SAN FRANCISCO, August 28, (THEWILL) – FBN Holdings Plc Tuesday reported its unaudited IFRS compliant results for the first half of the year which ended in June.
The highlights of the Profit and loss of the publicly listed company are as follows, according to a release by the bank.
Profit & Loss Highlights
• Gross earnings of N194.9 billion, up 7.7% year-on-year (Jun 2012: N180.9 billion)
• Net interest income of N112.7 billion, up 3.6% year-on-year (Jun 2012: N108.9 billion)
• Non-interest revenue of N44.1 billion, up 2.4% year-on-year (Jun 2012: N43.1 billion)
• Operating income of N156.9 billion, up 3.2% year-on-year (Jun 2012: N152.0 billion)
• Profit before tax of N55.1 billion, up 3.2% year-on-year (Jun 2012: N53.5 billion)
Balance Sheet Growth
• Total assets of N3.4 trillion, down 2.3% quarter-on-quarter (Mar 2013: N3.5 trillion) but up 6.1% year-to-date (Dec 2012: N3.2 trillion)
• Total customer deposits of N2.6 trillion, an increase of 0.9% quarter-on-quarter (Mar 2013: N2.5 trillion) and 6.4% year to date (Dec 2012: N2.4 trillion)
• Total customer loans and advances (net) of N1.5 trillion, down 1.4% quarter-on-quarter and 1.2% year to date (Dec 2012: N1.5 trillion)
Key Ratios
• Return on average equity of 22.1% (Jun 2012: 24.9%)
• Net interest margin of 8.2% (Jun 2012: 8.3%)
• Cost to income ratio of 55.4% (Jun 2012: 55.5%)
• NPL ratio of 3.8% (Jun 2012: 3.2%)
• 62.7% liquidity ratio (Jun 2012: 56.3 %)
Operational Highlights
• 17 new business locations deployed thus far 2013, bringing the total to 807 (Dec 2012: 790)
Selected Financial Summary
Commenting on the results, Bello Maccido, Chief Executive Officer of FBN Holdings said: “Over the first half of 2013, the performance of the Group remained resilient, delivering year-on-year growth of 8% in gross earnings to N194.9 billion. The regulatory environment across our portfolio of businesses has continued to evolve, as authorities take measures to strengthen the various sub-sectors within the financial services industry. We have sustained efforts to refine our approach and responses to these developments, focusing on the strong natural synergies and cross-selling opportunities that exist between banking and the other financial services sectors we are active in. We have intensified efforts to leverage our unique offering to forge deeper relationships with our customers as we navigate the evolving terrain.
We have made progress with the launch of our Banc assurance as well as, more recently, the launch of the FBN Life mobile insurance product; and will be driving product uptake in coming periods. FBN Holdings is uniquely positioned to benefit from existing and emerging opportunities across its core Nigerian market, as well as the other high growth markets it operates in. Ultimately, the focus remains on extracting and unlocking value from the exciting portfolio of businesses within the Group, increasing efficiency and deepening share of wallet, thus improving profitability and return to shareholders.
Group Financial Review
Profit & Loss Account
Gross earnings grew year-on-year (y-o-y) by 7.7% to N194.9 billion and was primarily driven by the increase in interest income from loans and advances (+17.8 %), foreign exchange income (+155.8%) and growth in other operating income (+44.7 %).
Net interest income rose 3.6% to N112.7 billion, from N108.9 billion in the corresponding period of 2012, due to rising interest expense (+31.2%) resulting from a sustained high interest rate environment, commencement of the minimum 3.6%[1] interest rate on savings deposits in the second quarter, as required by the Central Bank of Nigeria (CBN), as well as intense competition for deposits within the industry. Overall, the Group recorded blended average cost of funds of 3.0% (Q1 2013: 3.1%, FY 2012: 2.5%, H1 2012: 2.5%). Net interest margins (NIMs) declined to 8.2% in the period under review, in line with the year ago period (8.3%), but lower than the 9.4% achieved in Q1 2013.
Profit before tax increased 2.9% y-o-y to N55.1 billion (Jun 2012: N53.5 billion), driven by moderate growth in revenue, higher impairment charges and slower expense growth. This includes N322 million profit from sale of real estate assets held by FBN Mortgages in compliance with the CBN directive as contained in its circular on “the scope of banking activities and ancillary matters 2010”.
Tax expense (provisional) came in at N9.0 billion, higher than N8.1 billion as at the end of June 2012, resulting in an effective tax rate of 16.3% (Q1 2013: 22.2%; H1 2012 15.2%).
Profit after tax improved marginally by N429 million N46.1 billion from N45.4 billion.
The above performance translated into annualised after tax return on average equity of 22% (Q1 2013: 2.7%, H1 2012: 25.1%).
Earnings per share (annualised) of N2.8 at the end of June 2013, 0.9% higher than the corresponding period in 2012 at N2.78.
Total assets increased 6.1% year-to-date (y-t-d) primarily from growth in customers’ deposits but constricted by 2.3% decline q-o-q to N3.4 trillion (Mar 2013: N3.5 trillion, Dec 2012: N3.2 trillion), due to minimal decline in loan book.
Total customer deposits increased by N154.2 billion or 6.4% year to date and 0.9% q-o-q to N2.6 trillion, from N2.5 trillion in March 2013 and N2.4 trillion as at December 2012, with growth achieved across all deposit buckets. Overall, 76.3% of our deposits remain low cost with blended average cost of funds of 3.0% relative to 3.4% and 2.7% as at March 2013 and December 2012 respectively. In view of the headwinds to cost of deposits following regulatory pressure and the competitive environment, the decline in funding costs was driven to a large extent by more efficient balance sheet management, on reduced borrowings.
Competition for deposits has continued to intensify, which coupled with regulatory interventions, suggest that funding costs across the industry will continue to rise. In this regard, FirstBank’s diverse and extensive funding base, with retail deposits accounting for about 50% of the deposit base, cuts across over 9 million customer accounts, with a relatively high core portion, provides very stable funding. We will continue to strengthen our deposit gathering franchise, leveraging our extensive retail platform and deep customer relationships.
Non-interest revenue (NIR) rose a marginal 2.4% y-o-y to N44.1 billion (Jun 2012: N43.1 billion), impacted by a 15.9% decline in fee and commission income (57% of NIR), which was offset by the 44.7% growth in other operating income and very strong growth (+155.8%) in foreign exchange income. This underscores the success in replacing income streams lost in the decline in fee and commission income, which was driven primarily by a 21.9% decline in commission on turnover, coupled with a 75% reduction in credit-related fees (due to the reclassification of certain credit related fees in the current period into other fees & commission as well as for purposes of computation of effective interest rate), as well as the onset of the CBN’s revised banking tariffs. The revised tariff now requires fees previously charged periodically over the life of the facility, to be charged as a one-off throughout the life of the facility – depending on the terms of agreement. As a result, management fees will now only be charged on new loans created during the period under review.
Operating expenses rose 3.1% to N92.2 billion y-o-y (H1 2012: N89.4 billion), well below average inflation rate of 8.8% as we continued to consolidate on the expense base. Regulatory costs[2] rose 44.5%, and now constitute 13.2% of operating expenses, relative to 9.4% in the year ago period. In particular, AMCON levy rose +77.3% while the NDIC14 premium rose 17.0%. Driving the consolidation in the cost base was a 1.1% reduction in staff costs and a 3.6% reduction in other operating expenses which constitute 48.8% and 31.8% of operating expenses respectively. This reflects benefits of the various business repositioning, transformation and cost optimisation initiatives we have embarked on over the past few years.
The cost-to-income ratio improved to 55.2%, in line with 55.5% recorded in the corresponding period in 2012, and significantly lower than the 57% as at Q1 2013 and 61.9% as at December 2012.
This reflects our approach to entrenching efficiency in our business and is two-pronged: optimising our expenditure and enhancing revenue streams. With a slowdown in our infrastructure spend this year, and in the medium term on slower new branch deployment, coupled with efforts geared at restructuring compensation structures for long term sustainability, we expect cost growth to be contained for the rest of the year. In the coming periods, as the various transformation and business repositioning initiatives pick up steam and we consolidate our leadership position within the commercial banking business, we will use it as a platform to extract energy benefits inherent across the Group, and unlock new revenue streams, we expect income growth to outpace cost growth, keeping our CIR sustainably within our medium term guidance of 55%.
Regulatory costs are set to rise further with the expansion of the 0.5% AMCON levy to cover 33% of off balance sheet items, effective beginning of 2014 as recently guided by the CBN. We will continue to explore additional ways of streamlining the cost base, optimising expenditure and continuing to enhance revenue streams to achieve further efficiency in our operations.
Net impairment charge on credit losses rose 8.9% y-o-y to N9.9 billion, (H1 2013: N9.1 billion) bringing the annualised cost of risk to 1.3%, in line with the corresponding period last year but higher than 0.5% as at March 2013. The Group recorded a NPL ratio of 3.8% (Q1 2013: 3.0%, FY 2012 2.6%, H1 2012: 3.2%), with a NPL coverage ratio[3] of 113% (Q1 2013: 117.9%, FY 2012: 133.1%, H1 2012: 106.6%). The decline in asset quality was driven primarily by the commercial banking business in Nigeria. This related to proactive classification and provisioning of a couple of customer obligations in downstream oil/gas and a logistics provider, as well as recognised impairment in respect of some retail products. The impaired assets are adequately collateralised and we expect reasonable write back of provisions as collateral is realised and remedial action embarked upon yield positive results.
The Group will maintain a constant review of its risk appetite definitions and acceptance criteria. New credits will only be extended to suitable and well identified customers, in line with Board approved policy with the loan selection criteria remaining rigorous and appropriate pricing to reflect the risks being taken on such exposures.
Total loans & advances (LAD) to customers (net) contracted marginally year to date, to N1.52 trillion from N1.54 trillion as at December 2012. The slight decline in total LAD growth was driven by:
• modest growth in corporate business, flattish performance in Retail following suspension of some retail product programs with higher than expected delinquencies as well as competitive pressures in consumer lending especially personal loans against salaries; and,
• decline in the Institutional Banking business was driven by some pay downs following the re-pricing, which was not unanticipated.
All issues are being addressed and we are beginning to see an uptick in loan growth. We maintain guidance of minimum 10% loan growth for the year.
Shareholders’ equity[4] of N452.8 billion, up 3.8% (Dec 2012: N436.3 billion), reflects the increase in retained earnings.
The Group achieved a capital adequacy ratio of 21.1% (Mar 20.5%, Dec 2012: 21.9%) and tier 1 ratio of 18.8% (Mar 18.2%, Dec 2012: 19.6%).
Liquidity ratio of 62.74% (Mar 2013: 65.4%, Dec 2012: 55.4%).
BREAKDOWN OF ERFORMANCE ACROSS THE GROUP
Commercial Banking[5]
Gross earnings for the first half of 2013 stood at N186.1 billion, representing a 2.8% increase year-on-year, with profit before tax of at N49.9 billion, a slight decline of 6.7% impacted by a 22% contraction in commission on turnover, a 16% reduction in other fees and commissions and to a lesser extent 75% drop in credit related fees. The aggregate balance sheet grew by 5.9% to N3.3 trillion (Dec 2012: N3.1 trillion), driven by the growth in deposit liabilities (+6.6%). Operating expenses for the commercial banking group declined by 1.3% to N87.9 billion fromN89.4 billion in the year ago period.
Commenting on the results for the Commercial Banking Group, GMD/CEO of First Bank of Nigeria, Bisi Onasanya said: “The commercial banking group faced significant headwinds in the second quarter of the year, with the prognosis being for the operating environment to get even tougher over the course of the second half of 2013. Nonetheless, we are seeing tangible benefits of a modified operating model within the commercial Bank in Nigeria, with the development of segment and functional specialists. We will focus our efforts in coming periods on acquiring new customers in the emerging corporates and retail priority segments.
We have dimensioned the impact of the revised charges from the CBN and commenced the implementation of initiatives to mitigate the impact and ensure sustainability of our income streams. As these initiatives gain traction, and we rollout an increasing number of measures to counter the pressure on revenues, and as benefits of the investments made in the prior period begin to come to fruition, we expect to see an improved run rate relative to those observed in the immediate aftermath of the implementation of the new tariffs. Looking ahead, we will focus on increasing the overall volumes and activity levels across our business, increasing our share of the customers’ wallet, as well as driving productivity gains and additional efficiencies across the business. In the near to medium term, we intend to raise our profile beyond its current borders, establishing presence in select SSA countries which are of interest. This expansion is expected to result in a number of benefits, including greater earnings diversification and increased shareholder value through higher returns on equity.
First Bank of Nigeria Ltd. (“FirstBank”)
Gross earnings for the period under review stood at N171.2 billion which represents an increase of 8.8% y-o-y, while profit before tax declined by 9.3% y-o-y to N44.1 billion (Jun 2012: N48.6 billion). In the first half of 2013, total assets increased by 3.3% year to date to N2.9 trillion, with deposit growth of 4.1% over the same period.
In the six months to June 2013, FirstBank grew its distribution network by 15 locations (9 branches and 6 quick service points), bringing the total to 729 business locations[6]. Our branch strategy remains centred around improving overall convenience of banking to our customers, whilst driving increasing penetration across all customer segments, with a particular focus on the affluent, youth and SME sub-segments. In line with this strategy, for the remainder of this year, we will complete and deploy an additional 18 branches, whilst at the same time driving enhanced productivity across the branch network.
As at the end of June 2013, the total number of accounts stood at approximately 9.4 million, with about 675,000 new accounts opened since the start of the year, representing a y-t-d increase of 7.8%.
The debit card base as at the end of the first half stood at 5.95 million, of which 5.39 million are VERVE Cards, representing over 92% of the total Debit Card portfolio. FirstBank sustained the 30% market share of the total Cards issued on the industry’s largest network – Interswitch and, at 91% (Mar 2013: 90%), has also maintained the highest active Debit Card rate in the industry. The number of active cards[7] to total issued cards across the 3 card brands[8] currently being issued by the Bank rose by 6% to over 5.2 million (Mar 2013: 4.9 million, Dec 2012: 5.2 million). Our Instant Card and PIN issuance strategy, ensuring the customer is issued VERVE and MasterCard within 15 minutes, with immediate activation at the branches has ensured continued healthy growth in our card base. Within our cards business, we have continued to innovatively develop products that will appeal to different segments of the customer base to drive greater acceptance and use of the card products across a wider portion of our customer base. We believe that growth in these products will be important to the Bank in sustaining revenues given the tough operating environment.
As at the end of H1 2013, the Bank had deployed a total of 2,220 ATMs out of the total industry installed base of 11,702, representing a market share of about 19% and growth of 2.6% when compared to the 2,163 ATMs deployed at the end of Q1’ 2013. The average monthly volume of withdrawal transactions processed by our ATMs in H1 2013 decreased by 15% to 10.6 million over Q1 2013 and increased by 35% over the same period in 2012, whilst the value of cash dispensed by our ATMs (to both our customers and other bank’s customers) rose 26.6% fromN597.6 billion in H1 2012 to N735.6 billion in H1 2013.
FirstBank, as at the end of June 2013, had deployed a total of 18,105 POS terminals which represents a growth of 8% compared to the 16,832 terminals deployed as at H1 2012. Following the implementation of a number of initiatives, we achieved a 16% growth in the number of active POS terminals from 4,585 at the end of Q1 2013 to 5,324 at the end of Q2 2013. As at June, the total POS terminals deployed by the industry stood at 122,350, of which 38,187 were active, representing an industry active rate of 31.2%. FirstBank continues to engage all relevant parties in the POS ecosystem to address challenges associated with POS channel management in the country.
Firstmonie was launched on 19 September 2012, with over 213,000 customers and 9,350 agents with an average monthly addition of about 40,000 subscribers. To scale up effectively, we have secured several mandates of strategic importance with various corporate and public sector organisations to support aspects of their business. Leveraging on the strong retail platform and distribution network of FirstBank, Firstmonie is the preferred partner for the mobile money solution, aimed at both the unbanked and under banked, with several mandates/relationships won. Some noteworthy developments are:
• conclusion of the maiden UNICEF fund disbursement scheme in Kaduna and Kano states respectively; the first of its kind within the mobile money space in Nigeria, with disbursement of N10 million at pilot phase;
• current engagement with ‘Save the Child International’ with an estimated monthly disbursement of N450 million for 5 years; and,
• on-going joint telecommunications campaign with Firstmonie and Airtel Limited, aimed at acquiring Airtel subscribers to Firstmonie payment system.
We will continue to build strategic relationships and mandates, as well as product enhancements, which will provide on-going support to the Bank’s long term retail and agency banking aspirations. During the quarter, to support our aggressive Agent Network development, we completed the implementation of a robust Agent on-boarding platform that ensures that all agent recruitment processes are completed at the branches thereby improving the turnaround time. We believe that Agent Banking provides the Bank with a strong opportunity to deepen its retail footprint, and grow its customer base in a cost effective manner, and accessing low cost deposits, while increasing its non-interest revenues without the burden of huge capital investments.
Despite a tough operating environment occasioned by regulatory pressures and policy directives of CBN, we have sustained our leadership position in domestic card issuance, electronic transaction processing, ATM deployment and POS activity. We are implementing strategies to ensure the increased availability and visibility of our ATMs to manage the amount paid out to other banks, switches, card schemes and processors. We have focused largely on renegotiating existing contracts with card Schemes and Switches, driving efficiency in our operations. Our strategy continues to be anchored on innovatively unlocking new revenue opportunities across our channels, driving down our cost of operating the business, and deepening the usage of our services through improved customer experience.
In coming periods, with respect to managing our e-business, we will focus on channels integration of existing platforms for greater customer convenience, enhance our e-business platform and prioritise management of the cost of our customer’s use of other banks’ ATMs (Us-On-Them) and growing the number of “Them-On-Us” through a number of initiatives to drive behaviour change. Some of these include strategic deployment of additional ATMs, rolling out Firstmonie, driving behaviour change from the use of ATMs (Cash) to the use of Point-Of-Sale terminals, web and mobile channels through incentives, increasing visibility and revenue generation on our international cards and our ATMs, and continuing to improve the efficiency of our overall product offerings to meet the needs of our customers.
Banking application upgrade
The Bank’s Core banking application was upgraded to Finacle 10 from Finacle 7 (developed by Infosys), which is expected to significantly enhance our ability to meet our customers’ banking needs and increase our product offering. With the upgrade, the Bank can now achieve seamless “round-the-clock” operations, simplified end-user interfaces (especially for our frontline service delivery team), enhanced Know-Your-Customer (KYC)/Anti Money Laundering (AML) functionalities for regulatory compliance, better relationship management with new improved Customer Relationship Management (CRM) module, enhanced control and audit functionalities, supports for multi-entity operations (which would support the Bank’s International rollout plans), improved treasury process compatibility and capability to support new lines of businesses
Improvements in customer service ranking
Reflecting the significant progress along our transformation agenda, FirstBank has continued to record improvements in our ranking within the KPMG annual Banking Industry Customer Satisfaction Survey. FirstBank moved from third to second in the corporate segment, sixth to fifth in the SME segment, and eighth to seventh in the Retail segment. We continued to expand our internal service measurement activities, to aid us in identifying areas where service improvements are required across all channels, thereby improving our overall competitive positioning.
Differentiated service offerings to enhance market penetration
Sustained progress with the introduction of new premium lounges for affluent customers within our existing branches, with increasing acceptance and use by our affluent customers.
FBN UK
Gross earnings increased by N2.3 billion[9] (29%) in the six months to June 2013 to N10.6 billion with profit before tax of N4.3 billion (Jun 2012: N2.4 billion) – benefitting from increased lending activities, realized gain on sale of Bond and accelerated release of fee income from prepaid loans to profit & loss account. Total assets reduced in the quarter ended June 2013 by about N15.3 billion (3%) to N501 billion, largely driven by net customer deposit outflow.
Operating expenses increased by N206.3 million (16%) compared to previous quarter. All expense lines were largely within budget as management continued to apply strict cost control measures.
There was no credit impairment charge during the period as the non-performing loan ratio remained low with all criticised assets fully provisioned net of collateral.
FBN UK posted a profit before tax (PBT) of N4.3 billion for the half year period ended June 2013. The profit amount exceeded N2.4 billion posted during the same period last year by N1.9 billion (77%). FBN UK delivered PBT of N2.5 billion in the quarter ended June 2013 representing 37% increase in PBT from previous quarter. This performance was influenced by combination of strong net interest margin generated and appreciable operating cost savings.
The Bank maintained adequate liquidity position during the quarter as 38% of total assets were held in liquid asset form. Capital position remained strong with relevant capital ratio at 18.7%. Management continues to operate a diversified funding base as part of its strategy for a sustainable business model. Regulatory rules, particularly those relating to liquidity and capital remained stringent and constraining for bank lending business. Nonetheless, the Bank has the capacity for business expansion and strong profit performance in the future, leveraging on its robust operational infrastructure and strong risk management framework.
Operational highlights
The Bank successfully delivered a system upgrade project in the quarter. The banking system, Flexcube was upgraded in June to the latest version, which is expected to enhance operational efficiency and improve quality of customer service delivery.
Banque Internationale de Credit
Gross earnings rose 30.1% y-o-y to N3.58 billion (Jun 2012: N2.75 billion), driven by interest income and fees/commission. Fees and commission rose 39% to N2.00 billion (Jun 2012: N1.43 million), while net interest income rose 18.5% to N1.40 billion (Jun 2012: N1.18 billion). Profit before Tax rose 232% y-o-y to N726.4 million (Jun 2012: N218.7 million). Operating expenses rose 2.5% to N2.5 billion from N2.40 billion in the year ago period. The company recorded profit after tax of N367.6 million (Jun 2012: N13.3 million).Over, BIC recorded half year Profit after Tax of N367.6 million (Jun 2012: N13.3).
First Pension Custodian Nigeria Limited (FPCNL)
Cumulative earnings of N1.5 billion for the six months ended June 2013 was higher than prior year by 45.2%. This was due to an increase of 61.8% in custody fee income arising from growth in the underlying assets and payment of outstanding fee income from prior period. Custody fee income contributed 87.1% of total earnings from 78.2% in the prior year, whilst investment income and other income contributed 12.4% and 0.5% respectively. Operating expenses of N609 million for the six months to June 2013 increased by N40.7million (7.2%) above prior year corresponding figure of N568.3 million. Cost to income ratio for the half year was 40.9%, an improvement from 53.9% for 2012. The company recorded profit before tax of N904.3 million for the half year ended June 2013 (+86.1% y-o-y). The total market value of assets under custody (AuC) of the company (inclusive of capital contribution, capital appreciation and income accruing to the assets) as at June 30, 2013 was N1.24 trillion, a growth of 4.4% when compared with N1.19 trillion as at March 2013, 14.1% y-t-d and 30.4% y-o-y. Total AuC of N1.24 trillion comprised pension assets of N1.19 trillion (95.9%) and non-pension assets of N0.05 trillion (4.1%).
Review of the Pension Reform Act 2004
The National assembly commenced the process of revising the Pension Reform Act (PRA) tagged “PRA 2013”. The Bill has passed through second reading and the National Assembly has held a public hearing towards harmonising all stakeholders’ views. If enacted into law in its current form, the bill portends some key fundamental changes. The scheme will be applicable to employers with 3 or more employees (currently 5 or more is required); the total rate of contribution will increase from the current 15% of monthly emolument (being 7.5% each by the employer and the employee) to 20% with a minimum of 12% by the employer and a minimum of 8% by the employee. The major objectives of the review are:
• Identify ways to fully integrate the informal sector, States and Local Governments into the Scheme;
• Examine ways to diversify pension fund investments to provide adequate returns while guaranteeing safety of the pension assets;
• Revision of the Guarantee by parent Bank of the Custodian from 100% of all Pension Assets under Custody to only balances in the current account and any other assets with the parent bank; and,
• Draw lessons from other jurisdictions on how to promote best practices in the pension industry; and harvest inputs from all stakeholders and professionals with a view to conducting a comprehensive review of the PRA 2004.
If the objectives are achieved, this will drive increased inflows of pension contribution from employers/employees, which will increase the pension assets under custody and ultimately positively impact the company’s profitability.
Investment Banking and Asset Management (IBAM)
IBAM grew gross revenue by 47.5% to N6.5 billion (Jun 2012: N4.4 billion). Net operating income rose by 14% to N1.7 billion (Jun 2012: N1.5 billion) and recorded profit before tax of N2.8 billion (Jun 2012: N851 million). The performance was impacted by:
• Strong contribution from the Project & Structured Finance as well as Trust & Agency business ~31% & 24% of total revenues respectively;
• Slower than anticipated growth in assets under management (AuM); and,
• Subdued market activity in the debt capital markets and slower than anticipated return of issuers to the primary side of the equity capital markets.
Key imperative is to achieve optimal performance in the Investment Banking, Trust & Agency & Alternative Investments businesses, significantly grow revenues particularly within the Markets & Asset Management divisions as well as contain operating expenses.
Insurance
Gross earnings recorded a significant growth of N530 million or 42% to N2.5 billion (Jun 2012: N1.7 billion). Total Gross Premium Income (GPI) of N1.7 billion was achieved by FBN Life. This GPI figure is 148% of the corresponding period in 2012 and 61% of the 2012 full year figure; underscoring the Company’s increased drive to capture more share of the market while ensuring that good quality risk assets that will increase the Company’s profitability drive is adhered to.
Total assets closed the half year at N10.3 billion, an increase of 40% (Dec 2012: N7.2 billion).
Operating expenses grew by 27% compared to June 2012. This is attributable to expenses incurred in the courses of relocating to the new head office as well as business expansion costs. Profit before Tax grew significantly to N319 million (June 2012: N16 million), benefitting from substantial growth in premium fees & commissions. A total of N350 million was paid out in claims during the period under review, representing 70% of the total claims paid in 2012. FBN Life ensures that all genuine and adequately documented claims are paid within 48hours – this is a service-quality process instituted to capture more market share in an industry noted for slow claims administration process.
FBN Life obtained NAICOM’s approval to commence the sale of its mass retail product named “Padi-4-Life”. This is a mobile phone-based insurance product which was birthed in partnership with Airtel Nigeria, one of the leading GSM mobile telecommunication company in Nigeria. Padi-4-life is a life protection plan (for permanent disability or death to the tune of N500,000 for one Airtel line and N1 million for two lines) available to registered Airtel subscribers (21.6 million) upon payment of a daily premium of N20. To enroll for this service, you are required to text LIFE to 45433 on your phone and follow the prompts you receive.
The approval to commence the sale of this marks a significant milestone in the history of insurance industry as it is the very first insurance product sold through a Telecommunication channel. FBN Life is the FIRST Insurance Company in Nigeria to embark on this innovative and revolutionary method of selling Life insurance protection and supported strongly the Sanlam Group of South Africa, whose combined wealth of experience and expansive network places us at an advantage to lead our industry with consumer friendly and affordable insurance products. We expect that the launch of Padi-4-life with Airtel, the increased sale of FBN Life products to Affinity groups[10], increased synergy across the group and the take-off of the FirstBank Bancassurance, effective May 2013, as well as various initiatives in partnership with FirstBank, will positively impact on the earnings in coming periods.
FBN Life’s retail-focused strategy is geared towards the mass market where insurance penetration is at its lowest, and dovetails very strongly into the demographic trends in Nigeria. This strategy will utilise purpose-designed products, robust IT, distribution channels and strategic partners in reaching the teeming “un-assured” in the populace thereby driving up the company’s share of the insurance market. In the second half of 2013, FBN Life expects to grow its retail distribution of insurance products and public sector group life insurance by leveraging the Bank and other subsidiaries within the group, other financial service businesses, its relationship with key players in the public sector space and potentially activating the telecoms sector and other channels.
Other Financial Services
FBN Microfinance (‘FBNM’)
FBNM achieved profit before tax of N127.5 million relative to N160.3 million in the corresponding period of 2012. The decline in PBT is due to the decline in the loan book to N1.1 billion (Mar 2013: N1.1 billion; Dec 2012: N1.5 billion; Jun 2012: N1.4 billion). Deposit liabilities grew 33.9% to N2.3 billion (Mar 2013: N915 million, Jun 2012: N912 million). Focus remains on revenue optimisation, improving risk management and cost containment to enhance overall performance.
About the Author
