FBN of Nigeria Says Annual Profit Curbed by New Regulations

Jan 03, 2014 9:17 am ET

(Updates shares in final paragraph.)

Jan. 3 (Bloomberg) -- FBN Holdings Plc, owner of First Bank Nigeria, said its profit for 2013 will probably be the same as the previous year as tougher regulatory requirements increased its costs.

A regulator-mandated rise in the interest rate paid on savings cost the bank 5 billion naira ($31.5 million) in the nine months through September, while a reduction in commission on sales led to a drop of about 10 billion naira, First Bank Nigeria Chief Executive Officer Bisi Onasanya said in a phone interview yesterday from Lagos, the commercial capital. A sale of about 150 billion naira in treasury bills, placed with the central bank at an interest rate of zero percent, also hurt the lender’s income, he said.

The increase in interest on savings “was something not budgeted for by the bank,” Onasanya said. “Barring any additional pronouncements by the government, we will be achieving our 2012 numbers.” FBN reported 2012 net income of 75.7 billion naira, more than triple the previous year.

The Central Bank of Nigeria increased the cash-reserve requirement for federal, state and local government deposits to 50 percent from 12 percent in July to reduce liquidity and support the naira. The regulator also told lenders to lower fees and commissions from April 2013 to prevent potential conflict with clients.

FBN’s profit declined by 8 percent to 59.1 billion naira in the nine months through September from 64.3 billion naira in the previous year, as cost of funds increased to 3.2 percent from 2.4 percent, the lender said in a Dec. 31 filing to the Nigerian Stock Exchange.

Loans Increase

The bank plans to increase its loan book by 10 percent to 15 percent in 2014 from 5 percent growth in the nine months through September to boost its income, Onasanya said. It’s also seeking an acquisition to expand into general insurance from life insurance, he said.

First Bank “has many deals in the pipeline including the divestment of Shell and Chevron assets,” Onasanya said. Oil and gas explorers Royal Dutch Shell Plc and U.S.-based Chevron Corp. are selling onshore and shallow-water assets amid persistent unrest and crude-oil theft in the Niger River delta.

Lenders in Africa’s second-biggest economy are returning to profitability after central bank Governor Lamido Sanusi approved a 620 billion-naira bank bailout in 2008 and 2009 as loans to equity speculators and fuel importers pushed the industry near collapse. The government then created the Asset Management Corp. of Nigeria to buy lenders’ bad debts.

FBN shares declined 0.1 percent to 16.29 naira at close of trading in Lagos. They have fallen 4.7 percent in the past year, compared with a 45 percent gain on the Nigerian Stock Exchange All Share Index.

--Editors: John Bowker, Steve Bailey, Emily Bowers