Presentation by Mr Kehinde Lawanson Executive Director FirstBank of Nigeria Plc 1.
FirstBank Nigeria 2010 Result Presentation
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Transcript of FirstBank Nigeria 2010 Result Presentation
First Bank of Nigeria Results PresentationFor the nine months ended September 2010
First Bank of Nigeria Results PresentationFor the nine months ended September 2010
www.firstbanknigeria.com/investorrelations
2
This presentation is based on the financial results of FirstBank’s unaudited results for the period ended September30, 2010, consistent with Nigerian GAAP. First Bank of Nigeria Plc (‘‘FirstBank’’ or the ‘‘Bank’’) has obtained some information fromsources it believes to be credible. Although FirstBank has taken all reasonable care to ensure that all information herein is accurateand correct, FirstBank makes no representation or warranty, express or implied, as to the accuracy, correctness or completeness ofthe information. In addition, some of the information in this presentation may be condensed or incomplete, and this presentation maynot contain all material information in respect of FirstBank.
This presentation contains forward-looking statements which reflect management's expectations regarding the group’s futuregrowth, results of operations, performance, business prospects and opportunities. Wherever possible, words such as"anticipate", "believe", "expects", "intend" "estimate", "project", "target", "risks", "goals" and similar terms and phrases have been usedto identify the forward-looking statements. These statements reflect management's current beliefs and are based on informationcurrently available to the Bank's management. Certain material factors or assumptions have been applied in drawing the conclusionscontained in the forward-looking statements. These factors or assumptions are subject to inherent risks and uncertainties surroundingfuture expectations generally.
FirstBank cautions readers that a number of factors could cause actual results, performance or achievements to differ materially fromthe results discussed or implied in the forward-looking statements. These factors should be considered carefully and undue relianceshould not be placed on the forward-looking statements. For additional information with respect to certain of these risks orfactors, reference should be made to the Bank's continuous disclosure materials filed from time to time with the Nigerian bankingregulatory authorities. The Bank disclaims any intention or obligation to update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise.
Kindly note that in this presentation, all reference to:
• Q1’09 indicates the period April to June 2009
• H1’09 indicates the period April to September 2009
• 9 Mths’09 indicates the period April to December 2009
Cautionary Note
3
OutlineOutline
Key Observations in Q3 101
Financial Review 2
Summary & Outlook3
4
Headlines for Q3 10 - Road MapHeadlines for Q3 10 - Road Map
Highlights
StrategicDelivery
MacroConsiderations
Stable Core
Earnings
Improving Profitability & Margins
Strong & Liquid Balance Sheet
Improving Funding Mix
Growth Service Excellence TalentPerformance
Management
HealthyEconomic
Activity
Volatility In Yields &
Interest Rates
Pricing Pressure on Asset book
Slightly Weaker Naira
5
HighlightsKey performance indicators reflecting
a satisfactory result in challenging conditions
What FirstBank Delivered in Q3 10
Strong & liquid balance Sheet• 17% Capital Adequacy Ratio, significantly above regulatory
requirements with Tier 1 capital ratio of 15.4%• Stable net loan to deposit ratio of 74.1%• Liquidity ratio of 64.7% (Sept 09: 78.7%)• Non-performing loan ratio of 5.8% (Sept 09: 8.1%)
Business volume• QoQ and YoY growth in deposit of 8.82% and 29.38%
respectively. YTD growth of 15.8% to N1.6tn • Encouraging lending growth up; 4.98% QoQ, 5.36% YTD and
32% YoY.
Earnings• Resilient gross earnings at N177bn, down 10.57% YoY• Improved mix of earnings with non-interest income contributing
23% (Sept 2009: 17.6%)
Profitability• Expanding net interest margins• Profit before tax of N40.7bn.(Year to Sept 09: N6.6bn loss)• ROAE: 14.1%• ROAA:1.9% • Cumulative earnings per share of N1.33 from (N0.43) in year to
Sept 2009
HighlightsHighlights
6
MacroConsiderations
Economic output healthy, but risk
aversion still very prevalent
Global • World economic growth was predominantly driven by emerging and developing economies. • Growth in advanced economies restrained by low consumer spending, high
unemployment levels, stagnant incomes and reduced household wealth• Risk aversion prevalent as investors move to quality assets• Uptrend in oil prices due to supply constraints, weakened dollar and expectation of a cold
winter in temperate regions.
Nigeria• Inflation worries emerged in the quarter under review rising by 13.6% as at September
2010. • Q3 GDP growth of 7.72% was driven mainly by the non-oil sector but supported by
improving oil sector dynamics.• Strong output growth has failed to support job creation especially in the formal sector• Interest rates and bond yields declined for the larger part of the year on excess liquidity
concerns.• Recent hike in benchmark rate and illiquidity has led to a spike in short term interest rates
and bond yields.• Equities under pressure with the ASI declining by 8.29% QoQ bringing YTD performance
to 10.68%.• The Naira depreciated slightly by 0.91% in Q3 over concerns of reduction in foreign
reserves as well as apprehension ahead of the 2011 elections.
Banking Industry• The CBN focused on strengthening the regulatory framework for the industry. • The new prudential guidelines provide clearer provisioning method and matches nature of
loans advanced• Dismantling of the universal banking model
Macro ConsiderationsMacro Considerations
7
-50-40-30-20-10
010203040
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10
10Y FGN Bond Yields NIBORInflation NSE YTD (%)
Macro ConsiderationsMacro Considerations
120135150165180195210225240255270
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10GBP Euro USD
N
Naira against major currencies
19,000
21,000
23,000
25,000
27,000
29,000
31,000
33,000
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10
NSE All Share IndexBond yields, NIBOR and NSE return against inflation
%
8
Strategic Delivery
Key objective: Be the clear leader and Nigeria’s bank of First choice
Strategic focus on being “The leader, The Best”
Strategic DeliveryStrategic Delivery
Growth
Performance Management
Deliver unmatched results by creating a performance culture with clear individual
accountability at all levels
ServiceExcellence
Growth
TalentManagement
Attain full benefits of scale and scope by accelerating growth and diversification of
assets, revenue and profits
Drive unparallel service levels by developing world class institutional processes, systems &
capabilities
Become a hub for the best industry talent; cultivate a highly-motivated, capable, and
entrepreneurial workforce
9
Strategic Delivery - GrowthStrategic Delivery - GrowthO
verv
iew
of G
row
th S
trat
egy
Build scale internationally..
•Significant SSA expansion and growth in banking with selective international forays in non-bank financial services• Focus on driving economies of scale and scope across international network and portfolio of businesses
Diversify group and transform
bank...
• Drive bank transformation to completion• Build scale in investment banking and insurance and leverage group synergies• Commence SSA regional expansion in earnest
Consolidate in Nigeria...
• Drive organic and inorganic expansion• Continue aggressive bank transformation • Structure for growth in investment banking and insurance• Rep office expansion
LONG TERM
2013 - 2014
SHORT TERM
2010
• Group Governance: We are optimising our group structure for taxefficiency, legal/regulatory compliance and to ensure our structure supportsour aspirations.
• Investment Banking & Asset Mgt: On going realignment of FBNCapital, First Funds, FBN Securities and First Trustees to drive increasedsynergies
• FBN Life Assurance Ltd : Our JV with Sanlam commenced operations inSeptember, offering group life products, with a view to expanding theproduct offerings in the fourth quarter. A Chief Operating Officer from SouthAfrica has also been recruited.
• Holding Company Structure remains our preference in complying with theCBN guidelines. Critical considerations still being resolved, however, borderon tax efficiency
• Commencement of new operating model within the bank alonginstitutional, corporate, retail and public customer segments expected todrive deeper product penetration and sector expertise; relationshipmanagement based on deep understanding of customer needs; continuedfocus on innovative ways to service the retail market with technology andsimple easy-to-use products
• International Expansion: Our representative offices in South Africa andChina have continued to generate new business opportunities/referrals. Wewill continue to expand in identified markets through a combination ofacquisitions and greenfield strategies driven by consideration ofmacroeconomics, size, potential growth rate of banking industry and marketconduciveness amongst other strategic factors
• Brand Transformation: Continued modernisation of the image andperception of the FirstBank brand
Restructuring for Growth
MEDIUM TERM
2011 - 2012
10
Strategic Delivery – GrowthProposed Holding Company StructureStrategic Delivery – GrowthProposed Holding Company Structure
BUSINESSGROUPS
FBN HOLDING PLC
CORPORATE CENTRE
SHARED SERVICES
REP OFFICE SA
FIRST BANK OF NIGERIA
INVESTMENT BANKING & ASSET
MANAGEMENTINSURANCE EMERGING
VENTURES
FBN REAL ESTATE
FBN MICROFINANCE
FIRST TRUSTEES
FIRST FUNDS
FBN LIFE INSURANCE
FBN INSURANCE BROKERS
REP OFFICE CHINA
FBN BDC
FBN BANK (UK)
FBN SECURITIES
FBN CAPITAL FBN MORTGAGES
FIRST REGISTRARS
11
Strategic Delivery – GrowthNew Bank Operating ModelStrategic Delivery – GrowthNew Bank Operating Model
FirstBank
Institutional Banking
Public Sector Public Sector North
Public Sector Public Sector South Risk Finance OperationsRetail
Banking
Human Capital Mgt
Internal audit*
Company Secretary
Strategy &
Development
Strategy & Corporate Development
Corporate
nications
Corporate Commu-nications
Corporate
formation
Corporate Trans-formation
Corporate Banking
1 3 4 52
*Reports to Board of Directors via Board Audit and Risk Assessment Committee
Legal
Individuals
Massmarket
Affluent
Businesses
Enterprise
Corpo-rate
Public sector
Federal Gov’t
State Gov’t
Local Gov’t
Insti-tutional
HNI
Bank Customer Segments
1
2
3
4 5
New Bank Structure
12
Strategic Delivery – Service ExcellenceStrategic Delivery – Service Excellence
Channel Optimization & Migration
Issue Resolution/Customer Experience
Manning/Front-Line Transformation
Branch Transformation
Centralized Processing & Branch Process
reengineering
Transforming Service Delivery
• Optimize costs and increase customer satisfaction by ensuring alternative channels work, and migrating customers to appropriate channel (based on segment needs and requirements)
How can we drive customer ‘self-service’?
• Implement a framework that enables collection, resolution, and future prevention of various customer issues
• Set expectations on customer experience at each touch point, and monitor compliance
How can we identify every customer issue and prevent it from ever happening again?
• Optimize branch operations by centralizing non-customer facing/transactional processes, and redesigning/automating remaining processes within the branch
• Improve standardization of service, and processing speed
How can we minimize transaction time and create more time for sales/customer interaction?
• Transform the branch experience by ensuring all elements are in line with our service delivery aspirations (people, processes, layout, ambience, etc)
How can we maximize each customer visit to the branch for sales?
• Optimize our manning structure , empower staff and align our front-line staff with our service delivery mandate
How do we optimize our manning levels and ensure our service objectives are translated through our frontline staff?
We highlighted five key initiatives to transform our service delivery based on customer feedback and our competitive environment
13
• Account Opening Fulfilment• Account maintenance• Retail loan processing• Retail loan maintenance• Corporate Loan setup• COT ammendments• Fixed deposit processing• Salary processing
• Account creation/data entry
• “Welcome Pack” creation (cheque book, alternate channels set-up, ATM card, etc)
• Cheque confirmation• Salary processing• Intersol Cheque Book/Savings
Withdrawal booklet request• Form redesign
• Confirmation process• Collection, verification and
upload
• ATM • Internet Banking• Contact Centre
• Balance enquiries• Cash Withdrawals below
threshold• Funds transfer• Cheque book requests• Cheque confirmation
Improve standardization and leverage economies of scale for ‘non-customer’ facing activities
Improve turnaround time; increase efficiencies, and reduce error rates
Example Activities
De-congest the branch; drive self-service to improve customer satisfaction and optimise costs
Channel Migration
Objective Sample Processes
Automation/Simplification
Centralisation
Strategic Delivery – Service ExcellenceCPC/Branch Process Re-engineering: We are taking an end-to-end approach in redesigning branch processes
Strategic Delivery – Service ExcellenceCPC/Branch Process Re-engineering: We are taking an end-to-end approach in redesigning branch processes
14
Strategic Delivery – Service ExcellenceBranch Transformation: We are developing a ‘prototype’ branch to reflect our end-to end service delivery aspirations
Strategic Delivery – Service ExcellenceBranch Transformation: We are developing a ‘prototype’ branch to reflect our end-to end service delivery aspirations
– Raise awareness and consideration of bank offerings– Leverage redesigned processes & channel migration strategy to
meet/exceed service expectations and create cost-efficiencies– Attract sales-related visits using façade– Improve perception - leave a lasting impression
• Pilot approach to test the concept and assess impact on
• Selected POC branches
Objectives
Processes
Physical branch format (e.g. layout, communications media andaesthetics/design)
Staff factors (e.g. reporting lines, skills, competencies and mindsets/ culture)
Marketing Tactics (targeted product placements; tools to drive customer engagement, etc)
Trackingand analysis of
performance against objectives to enable effective management
15
“Soft” Issues (Engagement)
• “Role-Fit”
• Knowledge Gap
• Work Overload
• Career Progression
Strategic Delivery – Service ExcellenceManning/Front-Line Transformation: Implementation of the new operations structure providing a platform to address both hard and soft issues
Strategic Delivery – Service ExcellenceManning/Front-Line Transformation: Implementation of the new operations structure providing a platform to address both hard and soft issues
“Hard” Issues (Structural)
• Job grade alignment
• Manning levels• Transaction Volumes (Branch categorization)• Transaction Types• Leave days
• Simplified Structure & synchronized with CPC/branch process re-engineering
• Service Bottlenecks (review of ‘limits’ for all Unit Heads)
• Improved Core/Non-Core staff mix
16
Strategic Delivery – Service ExcellenceChannel Optimization & Migration: Improving ATM uptime is top priority; driving online banking and contact centre awareness/usage also key
Strategic Delivery – Service ExcellenceChannel Optimization & Migration: Improving ATM uptime is top priority; driving online banking and contact centre awareness/usage also key
ATM Optimization
Internet Banking
Contact Centre
Quick Fixes• Weekly ATM optimization report, “Name N Shame”• Verve card supplyStructural• Regionalized ATM support structure (IT)
• Monitoring tool; Vendor support & maintenance agreements/SLAs; • ATM Branch Operations (Operations)
• ATM Fit notes; Clear ATM custodian role – training, monitoring and consequence management
• Card production & issuance• ATM reconciliation (Internal Control/Audit)
• Increase accessibility by removing bottlenecks in user sign-up and password reset process
• Increase functionality (cheque confirmation)
• VOIP phones at branches to enable free-calls from branch• On-going campaign to increase awareness/usage, coupled with additional
functionality (e.g. cheque confirmation) • Expand services – Outbound (surveys, welcome calls, targeted
marketing, collections, etc)
Current Initiatives
17
Quick-Wins
Expense Control
Projects• Increased utilization of voice-over-IP (VOIP)
telephone usage in branches• Deletion of “Hold” Statements• Email statement drive• Elimination of “Double Ply” flow line purchase• Diesel/Early Closure
• Centralised Admin• Fuel card implementation (H/O; Lagos, Abuja, PH)• Review of Hotel Accommodation Policy• Travel Policy amendments
CostsManning Structure
Depreciation/Maintenance
• Execution ongoing through implementation of new operations structure
• H/O Centralized Fleet Management
Initiatives*• Execute quick-win cost optimisation initiatives- waste
items with little to no impact on strategy/employee morale; sustainable long-term; can be done in a relatively quick time frame
• Review current expense control policies and procedures, and identify opportunities for improvement, especially for controllable costs
• Assess current manning levels and manning approach (with an initial focus on branch operations), and identify ways to improve our operating efficiency and provide more satisfying jobs for our staff
• Review ‘big-ticket’ maintenance items and identify areas where we can eliminate and/or optimise our maintenance spend
• Evaluate alternative business models for our existing operations (e.g. outsourcing, in-sourcing, leasing, etc)
Description
~ 400 million naira+ estimated annual impact at steady state
* Initiatives in italics have not yet been included in the annual savings estimate
Strategic Delivery – Service ExcellenceCost Optimisation: We have made some progress against the key areas identified, but more work remains…
Strategic Delivery – Service ExcellenceCost Optimisation: We have made some progress against the key areas identified, but more work remains…
18
Strategic Delivery – Performance Management / TalentStrategic Delivery – Performance Management / Talent
Perf
orm
ance
Man
agem
ent /
Tal
ent
• Staff rejuvenation/corporate workforce renewal
• Implementation of the balanced score card
• Training intervention has been designed and selected to support the bank’s strategic aspirations
• The primary focus of training up till the end of September was on product, banking, IT and credit
• Commenced the use of in-house developed e-learning courses
• The smooth take off of the new operating model attests to the efficacy of the orientation programmes
19
OutlineOutline
Key Observations in Q3 10 1
Financial Review 2
Summary & Outlook3
20
136.3
40.7
32.6
46.7
40.8
5.7
83.9
8.1
Interest Income Interest Expense Non-Interest Income Provisions Operating Expenses Profit Before Taxation Tax Profit After Tax
Evolution of nine months to September 2010 group profit after taxEvolution of nine months to September 2010 group profit after tax
N’ bn
21
9%19% 20% 17% 15% 14%1%
1%11%
0% 0% 0%
73%66%
54% 78%73% 70%
17% 14% 14%5%
12% 16%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Placements Treasury Bills Loans and Advances Others**
Top line performance remains resilient in the face of challenging operating conditionsTop line performance remains resilient in the face of challenging operating conditions
Gross Earnings N’bn Interest Income
CommentsNon-Interest Income
50
103
162
50
94
136 11
22
34
12
28
41
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Interest Income Non Interest Income
24% 24% 18%8% 14% 14%
28% 29%33%
37% 30% 29%
12% 10% 12%
8% 7% 8%
9% 8% 5%
10% 9% 9%
27% 29% 31%38% 40% 40%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Other fees and commissions*
Remittance fees /Management fees
Exchange gain/FX Income
Commission on turnover
Other income
*Credit related fees , Letters of Credit commissions and fees , Financial advisory fees, Gains on disposal of investment properties , Commission on insurance premium , Commission on western union transfers , Loss/(Profit) on
disposal of property and equipment. **Advances under finance lease and commission on managed funds
• Year-on-year decline in gross earnings due to low interest rate regime, liquidity glut and slow capital market recovery
• Slower pace of economic recovery impacting transaction volumes• Improving contribution to top line by non-interest income• Migration to a much more customer focused operating model
expected to drive earnings growth via increased share of clients’ wallet
• Expect Q4 rise in yields to enhance interest income• Phased approach to increasing proportion of transactions with
shorter tenors and higher yields expected to benefit growth in non-interest income
61
125
196
62
122
177
22
Our spreads have improved, benefitting from historically low funding costs, and contributing to margin expansionOur spreads have improved, benefitting from historically low funding costs, and contributing to margin expansion
Yield
10.6%11.2%
11.8%
9.4%
8.2%7.6%
7.4% 7.2% 7.2%6.5%
4.1%
2.7%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Yield on Interest Earning Assets Cost of Interest Bearing Liabilities
Net Interest Margin
28
60
96
28
57
90
6.0%
6.7%7.2%
5.2%5.5%
5.8%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Net Interest Income (N'bn) Net Interest Margin
23
59% 61% 60%65% 63%
65%
64%
126%
83%
62% 64%
80%
8%
14%
-17%
13%
-2%
10%
12%
-10%
9%
2%
Q1'09 Q2'09 Q3'09 Q1'10 Q2'10 Q3'10
Pre-provisioning cost to income* Post-provisioning cost to income*
Operating Income Growth Operating expenses Growth
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Staff Cost Depreciation Admin and General Expenses NDIC Premium
55.1
38.0
6.7
23.7
1-Jan-10 Additional Provision
Amounts w/off 30-Sep-10
We expect that our sustained investments in automation and staff rejuvenation will drive improvements in productivity in coming periodsWe expect that our sustained investments in automation and staff rejuvenation will drive improvements in productivity in coming periods
Operating Expense Breakdown (N’bn)
Movement In Provision For Credit Related Losses (N’bn)
Provision for Credit and Other Losses (N’bn)
*cost to income ratio – operating expenses/operating income
Cost Efficiency
47%
7%41%5%
48%
7%
40%
5%
59%
7%
30%
4%
46%
7%39%
7%
50%
7%
37%
7%
49%
7%
38%
6%
23
49
78
26
55
84
1.8
29.5
40.5
2.7 3.8 6.7
0.1
0.0
0.1
(4.2) (4.7)(1.0)
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Loan Loss Provision Other Provisions
1.9
29.5
40.6
(1)5.7
(1.5)
24
Retail & Corporate Banking 72.5%
Investment & Capital Markets 10.5%
Asset Management 14.7%
Mortgage Banking 0.0%
Other* 2.2%
Steady improvement in profitabilitySteady improvement in profitability
Profit Before Tax (N’bn)
H1 2010 PBT Split
9 months 2010 PBT Split
* Insurance, Pension Custodians, Bureau de Change & First Funds
Retail & Corporate Banking 90.3%
Investment & Capital Markets 7.3%
Asset Management 0.3%
Mortgage Banking -0.3%
Other* 2.1%
14
3
12
15
32
41
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
ROE, ROAA & EPS
N40.7bn
N31.7bn
1.37 0.15 0.32 1.70 1.75 1.33
9.8%
1.2%3.0%
15.9%
16.4%14.1%
1.7%
0.2%0.4%
2.2%2.2% 1.9%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
EPS (Kobo) ROAE ROAA
25
36.8% 37.4% 35.6% 37.2% 36.6% 36.1%
24.8% 25.3%20.8%
25.4% 24.1% 23.4%
14.1% 13.7% 25.2% 13.9% 14.1% 14.0%
15.5% 15.0% 9.1% 15.0% 16.0% 16.3%
8.8% 8.5% 9.2% 8.5% 9.2% 10.2%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Over 12 months
6-12 months
3-6 months
1-3 months
0 - 30 days
309 83
1,550
227 73
182
Liabilities
Benefiting from our strong brand and continued customer confidence and loyalty, we have continued to grow and improve the quality of our deposit funding especially at the low cost end
Benefiting from our strong brand and continued customer confidence and loyalty, we have continued to grow and improve the quality of our deposit funding especially at the low cost end
Balance Sheet Structure Sept 10 (N’bn)
577
25
1,148
490
55129
Assets
Inter Bank & Cash 24%
Treasury Bills 1%
Net Loans & Advances 47%
Investments 21%
Managed Funds 2% Other Assets 5%
Capital & Reserves 13%
Short Term Liabilities 3%
Deposits 64%
Other Borrowings 3% Other Liabilities 17%
1,150 1,198 1,339 1,407 1,427
1,550
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Deposits (N’bn)
Deposit Mix
39% 38% 40% 39% 38% 41%
21% 22% 20% 28% 29% 28%
31% 31% 31% 25% 19% 16%
10% 9% 9% 9% 14% 15%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Current deposits Savings deposits Term deposits Domiciliary deposit
Deposit by Maturity (bank only)
2,424 2,42415.8%
8.6%Due to Other Banks 9%
26
340
307 303 303 303 304
45
29 32
69
31 32
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Tier 1 Capital Tier 2 Capital
XXXXXXXXX
XXX
XXXxx
1,403 1,411 1,633 1,694 1,733 1,857
22.8%20.5%
17.5%16.2% 16.3% 15.4%
25.9%
22.4%19.4% 19.9%
18.0% 17.0%
75.6%78.7%
62.0%
67.0%
63.5%64.8%
46.2%
36.7%
33.2%
42.9%40.4% 41.3%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
total RWA (N'bn) Tier 1 capital adequacy ratio %total capital adequacy ratio % Liquidity Ratio (Group)Liquidity Ratio (Bank)
Our capital and regulatory ratios are significantly in excess of regulatory requirements, and adequate to support our businessOur capital and regulatory ratios are significantly in excess of regulatory requirements, and adequate to support our business
N’ bn
385
336 335
373
335 336
27
Net Loans & Advances** (N’bn)
Business Lines (Bank Only)
We are gradually improving the mix of our interest earning assets in favourof higher yielding assets, whilst maintaining a diversified loan bookWe are gradually improving the mix of our interest earning assets in favourof higher yielding assets, whilst maintaining a diversified loan book
913 868
1,089 1,074 1,094 1,148
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Interest Earning AssetsN1,917 bn N2,302 bn
45.3% 49.9%
1.2%1.1%
32.7% 22.2%
0.3%0.3%
15.5% 21.3%
2.4% 2.4%2.6% 2.9%
Sep-09 Sep-10
Cash and balances with Central Bank Managed funds
Investment
Investment property
Due from other banks
Treasury bills
Loans and advances to customers
Agriculture 0.8% (0.8%)
Oil & Gas 24.1% (23.2%)
Manufacturing 8.5% (7.3%)
Construction 0.6% (0.6%)
Real Estate 9.8% (10.6%)
General Commerce 6.9% (4.6%)
Education* 0.5% (0.5%)
Transport 0.1% (0.1%)
Information & Commerce* 5.7% (6.4%)
Finance & Insurance 20.1% (21.4%)
General 14.6% (14.5%)
Public Sector 0.6% (6.1%)
Power & Energy* 0.1%
(0.1%)
Capital Market*
2.6% (2.9%)
Professional* 0.6% (0.5%)
Admin & Support Services* 0.3%
(0.3%)
Human Health* 0.1% (0.1%)
Gross Loans and Advances (sector exposure) (Bank Only)
( ) June 2010 * New sectors introduced by the CBN **includes advances under finance lease
5.4%4.9%
N1,088bn
34%45.5%
1%
0.8%32%
16.7%
11%9.6%
8%4.6%
6%
3.1%
8%19.6%
Sep-09 Sep-10
Money market line
Financial instituitions & treasury
Public sector
Consumer
Retail
Agric/Misc
Corporate
28
62.7% 68.0%74.7% 75.2% 77.5% 76.3%
14.3%12.5%
9.9% 6.8% 6.5% 8.5%21.2% 17.5% 14.0% 16.6% 14.4% 13.9%1.7% 2.0% 1.4% 1.5% 1.5% 1.4%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Others
Overdrafts
Commercial Papers
Term Loans
By Type (bank only)
Ultimately, our key focus is on improving the quality and efficiency of our balance sheetUltimately, our key focus is on improving the quality and efficiency of our balance sheet
85.1%88.0% 89.3%
2.5%
1.6%2.2%
12.4%10.4%
8.5%
Q1'10 H1'10 9 Mths'10
61 - 90 Days
31 - 60 Days
0 - 30 Days
Ageing Analysis of Performing Loan Book (bank only)
N974 bn N960 bn N1,039 bn
Balance Sheet Efficiency
5.76.5 7.0 7.4 7.3 7.8
79.4%
72.5%
81.3%
76.3% 76.7%
74.1%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Leverage Ratio (Times) Loan to Deposit Ratio
Comment
• Steady growth in loan book, driven by the corporate, retail and consumer
segments
• Reduced rate of new NPL formation due to remedial management and
enhanced monitoring by relationship mangers
• Continually reviewing portfolio in line with prudential guidelines, whilst
seeking to optimise volume growth
• Phased approach to skewing loan book to shorter tenored, higher yielding
transactions
• Focus on increasing share of wallet of current clientele
29
27.0%33.8%
17.1% 21.0% 26.9%17.4%
29.7% 13.0%34.8% 20.8%
35.9%
30.4%
32.2% 46.0% 39.7%44.8%
22.8%
35.6%
11.1% 7.2% 8.4% 13.4% 14.4% 16.7%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Interest in suspense
above 360 days (Lost)
180 - 359 days (Doubtful)
90 - 179 days (Substandard)
We have continued to focus on our non-performing loan portfolio, in order to drive sustained recoveriesWe have continued to focus on our non-performing loan portfolio, in order to drive sustained recoveries
NPL Ageing Analysis (bank only)NPL & Coverage Ratios
Agriculture 1.8% (0.9%) Manufacturing 0.5%
(4.7%)
Oil & Gas 13.6% (13.6%)
Construction 1.2% (1.1%)
General Commerce 6.4% (5.4%)
Transportation 0.3% (0.2%)
Information & Communication
0.3% (0.2%)Finance & Insurance 15.9% (17.0%)
Real Estate 35.1% (35.6%)
Power & Utility 0.2% (2.2%)
Government 0.2% (0.3%)
General 24.6% (18.8%)
NPL Sector Exposure Sept 2010 (bank only) NPL By Business Lines (bank only)
25.9%
42.1%34.4% 32.8%
46.8%39.8%
17.5%
16.9% 30.2% 27.7%
23.1%28.1%16.3%
11.4%
16.7%15.9%
11.9% 14.4%
0.0%
0.0%
0.1%0.3%
0.3% 0.2%38.9%
29.0%18.6% 23.1% 17.0% 15.9%
1.3% 0.6% 0.0% 0.3% 0.9% 1.7%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
Agric/Miscellaneous
Financial instituitions and treasury
Public sector
Consumer
Retail
Corporate
44 74
94 91 65 70
61.4%
72.3%67.1%
77.2%70.1% 71.5%
4.7% 8.1% 8.2% 7.9% 5.7% 5.8%
Q1'09 H1'09 9 Mths'09 Q1'10 H1'10 9 Mths'10
NPL NPL Coverage NPL %
N64.4bn
30
Facilities Against Shares – portfolio characteristics (Bank Only)Facilities Against Shares – portfolio characteristics (Bank Only)
Jun - 10Mar – 10
Non-Performing FAS1 Loans N30.1bn N23.1bn
Collateral value of non-performing margin loans N4.9bn N8.84bn
Provisions held against FAS1 N23.5b N19.2bn
N48.7bn
FAS/Total Loans and advances 4.6%
% of FAS exposure renegotiated/restructured* 5.9%
1.2% 1.3%Percentage of margin loans to total LAD
N53.1bn
4.8%
2.8%
Portfolio Coverage of FAS1 104.8%92.7%
35.3%35.0%
Facility Against Shares (FAS)1 - gross
% FAS1 backed by shares in private placement
Margin Loan Exposure N13.9bnN11.8bn
N51.1bN49.2bCollateral value FAS1
Non-Performing FAS1 Loans (%) 56.7% 47.5%
Collateral value of total margin loans N6.9bn N8.9bn
FAS NPL Coverage 78.2% 82.8%
1
6
11
8
10
4
12
5
3
9
2
7
14
15
Sep - 10
N10.1bn
N462m
N5.84bn
N28.7bn
2.6%
18%
0.5%
100.8%
50.9%
N5.9bn
N28.9bn
35.2%
N2.2bn
57.8%
1FAS – Includes margin loans and other loans secured by shares*Largely margin loan accounts Figures may not add up due to rounding
Non-performing margin loans N11.7bn N5.8bn13 N3.8bn
31
OutlineOutline
Key Observations in Q3 101
Financial Review 2
Summary & Outlook3
32
Summary and OutlookSummary and Outlook
• SSA underpinned by strong macroeconomic fundamentals and global economic recovery: GDP growth forecast of 5% in 2010 and 5.5% in 2011
• Nigeria is one of the fastest growing oil exporting economies in Africa with GDP growth forecast of 7.4% in 2010 and 2011 (South Africa 3-3.5% over the same periods).
• The Nigerian banking sector remains significantly underpenetrated,FirstBank has industry scale with 13% of total assets and 15% oftotal loans and is well positioned to grow its share of market
• We continue to progress towards its objective of being the ‘clear leader and Nigeria’s bank of first choice’ through the implementation of a focused transformation programme.
• In the near term, our objectives borders on growth and transformation of the Bank while creating growth options for the group
• Our medium term strategy is to defend our leadership position, whilst extending it across key dimensions (i.e. customers, brand, service etc) to achieve superior/sustainable financial results
• Nigerian imperativesFully optimise and expand our diversified financial services
– Improve product and sector expertise with deep understanding of customer needs
– Improve existing client business volume and increase clients
– Deploy balance sheet towards higher yielding assets– Optimisation of liquid assets– Brand transformation
• International imperatives:Increase the Group’s profile across Sub Saharan Africa via international expansion. Benefits include:
– Greater earnings diversification– Increased shareholder value through higher ROE– Enhance ability to effectively serve an increasingly
international profile of corporate customers.
Above all, we believe that by focusing on our outlined strategies and coming from a position of strength, we are well poised in delivering exceptional returns while consolidating, diversifying and transforming the business and building scale internationally
Consolidate in Nigeria…
Diversify group and transform bank…
Build scale internationally…
• Drive organic and inorganic expansion
• Continue aggressive bank transformation
• Structure for growth in inv. banking and insurance
• Rep office expansion; initial SSA explorations
• Drive bank transformation to completion
• Build scale in inv. banking and insurance and leverage group synergies
• Commence SSA regional expansion in earnest
• Significant SSA expansion and growth in banking with selective international forays in non-bank financial services
• Focus on driving economies of scale and scope across international network and portfolio of businesses
2010 2011 - 2012 2013 - 2014