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Banking Sector

GCR Affirms Coronation Merchant Bank Limited’s National Scale Long and Short-term Issuer Ratings of A-(NG)/A2(NG); Outlook Stable

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GCR Ratings (“GCR”) has affirmed Coronation Merchant Bank Limited’s national scale long-term and short-term ratings of A-(NG) and A2(NG) respectively, with a Stable Outlook.

Rated Entity Rating class Rating scale Rating Outlook
Coronation Merchant Bank Limited Long Term issuer National A-(NG) Stable
Short Term issuer National A2(NG)

Rating rationale

The ratings of Coronation Merchant Bank Limited (“Coronation MB” or “the bank”) reflect its adequate funding and liquidity position, and sound asset quality metrics, as evidenced by the nil non-performing loans (“NPL”) since inception to date. However, these strengths are partly offset by the bank’s modest competitive position, significant loan book concentration and heavy reliance on wholesale funding from financial institutions.

Coronation MB is a strong player within the Nigerian merchant banking subsector based on its product/service delivery, loan portfolio and deposit mobilisation capacity relative to peers. Leveraging its long track record (having previously operated as a discount house for over two decades) and partnerships, the bank ensures consistent enhancement of its operational scale, particularly within the trade finance space. Reflective of its relatively small customer base and the trends across the merchant banking subsector, elevated concentration risk is perceived, with the twenty largest obligors and depositors constituting 85.0% and 75.4% of gross loans and customer deposits respectively at FY20. Also, the bank evidenced moderate market share within the Nigerian banking industry in terms of total assets, customer deposits, and loan portfolio, which are estimated at 0.8%, 0.7% and 0.7% respectively at FY20. Management & Governance is a neutral ratings factor.

Capitalisation is assessed at an intermediate level. The GCR computed capital ratio registered at 17.6% at FY20 (FY19: 19.8%) and expected to moderate to 16%-17% range over the next 12-18 month in view of the outpacing growth in risk weighted assets vis-à-vis internal capital generation. Earnings quality is considered ratings negative, reflected by revenue stability risk characterised by high source concentration and a material exposure to market sensitive income, which constituted a sizeable 42.5% of total operating revenue in FY20 (FY19: 41.3%).

Risk position is sound and a key ratings strength, underpinned by the bank’s nil NPL since inception to date and moderate credit losses of 0.2% at FY20, which broadly compared favourably with the industry average of about 3%. Initial assessments of the potential impact of the COVID-19 pandemic indicated that the bank will not be immune to the sector-wide challenges, which include asset quality concerns and slower loan repayments. However, this impact has thus far remained minimal, with the bank making no recourse to regulatory forbearance during the period. That said, we expect NPL and credit losses to remain at similar strong range over the rating horizon on the back of sustenance of stringent underwriting criteria and the macroeconomic environment recoveries. Conversely, the loan book is considered highly concentrated, with the top twenty obligors accounting for 85% of the loan book at FY20. While this is a rating constraining factor and typical of merchant banks in Nigeria, management expects this concentration to moderate somewhat over the short to medium term on account of the recent sectoral coverage expansion. GCR is also cognisant of the bank’s significant exposures to market risk considering the substantial market sensitive income realised in FY20.

Coronation MB’s funding base is considered adequate, predominantly bolstered by the debut N25bn subordinated unsecured bonds issued during 2020, as well as its improved deposit mobilisation capacity. As a result, the GCR long term funding ratio and stable funding ratio was robust at 80.8% and 73.1% respectively at FY20. While cognisance is taken of the sizeable (41.3%) growth in customer deposits in FY20, concentration risk is evident, with the top twenty depositors accounting for 75.4% of the deposit book, the bulk of which were from financial institutions. Positively, liquidity position is solid, with the GCR liquid asset covering wholesale funding and customer deposits by 3.9x and 53.1% respectively at FY20.

Outlook statement

The stable outlook reflects GCR’s expectation that Coronation MB’s asset quality metrics would remain sound despite the strains in the operating environment, albeit with the loan portfolio concentration by obligor remaining high. GCR calculated capital ratio is anticipated to moderate to 16-17% range over the next 12-18 month given our expectation that the outpacing growth in risk weighted assets vis-à-vis internal capital generation will continue to weigh down capitalisation metrics. However, GCR will positively consider a material improvement in core earnings over the rating horizon. While we anticipate liquidity to remain sound, diversification of the deposit book with a better mix of non-financial institution clients would be positively considered.

Rating triggers

The ratings could be upgraded if Coronation MB materially improves its core earnings and achieves a core capital ratio above 20% on a sustainable basis, while also maintaining sound asset quality metrics. In addition, GCR would positively consider a well-diversified loan portfolio and funding base. Conversely, a downward rating movement could be triggered by a material deterioration in GCR computed capital ratio to below 15% range, asset quality pressures and increase reliance on wholesale funding from financial institutions.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

FirstBank Commemorates 2022 International Youth Day, Dedicating the Week to Celebrating the Youth

First Bank of Nigeria Limited has announced its commemoration of the 2022 International Youth Day, globally celebrated today, 12 August 2022.

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First Bank of Nigeria Limited has announced its commemoration of the 2022 International Youth Day, globally celebrated today, 12 August 2022 and themed “Intergenerational solidarity: Creating a World for All Ages.” 

The International Youth Day is commemorated every year on 12 August, bringing youth issues to the attention of the international community and celebrating the potential of youth as partners in today’s global society. The Day also amplifies the message that action is needed across all generations to achieve the United Nations Sustainable Development Goals (SDGs) and leave no one behind.

Leading up to the day, the Bank dedicated the week of 8 – 12 August with a lineup of activities to reiterate its commitment to Youth Empowerment.

As a Bank renowned for its role in developing the economy through sustainable employment and entrepreneurship endeavours, the 2022 edition of the Youth Week will promote economic empowerment and employment, digital technology, and education as its focus during the celebration.

The Youth Week comprises various activities, including a Fashion illustration workshop, Design skill training, Gen Z/Millennial Webinar and many more exciting activities. These activities would give participants opportunities to win various exciting gift items.

Under the First@arts program, the Bank will empower the youths through Artistry Workshop Sessions & Arts Classes. Interested in the art of fashion design and illustrations, visit the Bank’s social media handles – Instagram: @firstbanknigeria, Facebook: First Bank of Nigeria Limited, Twitter: @FirstBankngr – for information on how you can be among 10 lucky winners to have the opportunity to learn the business of fashion at Claire Idera fashion studio.

Likewise, the Creative design workshop will enable youths design skill training; design thinking principles and their application in the context of layout, typefaces and colour. Interested youths can also participate on the FirstBank social media handles, where 25 lucky winners will be selected to learn the Art of Design at Geneza School of Designs.

Commemorating the Youth Week, Dr Adesola Adeduntan, Chief Executive Officer of FirstBank said: ‘’We remain committed to celebrating the younger demography whose voices, actions, vigour, and tireless participation in the political, economic, and social activities have continued to birth major contributions towards the sustainable development of Africa and the world at large. The planned activities will promote better collaboration and solidarity across generations to foster successful and equitable relationships, and partnerships thereby ensuring “no one is left behind” and empowering everyone to leverage their full potential toward achieving the much-desired Sustainable Development Goals (SDGs).

This Youth demography has a striking significance for us at FirstBank with the Millennials and Gen Zs constituting almost 60% of our workforce. This shows that youths are an integral part of our organisation and every country where we operate”, he concluded.

For more information and participation in the Youth Week, kindly visit the bank’s verified social media platforms; Instagram: @firstbanknigeria, Facebook: First Bank of Nigeria Limited, Twitter: @FirstBankngr

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Banking Sector

FBN Holdings Reports 49% Increase in Profit in H1 2022

FBN Holdings Plc has reported a 48.9% increase in profit after tax for the first half (H1) of 2022.

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Nnamdi Okonkwo

FBN Holdings Plc, the parent company of FirstBank of Nigeria Limited, has reported a 48.9% increase in profit after tax for the first half (H1) of 2022.

The financial services provider announced gross earnings of N359.2 billion for the period under review, an increase of 22.4% when compared to the N293.4 billion recorded in the first half of 2021.

Interest income jumped 40.6% from N161 billion achieved in H1 2021 to N226.4 billion. While the Group’s net interest income rose a whopping 47.3% to N152.9 billion, up from N103.8 billion in H1 2021.

Non-interest income remained largely unchanged at N120.6 billion, a 0.2% decline from N120.9 billion posted in the corresponding period of 2021.

FBN Holdings’ operating income expanded by 21.7% to N273.5 billion from N224.7 billion in H1 2021. The lender’s impairment charges improved by 18.7% to N21.7 billion, down from N26.7 billion in the same period of 2021.

As expected, operating expenses inched higher to N186 billion from N152.6 billion recorded in H1 2021. Profit before tax stood at N65.7 billion a 45.3% increase from N45.2 billion filed in H1 2021.

The total profit realised for the period grew by 48.6% from N38.1 billion in H1 2021 to N56.5 billion in H1 2022.

Earnings per share also rose 48% to N1.55 from N1.05.

Speaking on the group performance, Nnamdi Okonkwo, the Group Managing Director said “FBNHoldings continues to demonstrate resilient performance despite the challenging operating environment with an impressive improvement in revenue and profitability. For the half year 2022, gross earnings and profit before tax grew by 22% y-o-y and 45% y-o-y to N359.2 billion and N65.7 billion respectively. Furthermore, we continue to see good progress across our performance metrics, which remain in line with our focus on driving sustainable growth.

“The Group remains committed in its transformation drive, which has resulted in stronger balance sheet and better asset quality with non-performing loans closing at 5.4% at H1 2022. Similarly, risk management capability remains robust across the Group supporting the drive for enhanced earnings for sustainable capital accretion.

“During the period, cost to income ratio remained flat y-o-y despite the inflationary and currency pressure, as we continue to focus on optimising overall efficiency.

“Our strategic intent remains unchanged in optimising opportunities that drive growth in revenue, profitability, capital accretion and overall operational efficiency that delivers sustainable value to our stakeholders.”

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Banking Sector

FirstBank’s Firstmonie Agents Processed Over N22 Trillion in Transaction Value

FirstMonie Agents have processed over N22 trillion in combined transaction value.

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Nigeria’s leading financial services provider, FirstBank of Nigeria Limited on Thursday said its fast-growing agent banking network, Firstmonie Agents, has collectively processed over N22 trillion in transaction value.

The lender, which announced a profit after tax of N53.3 billion in the first half of the year, said Firstmonie Agents processed transaction volume in excess of 1 billion across all its 180,000 agents that operate in 772 local governments.

In an effort to bring financial services to the unbanked and underbanked segment of the Nigerian society, Firstmonie Agents was the first banking network to operate in all the local government areas, except the two local governments enmeshed in insecurity.

Since its launch, FirstMonie Agent Banking has been providing convenient banking services to Nigerians previously cut off from the financial system, playing a pivotal role in deepening financial inclusion and empowering existing businesses within the communities to deliver these services.

Popularly called ‘Human ATM’, Firstmonie Agents are empowered to reduce the reliance on over-the-counter transactions while providing convenient personalized services. Amongst the services carried out by the Agents include; Account Opening, Cash Deposit, Airtime Purchase, Bills Payment, Withdrawals and Money Transfer.

Through various empowerment and reward schemes implemented to put its Firstmonie Agents at an advantage to economically impact their immediate communities whilst importantly having their business sustained, the Bank’s Agent Banking scheme has remained a toast to Nigerians, irrespective of where they are in the country. Amongst these schemes is the Agent Credit – launched in 2020 – which has had the Bank provide credit facilities to the tune of 238 billion naira to its teeming Firstmonie Agents.

Commenting on the milestone, Dr. Adesola Adeduntan, CEO, FirstBank said “since the relaunch of our Agent Banking scheme in 2018, our Firstmonie Agents have played a vital role in bridging the financial inclusion gap in the country, as many more people have been able to undertake various financial and business transactions in cost-effective ways, thereby saving a lot of time and money in travelling over long distances for basic banking services.“

“We are delighted by the giant strides of our Firstmonie Agents in promoting financial inclusion and commend them for their efforts in taking banking to the doorsteps of Nigerians – irrespective of where they are – in a very effective way”, he concluded.

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