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Banking Sector

Despite Economic Headwinds, FBN Holdings Grows Profit by 100% in 2021 Financial Year

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FBN Holdings Plc, Nigeria’s leading financial institution, has exceeded all expectations in the financial year ended December 31, 2021 as profit after tax jumped a whopping 100% to ₦151.1 billion.

The bank disclosed this in its audited financial statement obtained by Investors King.

Gross earnings grew by 28.2% to ₦757.3 billion, up from  ₦590.7 billion filed in the 2020 financial year. Operating income also inched higher by 35.5% in the year under review to ₦592.8 billion from ₦437.6 billion filed in the corresponding year of 2020.

As expected, operating expenses stood at ₦334.2 billion in 2021, representing an increase of 14.2% from ₦292.5 billion achieved in the 2020 financial year. The growth was broad-based as the lender’s profit before tax jumped 99.1% to ₦166.7 billion from ₦83.7 billion while profit after tax rose from ₦75.6 billion in 2020 to ₦151.1 billion in 2021, an increase of 99.9%.

Similarly, earnings per share improved by 70.2% to N4.17 from N2.45 in the same period of 2020.

However, interest income dipped by 4.1% from ₦384.8 billion in 2020 to ₦369 billion in 2021, largely due to the moderated interest rate environment that negatively dragged on yields.

Therefore, to mitigate the effect of the low-interest rate, FBN Holdings intensified deposit mobilisation and funding strategy that help enhance loan growth at optimised rates, leading to a 5.7% increase in interest expense to ₦140.8 billion from ₦133.2 billion in 2020. As a result, net interest income declined by 9.3% to ₦228.2 billion.

Conversely, non-interest revenue grew by 96.1% to ₦364.6 billion from ₦185.9 billion in 2020 on the back of increased fees and commission income, treasury activities and other operating income.

Commenting on the results, Dr. Adesola Adeduntan, Chief Executive Officer of FirstBank Group said: “Following years of strategic restructuring of the Bank’s balance sheet and operations, the Commercial Banking business is beginning to transition into a sustained growth phase delivering performance commensurate to the size of our business and capabilities of our people. Profit before tax is up 77.9%, gross earnings 30.3%, total assets 15.9% and customer deposits up 19.5%.

“This performance was driven by a relentless focus on the needs of customers and improving the competitiveness of our offerings. We have sharpened our ‘Go To Market’ approach to better leverage the opportunities which our large scale provides in addition to becoming more relevant to our clients by improving our value propositions.

“This performance is also in line with the Bank’s Quantum Profitability Leap agenda which seeks to ensure that we fully maximise the revenue generating capacity of our business to boost the bottom line and fulfil the expectations of all stakeholders in the business.

“The demonstrated resilience of our franchise to headwinds and excellent risk management capabilities place us in a good position to weather any macro-economic shocks which may arise due to the volatile nature of current operating environment. Our Non-performing loans ratio at the end of the year was 6.1% which represents significant progress towards those of other Tier 1 banks and the regulatory threshold of 5.0%.

“We will continue to leverage our investments in digital platforms, IT infrastructure, people, and pan-African operations to ensure this growth trend is sustained”.

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

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Banking Sector

CBN Governor Vows to Tackle High Inflation, Signals Prolonged High Interest Rates

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The Governor of the Central Bank of Nigeria (CBN), Dr. Olayemi Cardoso, has pledged to employ decisive measures, including maintaining high interest rates for as long as necessary.

This announcement comes amidst growing concerns over the country’s soaring inflation rates, which have posed significant economic challenges in recent times.

Speaking in an interview with the Financial Times, Cardoso emphasized the unwavering commitment of the Monetary Policy Committee (MPC) to take whatever steps are essential to rein in inflation.

He underscored the urgency of the situation, stating that there is “every indication” that the MPC is prepared to implement stringent measures to curb the upward trajectory of inflation.

“They will continue to do what has to be done to ensure that inflation comes down,” Cardoso affirmed, highlighting the determination of the CBN to confront the inflationary pressures gripping the economy.

The CBN’s proactive stance on inflation was evident from the outset of the year, with the MPC taking bold steps to tighten monetary policy.

The committee notably raised the benchmark lending rate by 400 basis points during its February meeting, further increasing it to 24.75% in March.

Looking ahead, the next MPC meeting, scheduled for May 20-21, will likely serve as a platform for further deliberations on monetary policy adjustments in response to evolving economic conditions.

Financial analysts have projected continued tightening measures by the MPC in light of stubbornly high inflation rates. Meristem Securities, for instance, anticipates a further uptick in headline inflation for April, underscoring the persistent inflationary pressures facing the economy.

Despite the necessity of maintaining high interest rates to address inflationary concerns, Cardoso acknowledged the potential drawbacks of such measures.

He expressed hope that the prolonged high rates would not dampen investment and production activities in the economy, recognizing the need for a delicate balance in monetary policy decisions.

“Hiking interest rates obviously has had a dampening effect on the foreign exchange market, so that has begun to moderate,” Cardoso remarked, highlighting the multifaceted impacts of monetary policy adjustments.

Addressing recent fluctuations in the value of the naira, Cardoso reassured investors of the central bank’s commitment to market stability.

He emphasized the importance of returning to orthodox monetary policies, signaling a departure from previous unconventional approaches to monetary management.

As the CBN governor charts a course towards stabilizing the economy and combating inflation, his steadfast resolve underscores the gravity of the challenges facing Nigeria’s monetary authorities.

In the face of daunting inflationary pressures, the commitment to decisive action offers a glimmer of hope for achieving stability and sustainable economic growth in the country.

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Banking Sector

NDIC Managing Director Reveals: Only 25% of Customers’ Deposits Insured

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The Managing Director and Chief Executive Officer of the Nigeria Deposit Insurance Corporation (NDIC), Bello Hassan, has revealed that a mere 25% of customers’ deposits are insured by the corporation.

This revelation has sparked concerns about the vulnerability of depositors’ funds and raised questions about the adequacy of regulatory safeguards in Nigeria’s banking sector.

Speaking on the sidelines of the 2024 Sensitisation Seminar for justices of the court of appeal in Lagos, themed ‘Building Strong Depositors Confidence in Banks and Other Financial Institutions through Adjudication,’ Hassan shed light on the limited coverage of deposit insurance for bank customers.

Hassan addressed recent concerns surrounding the hike in deposit insurance coverage and emphasized the need for periodic reviews to ensure adequacy and credibility.

He explained that the decision to increase deposit insurance limits was based on various factors, including the average deposit size, inflation impact, GDP per capita, and exchange rate fluctuations.

Despite the coverage extending to approximately 98% of depositors, Hassan underscored the critical gap between the number of depositors covered and the value of deposits insured.

He stressed that while nearly all depositors are accounted for, only a quarter of the total value of deposits is protected, leaving a significant portion of funds vulnerable to risk.

“The coverage is just 25% of the total value of the deposits,” Hassan affirmed, highlighting the disparity between the number of depositors covered and the actual value of deposits within the banking system.

Moreover, Hassan addressed concerns about moral hazard, emphasizing that the presence of uninsured deposits would incentivize banks to exercise market discipline and mitigate risks associated with reckless behavior.

“The quantum of deposits not covered will enable banks to exercise market discipline and eliminate the issue of moral hazards,” Hassan stated, suggesting that the lack of full coverage serves as a safeguard against irresponsible banking practices.

However, Hassan’s revelations have prompted calls for greater regulatory oversight and transparency within Nigeria’s financial institutions. Critics argue that the current level of deposit insurance falls short of providing adequate protection for depositors, especially in the event of bank failures or financial crises.

The disclosure comes amid ongoing efforts by regulatory authorities to bolster depositor confidence and strengthen the resilience of the banking sector. With concerns mounting over the stability of Nigeria’s financial system, stakeholders are urging for proactive measures to address vulnerabilities and enhance consumer protection.

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Banking Sector

Wema Bank Celebrates 79th Anniversary with Launch of CoopHub for Cooperative Societies

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Wema Bank, one of Nigeria’s leading financial institutions, has introduced a digital solution tailored for cooperative societies.

The innovative platform, named CoopHub, was developed to drive digital transformation and empower communities across Nigeria.

The unveiling of CoopHub took center stage at the bank’s anniversary celebration, held on Friday amidst much anticipation and excitement.

The launch of this pioneering platform underscores Wema Bank’s dedication to innovation and customer-centricity, aiming to revolutionize the operations of cooperative societies and address longstanding challenges within the sector.

At the heart of CoopHub lies a strategic vision to redefine the way cooperative societies function by providing tailored solutions that bridge the gaps inherent in traditional cooperative frameworks.

Designed to streamline operations, enhance communication, and promote financial inclusivity, CoopHub aims to empower cooperative societies and their members for optimal productivity and growth.

Moruf Oseni, the Managing Director/Chief Executive Officer of Wema Bank, emphasized the strategic importance of CoopHub in addressing the pain points faced by cooperative societies.

He highlighted challenges such as manual recordkeeping, limited access to loans, poor communication, insecurity, and other restrictions that CoopHub seeks to overcome. Oseni reaffirmed Wema Bank’s commitment to innovation and customer-centricity, stating that CoopHub represents a significant step forward in empowering communities across Nigeria.

Solomon Ayodele, Wema Bank’s Head of Innovation, elaborated on the transformative features of CoopHub, emphasizing its role in ushering cooperative societies into a new era of efficiency and transparency.

Ayodele highlighted features such as a digitized database for recordkeeping, user management capabilities for leaders, transparent overviews of contributions, seamless communication frameworks, and robust security measures, including a three-factor authentication system for withdrawals.

Ayodele urged cooperative societies to embrace CoopHub and experience the future of cooperative operations firsthand.

He emphasized the platform’s potential to eliminate conflicts, mistrust, and inefficiencies, offering a seamless and secure ecosystem for cooperative members to thrive.

The launch of CoopHub comes at a time when cooperative societies play a vital role in Nigeria’s socio-economic landscape.

According to the National Cooperative Financing Agency of Nigeria, over 30 million Nigerians belong to cooperative societies, highlighting the significant impact of these entities on community development and financial inclusion.

As Wema Bank embarks on its 79th year of operation, the introduction of CoopHub underscores the institution’s commitment to driving positive change and fostering sustainable growth within Nigeria’s cooperative sector.

With its innovative features and transformative capabilities, CoopHub promises to empower cooperative societies, enhance financial inclusivity, and catalyze socio-economic development across Nigeria.

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