FBNH: When the Big Elephant Turns the Corner

• Grows 2017 PAT by 179%
• Targets N1 dividend and above in 2019
• To end impairment in bank component in 2019
• Current price considered low

I have, in the last eighteen years chatted with hundreds CEOs of organisations operating in various sectors within the Nigerian capital market. I rarely attend general press briefings.
The first three to five minutes of a chat is critical to me. As far as I am concerned, that is when I make up my mind about a CEO. It is not in the eloquence or analytical prowess of the company’s operations and figures but in certain key ingredients in the content of responses and the time it takes between my first jab and the first comment from the CEO. I do always watch the body language. U.K Eke, the Group Managing Director of FBN Holdings Plc is a delight to speak with.

Before I set up my gadgets for the recording, we discussed the capital market and the Nigerian economy for a few minutes. After the recording also, we still took time off to talk on the market. His perceptions are uncommon, the ease at which he quotes prices of stocks other than his is unimaginable. It shows clearly that he has his eyes on the financial market. He perhaps was putting me to test by asking me a few questions on the market which I did not get right really.

At the end, it was more of a class for me than a chat and when we began to talk about his company, I can say precisely, FBNH has negotiated the curves, the Holding company is now gradually making its way back to the top.

Knowing where they fell, the severity of the fall, how low the fall had brought them is all significant. Knowing what to do to rise and taking decisive actions is what the management of the company should be commended for. The results have started showing. To the discerning investors who can read in-between the lines, they know what exactly to do. Let me take you through the chat.

My first jab: ‘What is happening to the big elephant?’

The big elephant is on the upward swing and you can see what is in the market. The good news is that the share price has shown remarkable approach in the past 12 months and we have outperformed the All Share index, which is good and we have seen the share price appreciate by over 300% in the last one year. But we are not where we think we should be. We believe that the stock should be trading far more than what it is trading currently. Hopefully, the result we have posted for the 2017 financial year and also what we would post for 2018 would create a rebound in the stock price for 2018.

‘We believe that the stock should be trading far more than what it is trading currently. Hopefully, the result we have posted for the 2017 financial year and also what we would post for 2018 would create a rebound in the stock price for 2018.’

Then I asked: ‘Overall, what is your take on the full year result of 2017 as well as the Q1 of 2018? What are the key drivers?’
2017 was definitely a better year for us than 2016. And if you take it from the topline in gross earnings, the growth is nearly N600billion despite the very tough operating environment.
The group as a whole closed gross earnings at N595 billion which is 2.3 % growth year on year. But if you walk further down and you get to the Profit before Tax, you see a growth of 147% closing at N56 billion from N22.9 billion. The Profit after Tax grew by 179% closing at N47 billion.

So that tells you that we have turned the corner. The issues that we have to deal with were largely around the impairment at the commercial bank where we took a hefty N150 billion impairment charge. But that is coming down because for 2016 it was N226 billion, so that tells you that we have pretty much resolved most of the issues we have to deal with for 2016.

Based on the huge profit that we made, which is improvement in profit, we are also proposing to the shareholders to approve the dividend payout of 25 kobo which is higher than 20 kobo we paid for 2016 financial year. So that’s good news for all investors in the stock.

‘We have turned the corner. The issues that we have to deal with were largely around the impairment at the commercial bank where we took a hefty N150 billion impairment charge. But that is coming down.’

Then I asked: ‘What is the outlook for the loan growth in 2018 and how will it impact the NPL ratio?’

First of all, we need to understand that 2017 was challenging. In the first two quarters, if you remember, we operated under a recession. It was only from the third quarter that we began to show some recovery. By the end of the year, the economy grew by just about 1%. What that meant was that even though the commercial bank and merchant bank were ready to lend, but borrowers found it difficult to even approach banks.

So the loan growth we planned was not achieved. In fact, we had a negative growth of -4%, the loan book dropped by 4%. What that tells you is that as the economy begins recovery, remember that 2018 was projected that we grow above 2%. We have to lend because we are a bank that support the real sector, we are a bank that support manufacturers; we support the retail borrowers and commercial borrowers. And so we are planning that 2018 financial year; the loan book will grow by between 7 and 10 percent. Compare that with a negative of 4%, it tells you that this year; we are going to make more money.

Now with respect to Return on Equity (ROE), if you add back the impairment charge which we took for 2017, we would have been at above 20% return on equity, but we closed just about 7.6%. Now that compares favorably with what we did for 2016 which was 3%.

For 2018, we believe we will return to above 20% return on equity. It is a very ambitious plan.

‘We are working on the cost; we are working on our revenue generation ability; we are working on integrating the businesses of insurance and merchant bank into the commercial bank which obviously will translate to higher profit for the benefit of the shareholders.’

Then I asked: ‘What should the market expect in the next one to two years?

I think what should interest the shareholders are two things above all. One would be the share price appreciation, and two would be the dividend payout. Consistently, this company has paid dividend every year, and we will not relent. And I think it’s the beauty of a holding company that even though the commercial bank is dealing with the issues around loan book and they haven’t remitted dividend to the Holding company, we are able to get dividend from the insurance company (a subsidiary of the holdings), we are also able to get dividend from the merchant bank (another subsidiary of the holdings). And so we have consistently paid dividend.

The assurance first is that we will not stop paying dividend to our shareholders. Second point to make is even with respect to the dividend payout, it can only improve, it cannot go down. This is a stock that you have previously earned mega dividend from. If you remember the years of bonus; remember N1, N2 dividend. We are gradually making our way back to the top.

We have an aspiration to reclaim our number one spot for dividend payout and that would happen once the commercial bank is able to conclude it’s clean up in 2019 financial year.

The second thing to expect is that we would keep being a key player in this market.

We are a bank that supports the real sector and we do believe that the economy can only grow when commercial banks lend to the real sector. That is why we are committed to lend this year more aggressively than we lent last year. 10% growth we are committing. In every sector; manufacturing, consumer goods, if you are into distribution, you are in need of salary advance for those in employment, this is the bank to approach. Our commercial bank will gladly support your business. So we win together, all of us will win together. This is a brand to support and to be with.

Again, I asked: ‘What has the Holding Company’ journey being so far?’

It has been a very exciting and rewarding journey so far. And I am particularly proud of what we have achieved in the Holding Company in the last six years. We have seen expansion in our various businesses.


The insurance continues to be the fastest growing in the market today. Last year alone, we grew our gross rating premium by 51%. No other insurance company in Nigeria comes close to that. And just last week, it will interest you to know that FBN insurance won the Africa Insurance Company of the year. This is a contest that was entered into by all major insurance companies across Africa and we took the award. So that tells you how the insurance business is doing.


The merchant bank and asset management has also being doing very well. They are the preferred advisers to the Federal Government on many of the concession projects they are embarking upon.We are advising the FG on Lagos-Ibadan express road, Eurobond issuance, various power projects and the second Niger Bridge.

So HoldCo has created the platform for Nigerians to benefit; not just the commercial bank, providing support to the industry and to the economy; but the other subsidiaries. And we do believe that this holding company today; we will be making major announcements in the days to come on what our aspirations are; but I can tell you just one thing, our desire is to be the leading financial services institution in the Middle Africa. So we are going to dominate that space. As we know, we are in Ghana, Democratic Republic of Congo, Guinea, Gambia and Sierra Leone. Of course we have subsidiaries in London, Paris and also have a representative office in China.

‘Our desire is to be the leading financial services institution in the Middle Africa. So we are going to dominate that space.’

..And my last question: ‘I am very sure your major message to your investors is “buy more and never sell” am I correct?’

You are very correct and I said this to that listened to us last year. About this time last year, the stock price was about N3.90 and I said ‘you better buy because the train is about to leave the station’. But the train has made stops along the way; there is another opportunity you have to buy because by next year when I come back, I will remind you what I am saying today that the share price of N12 is very cheap. Do not be left out because there is a rush for this share.


• Turning the corner as PAT grew 179% to N47billion in 2017 audited accounts
• Impairment from the bank is reducing. From N226billion in 2016 to N150billion in 2017
• Impairment is targeted to end in 2019.
• Current dividend payout has been from other component of the Holdco aside from the bank.
• Dividend payout is expected to hit N1 mark after the bank component must have dealt with impairment in 2019
• Its Insurance component is about the most profitable in the industry
• Its merchant bank and asset management company component are key advisers/consultants to government on big ticket transactions.
• Current price is low relative to possibilities.

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