FBN Holdings’ bad loan losses jumps to N226bn

NPL ratio worsens to 24%

By Babajide Komolafe

FBN Holdings Plc, the parent of FirstBank of Nigeria yesterday released its operating results for the year ended 2016 which revealed further deterioration in the quality of its loan.

The results revealed that losses to bad loans jumped by 90 per cent to N226 billion from N118.8 billion in 2015, implying the bank lost N344 billion to bad loans in two years.

The result also showed that ratio of Non Performing Loans (NPL) to total loans worsened from 18.1 per cent in 2015 to 24.4 per cent in 2016. The company’s NPL ratio is 19.4 percentage points above the regulatory maximum of 5 per cent, and also 9.6 percentage points above the industry NPL ratio of 14 percent at the end of 2016.

This unprecedented deterioration in asset quality, the bank stated is: “largely driven by the translation effect of the foreign currency portfolio due to the Naira devaluation as well as one-off exceptional credit charge from legacy exposures in subsidiaries.”

It stated: “Credit losses are predominately driven by the oil and gas sector exposures and to a lesser extent real estate/residential mortgages, general commerce and the general sectors. As a result, Cost of risk increased to 10.4 per cent , (Dec 2015: 5.7 per cent), while NPL ratio closed at 24.4 percent (Dec 2015: 18.1 per cent).

“We have remained focused on remediation and recovery activities towards declassifying non-performing accounts and driving asset quality improvements. In line with this, we have made significant progress on remediation and recovery of NPLs in the last nine months. One of the three major accounts contributing to the NPL has been fully restructured and will be reclassified as a performing loan in 2017 in line with IFRS guideline, while asset realization is at advanced stage on the second material NPL. Resolution on Atlantic Energy has taken longer than expected but despite the delays we are confident in achieving a positive outcome in the near future.”

Despite the deterioration in quality of loans, the company recorded 15 per cent increase in gross earnings, from N502.7 billion in 2015 to N581.8 billion. Profit after tax rose by 10.3 per cent to N17.1 billion from N15.5 billion in 2015.

Furthermore, the company achieved customer deposits of N3.1 trillion, up 4.5 per cent from N3  trillion in 2015, as well as loans and advances of  N2.1 trillion, up 14.7 per cent from  N1.8 trillion in 2015.

Commenting on the results, Group Managing Director, FBN Holdings Plc, Mr. Uke Eke, the said: “2016 has been a year characterised by significant uncertainty in the operating environment. Despite this, FBNHoldings has delivered a solid performance while focusing on addressing the pre-existing issues in the loan book which resulted in the current loan loss.

“This performance has been achieved through ongoing initiatives in driving efficiency across the various businesses, transforming the risk management and control environment, containing cost, as well as enhancing revenue generation from the banking and non-banking subsidiaries. We expect an improved economic environment through 2017 and are confident that the foundations we have put in place will drive improved financial performance and consequently enhance shareholder returns.”

 

The post FBN Holdings’ bad loan losses jumps to N226bn appeared first on Vanguard News.