016 to 7.27per cent March 2017.

‘’Meanwhile, our effective loan recovery machine recorded good success, thus offsetting the impact of tightening net interest margins.

Gross Earnings and Net Income before Impairment were both up by 24per cent and three per cent respectively compared to the same period in 2016.

“Inflationary and Naira devaluation pressures in the economy drove Operating Expenses up by 10per cent, also impacting cost-to-income ratio which went up by 5.25per cent.

“We will continue to focus on delivering consistent results each quarter as we adapt to evolving circumstances in the Nigerian economy,” she added.