Despite a moderation in funding cost, the significant decline in core income given a combination of weak asset creation and a lower yield environment drove the weak performance.
Nevertheless, non-funded income growth was
positive but not strong enough to offset the decline in interest income.
According to the report, the HoldCo recorded an EPS of N2.79 less than N3.31 in
2020 and declared interim dividends of N0.30 per share representing a dividend
yield of 1.1% based on a trading price of N27.05 per share as at today,
September 10, 2021,
The weak financial performance resumed with
interest income declined by 18.0% year on year to N126.09 billion, as all major
lines recorded lower gains – investment securities declined by 44.0% year on
year to N32.06 billion, while loans and advances to customers follow declined
pattern by 1.6% year on year to N91.37
billion and cash balances with banks closed on the declined note by 13.6% year
on year to N2.32 billion.
Interest expense also declined by 27.0% year
on year to N19.04billion, but deposits changed the narrative by grown by 3.3%
Year To Date to N3.63 trillion. Also, the funding mix deteriorated (CASA stood
at six months of 2021 on 86.7% from 2020 Full Year on 88.9% as the HoldCo took
on some higher-cost (term) deposits, likely due to tight system liquidity that
increased competition for deposits forcing elongation of the maturity schedule.
Given the more significant funded income
decline that outweighed the decline in expense, the HoldCo recorded a 16.1%
year on year decline in net interest income. Also, despite moderations in
provisions for credit impairment declined by 30.3% year on year, net Interest
income settled 15.3% year on year lower at N102.34 billion.
On the other hand, non-interest income grew
during the period, settling 11.4% year on year higher at N80.39 billion. This
followed the growth in net fees and commission income by 65.3% year on year to
N36.86 billion, gains from FX trading by 5.3% year on year to N8.05 billion and
discounts on digital earnings. As with preceding periods, income from
e-business was a strong contributor, supported by reduced expenses on loan
recoveries and bank charges.
Further driving this weak performance were higher operating expenses which hits 7.2% year on year to closed on N89.34 billion recorded, with the most pressure exerted by AMCON levy which jumped up by 27.3% year on year to N21.89 billion.
On the back of OPEX growth and
operating income decline, the cost-to-income ratio settled at 49.0% to 43.2%
with six months of 2020 representing a significant deterioration in the bank’s
efficiency of 5-year average to 2020Full Year stood at 37.3%.
Consequently, the HoldCo’s profitability
declined significantly relative to the prior year, settling 15.8% year on year
lower at N79.41 billion showed that the management headed by Mrs Miriam
Olusanya as the Managing Director of the banking subsidiary needed to work hard
to returned the Group as the holding company to profitability at the end of the year 2021.
The analysts at Codros Research in tis comment
said the HoldCo’s performance is reflective of the pressured macroeconomic and
business environments. Nevertheless, the analysts are of the opinion that for
the rest of the year, we expect improvements in funded income performance as
maturing funds are reinvested at higher yields and risk asset creation is
accelerated. “These should supplement the consistent growth recorded in
non-funded income.
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