Market Intelligence

ARM Research places ‘Buy’ rating on FirstBank stock


February 19, 2018 | 1:08 am
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Leading investment firm, ARM Securities Limited, has placed “Buy” ratings on First Bank Holdings Nigeria (FBNH) Plc, describing the lender as very attractive with the potential of improving asset quality.

The investment house says the lender looks increasingly attractive, strengthened by above par core banking metrics and resilient in Net Interest Margin (NIM) and operational efficiency.

“Overall, we forecast 2018F EPS of N3.18 (+85% YoY) and DPS of N1.43. FBNH trades at a P/B of 0.7x compared to peer average of 1.4x with FY 17 P/B of 0.4x at a discount to peer average of 0.9x,” said analysts at ARM.
“Our FVE of N16.69 translates to a 32% upside from current pricing. Consequently, we rate the stock a STRONG BUY, reflecting attractive valuation and a view that fundamentals will improve going forward,” said analysts at ARM Securities.
The sharp drop in oil price since mid-2014 that resulted in a severe dollar scarcity hit FBNH and other lenders in Africa’s most populous nation as collateralized assets were beaten down and customers found it difficult to service debt.
However, a rebound in the oil production and price of the commodity resulted in economic recovery as the country existed its first recession in 25 years in the second and third quarters of 2017.
Also, the introduction of a new window by the central bank availed banks as dollar became available for transactions.
FBNH’s has strengthened its risk management strategy as Non-Performing Loans (NPLs) fell to 20.10 percent in September 2017 as against 24.90 percent as at September 2016.
Cost of risk dipped to 5.60 percent in the period under review as against 6.90 percent the previous year. In other-words, the lender is writing off less of its loans as impairment charge dropped by 14.90 percent to N114.70 billion as at September 2017.

“NPL in the Oil & Gas sector constitute 64 percent of total NPL (FY2016:73 percent) while the general commerce and manufacturing sector constitute 4 percent respectively (FY2016:3.0 percent),” a statement by FBNH said.

The Nigerian lender’s net interest margin improved to 8.8 percent in September 2017 against 7.50 percent the previous year, driven largely by improved yields on investment securities and interest earning loans and advances.
FBNH has 13 million active customer accounts with at least 80 percent of the customer induced transactions done on its digital platform.

The bank has at least 35% of all electronic traffic in Nigeria either by count or value on the Interswitch platform and remains the only bank to process over 100 million transactions per month on the Interswitch platform multiple times.




February 19, 2018 | 1:08 am
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