FBN Holdings Plc is the second-best performing tier-1 bank stock in the last three years as the lender continues to magnify shareholders’ earnings even amid a tough operating environment.
FBHN Holdings’ share price 3-year price returns stands at 178 percent, which shows it has enjoyed some level of re-rating from investors, according to a latest report by Chapel Hill Denham Limited.
“Beyond share price return, the lender’s 2024 strategic objective which entail enhancing revenue and profitability, strengthening value prepositions, and optimising operational efficiency are obtainable,” said analysts at Chapel Hill Denham led by Tajudeen Ibrahim.
Over 2018-2023, FBHN has experienced a compound annual growth rate (CAGR) of 35 percent in net interest income, faster than non-interest income CAGR of 14 percent over the same period.
Last year, it crossed the N1 trillion market capitalisation as investors swoop on its shares like ants over honey.
However, FBHN’s shares have shed 13.54 percent, due to a selloff in banks’ stocks as investors fret over a dilution in earnings per share (EPS) following industry recapitalisation and the windfall tax by the government banks on unrealised foreign exchange gains.
The bank has been recording double digit growth in earnings in the last year while an excellent risk management strategy and efficient allocation of portfolio are strengthening asset quality.
It is leveraging digital channels to meet customers demand, taking banking servicing services to rural dwellers as it continues to deepen financial inclusion.
Analysts are sanguine that the lender will cling on to the stellar performance till the end of the year and into 2025 given its resilience and a well-diversified earnings stream.
For the first six months through June 2024, FBHN’s interest income surged by 155.39 percent to N974.69 billion from N371.07 billion as at June 2023.
Net income or profit after tax (PAT) surged by 95.14 percent to N365.30 billion in the period under review from N187.17 billion the previous year.
The return on average equity (ROAE) increased to 36.40 percent in June 2024 from 31.30 percent the previous year.
Based on their optimism on revenue generation and improved efficiency, analysts at Chapel Hill Denham believe FBHN is on track to deliver an above 20 percent for the second consecutive year in the past five years.
Among its peers, FBHN currently trades on a price to book (P/B) of 0.33x and a Full-Year (FY) ROAE of 25.40 percent, relative to tier-1 average of 0.58x and 30.40x, according to analysts at Chapel Hill Denham.
From their valuation standpoint, analysts at Chapel Hill Denham have retained their buy ratings on FBNH, but raised their 12 months target price (TP) to N28.61 from N27.04 previously.
Investors who are nimble in taking advantage of investment opportunities should own FBHN’s shares.
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