First HoldCo Plc (FIRSTHOLDCO) Earnings Call Transcript & Summary

Good day, everyone, and thank you for joining us on this call on the 9 months First HoldCo 9 months results conference call. Thank you for being on the call and for your continued interest in First HoldCo. So we'll start with an overview by the Group Managing Director, Wale Oyedeji. [Operator Instructions] So without much ado, I welcome Wale for his opening remarks. Please go ahead.

Good day, ladies and gentlemen. I welcome you to today's call where we'll be discussing our 9 months 2025 results. Joining me on this call are Segun Alebiosu, the CEO of First Bank; Ini Ebong, the Deputy Managing Director, will be online; Tolu Oluwole, Head of Investor Relations, who has already introduced himself. Also on the call are [indiscernible] and Yemi Adesanya, the Financial Controller for First Holdco and First Bank, respectively. I will begin by providing a brief overview of the key financial and operational highlights for this period, and then we will proceed directly to Q&A. On Slide 5, I'll begin by sharing some insights into the key financial highlights for the period, which demonstrates the inherent strength of our group. Gross earnings increased by 17.1% year-on-year to NGN 2.6 trillion, driven by growth in our core business with net interest income up by 71.7% on the back of loan growth and optimization of earning assets and an improvement in our cost of funds to 4.9% from 5.6% in the prior year. The decline in profit before tax is directly attributable to the normalization of fair value gains and the measures implemented to strengthen the balance sheet for the long term. Our strategic risk management initiatives are already yielding positive results as evidenced by an improvement in the NPL to 8.5%. The strength of our business model is reflected in the improvement in gross fees, commission and commission income, which is up 26.9% year-on-year, underpinned by robust growth in income from net of credit, e-banking and funds transfer and intermediation. We're pleased to announce that First Bank, our flagship subsidiary, successfully redeemed its $350 million Eurobond upon maturity on October 27, 2025. This redemption demonstrates the group's strong foreign currency liquidity and sound liability management, further establishing our reputation as a preferred issuer within international investment community. During the period, leading credit agencies such as S&P, GCR reaffirmed their ratings for HoldCo and the bank, which further validates the group's robust and enduring credit quality and stability. Additionally, we launched our seventh digital experience center, further strengthen First Bank's position as a leader in innovation and customer-focused banking. Each center is designed to enhance accessibility, efficiency and personalized service, providing an improved and seamless banking experience while upholding our commitment to pursuing and prioritizing our customers better value. We are proud to have achieved a landmark integration of the Pan-African payment and settlement systems into a digital platform, expanding our cross-border payment capabilities, strengthening our capacity in digital services and facilitating intra-African trade under AfCFTA. Our network of agents continues to grow. We now have over 308,000 agents, creating more than 700,000 jobs. These agents processed over 170 million transactions during the period. To conclude on this slide, I want to reiterate that our financial targets and strategic approach for 2029 remains unchanged. The fundamentals of our business are solid, and we plan to continue to grow and generate value for our stakeholders. Moving on to Slide 6 for some key developments. I want to update you on our bond facilities and the recapitalization process. I know you are interested in this. As mentioned previously, the NPL improved to 8.5% following recoveries and progress in the performing status of the loan book. We're still on track to resolve the single obligor limit position by year-end. Importantly, I want to emphasize that the obligors remain operationally active and continue to generate robust revenues. We're pleased to confirm that the first phase of the private placement capital raise has commenced. We will obtain the regulatory approvals required to conclude the transaction and close out this first phase in November 2025. This means that First Bank will comply with the minimum capital requirement by year-end. In the upcoming year, we intend to make progress on the balance of our NGN 350 billion capital raise program. The funds obtained will be strategically allocated to advance our objectives and capture new value accretive opportunity. Before we move to Q&A, I would like to express my satisfaction with the strong performance of the group during the period. I would like to thank the team as well as our operating companies and their respective leadership for their valuable contributions. We remain committed to our strategic goals and are confident in our ability to deliver optimal value to our stakeholders. On this note, thank you for taking the time to listen. I will now hand over to Tolu to moderate the Q&A. Thank you.

Thank you very much, Wale. So just as a reminder, we'll take questions in the Q&A session we'll questions now. [Operator Instructions] So moving on, we can take a question from Ahmad Buhari.

So I have a few questions, please. The first one is what should we expect in dividends for full year 2025 and full year 2026? Secondly is regarding the prudential regulations for holding companies to have the minimum paid-up capital for the HoldCo to be greater than the sum of the minimum paid up capital of its subsidiaries. Is First HoldCo currently in line with this regulation? And if not, what is the shortfall? Next is regarding the NPL. What are management's plans for the reduction in the NPL ratio? And then the merchant banking business sale, has it been concluded? And if not, what is the status, please? And then finally, your thoughts, please, on the pension recapitalization and the implications on the PFC business. What is the shortfall, please? And what is the -- what are the plans around recapitalizing?

Thank you very much. Regarding dividend expectations for 2025 and 2026, as we had reiterated at the market earlier on, the HoldCo will continue to pay dividends. We will pay dividends for 2025 as a HoldCo. Remember that we have companies within our group, which are nonbank subsidiaries who typically upstream dividends to us. So we will be paying a decent level of dividends. 2026, there will be a significant increase in the level of dividends that we will be paying, and that's on the back of the fact that all our operating entities will upstream dividends to the HoldCo, which we will be paying to our shareholders. On the minimum capital -- minimum pay of capital regulation regarding holding companies, we will work towards that. I do believe that at the moment, we are compliant even with the additional capital raise, if there is any difference, we will work with the regulators to ensure that we close that out. I will take the question on the merchant banking sale. I will say that, that is probably close subject to very some regulatory approval. So we've come to the end of the road on that transaction. more or less. You permit me to have the bank CEO speak to the NPL issue and the pension capital implication for the PFC, which is a direct subsidiary of the bank. Thank you.

Thank you. There was a question on if HoldCo has [indiscernible] capital subsidiaries. The answer is yes. Again HoldCo is a shareholder in the bank and is a subsidiary. So this capital [indiscernible] to the subsidiary. There's no way it should be regularized. So if you check [indiscernible] is always there. So you may congratulate yourself [indiscernible]. The operating HoldCo, the CBN would drop the capital subsidiaries from the entire group of capital for the [indiscernible]. On the issue of NPL, Two, three names account for about 70% of our NPL [indiscernible] over time. We're working towards resolution of those names and they are all known -- we believe that within the next 6 months, there will be a lot of progress before the end of the year. It might not be possible to reclassify them back before the end of the year possible to achieve that by the end of the year, we're just 2 months away. [indiscernible]. We have those accounts performing [indiscernible]. The last question here is on the pension custodian business, we are fully compliant. The rule says NGN 25 billion and 0.2% of assets on the [indiscernible]. So based on where we are today, NGN 25 billion [indiscernible]. So NGN 25 billion is just that 0.2% looking at what we have, [indiscernible] we are far, far ahead of that. So the only implication we see across the industry maybe it will hold back the size of dividend that [indiscernible]. So for us, we're far, far, far -- and there's no year -- look at what we are doing and our profit [indiscernible]. There's no need for us to [indiscernible].

Okay. So we'll take our next question, and that from Steven [indiscernible]. So the question reads, could you comment on the facilities or sectors that have seen the most recoveries on the banks?

Thank you,. We'll have the Bank CEO take that.

1 Okay. If I'm right, so if I understand the question, recovery means -- I mean from your NPL issues. It is in manufacturing. Manufacturing sector, even when we have issues because the businesses with presence and it [indiscernible] economy. [indiscernible] there economy, you see that positive range also [indiscernible] into the activities and you see that. So we've seen that progressing. And if you look at the NPL [indiscernible]. The real problem has always been oil and gas. And the oil and gas issues started in 2013 when the entire industry went into this [indiscernible] in the oil and gas industry. Our core assets were funded we ran into crisis. [indiscernible]

Okay. So we go to the next question, and that's from [indiscernible]. So [indiscernible] asks, what is the progress of the private placement capital raise and how much have we raised?

Thank you. We have a NGN 350 billion program that we seek to execute. Like I mentioned earlier in my opening remarks, we will conclude the entire NGN 350 billion in 2026. As it is today, our focus is on raising money via the private placement in the first tranche to take the bank to the NGN 500 billion stipulated by the Central Bank. So put it this way, we will have all the funds required from the private placement and any other resources of the HoldCo to get the bank to the NGN 500 billion. If I'm not mistaken, that totals about NGN 122 billion, which is what will get the bank to be compliant. And that will be achieved on or before the end of November 2025.

[Operator Instructions] We have a follow-up question from Steven [indiscernible]. And Steven wants to know what the year-end cost of risk is likely to be.

Thank you, Steven. The year-end -- the full year cost of risk [indiscernible]. And the GMD was in -- reality was that NGN 1 billion or NGN 2 billion is already in the pocket. We are only waiting for regulatory clearance.

So we have a new set of questions. [Operator Instructions] So we have a question here. And he wants to know, could you give us a sense of what the FCY and LCY is like on the loan book and the same deposits and other liabilities as well.

Okay. For the loan book, foreign currency Nigeria, [indiscernible] 48% foreign currency and 52% [indiscernible]. And by the end of the year, we are likely to see reduction in that position. For liabilities, Nigeria, you have about 2/3 of our deposit in Nigeria in local currency and about 1/3 for [indiscernible].

So moving on to the next question. So [indiscernible] wants to know what drove the considerable moderation in interest expense in the 9-month period? And last question, what's the status of your loan forbearance? So I can take that.

Okay. For 9 months, we set out to reduce our interest cost -- interest expense cost, one. We decided to close out on expensive deposits. So it was a deliberate plan by the bank to pay down on expensive deposits. So it's not about growth for the sake of growth, but we wanted low-cost funding base allow us [indiscernible] watch next year. You are likely to see the same pattern. So it's deliberate, and we are working towards to ensure that we bring down our cost of funds. On forbearance -- or whereas on cost by the end of the year, we will have fully exited forbearance. And the outstanding today is the SOL. And SOL issues to be closed by year-end as [indiscernible] by GMD, those accounts remain very active on the big accounts that you can see by year-end, [indiscernible] closed.

Just on the same question, I think there's a question here about -- could you please comment on the resolution of the GHL [indiscernible].

[indiscernible] restructuring. So as of June, [indiscernible] the account. And once [indiscernible] is concluded. For hydrocarbon legal issue, I'm sure you are aware that the bank won the arbitration. In fact, GHL case was closed and First Bank was described as beyond push to a [indiscernible]. To the issue before the Court of Appeal [indiscernible] was also including a mandate to [indiscernible] the registrar of [indiscernible]. So cash flow. I hope that clarifies. With that, those 2 documents, I think the path is now clear for full resolution of the GHL issue and it's one of the NPLs that we spoke about earlier. That is off our books. You see the NPL ratio crushing very fast. Thank you.

[Operator Instructions] So we'll take this question from [ Juliet ]. Congratulations on your 9 months results. What drove the decline in the group's noninterest income and the increase in impairment charges [indiscernible] that before.

The noninterest income last year was high because of currency gains, currency devalued [indiscernible] across the industry drove notinterest income. But in 2025, turned our lives. So the noninterest income [indiscernible] I'm sure you saw that across the banks published their [indiscernible]. The increase in payment charges as a result of the end of [indiscernible]. So the banks now need to quickly cover those exposures. So I'm sure you also saw that across industry banks trying to quickly cover that [indiscernible]. That's why we're confident by the end of the year, the NPL [indiscernible].

Thank you, CEO. so just on the same topic as well, we have this question from [indiscernible]. We are seeing banks writing off the forbearance which are in their H1 '25 results. How much has [indiscernible] written off as we speak?

Details of that, I don't have the complete figure. But what I can assure you is that by the end of the year, we [indiscernible].

Thank you, Okay. [Operator Instructions] Do we have any questions in the chat. There's a followup question. We had already spoken on this in terms of the outlook on dividends. Do you want to...

No, I answered that already. For a holding company, dividends will be upstreamed from our various businesses. There will be dividend payments in 2025 and a stronger, more robust dividend payout in 2026 when all our operating companies will be upstreaming dividends. There's a question we missed out on loan growth guidance for 2026. Segun, do you want to speak to that?

Yes. Thank you. For 2026, depending on the variables and how the macro play out, despite an election year. So we expect a general drop. We also expect currency to stabilize. [indiscernible] geopolitics that may affect. That is correct. Our loan growth for next year [indiscernible].

Do we have any further questions at this time? [Operator Instructions] And we have another question here from Gloria. Gloria wants to know, can you also share the 2026 outlook for the cost of risk?

So 2026, the cost of risk will be less than 5%.

I hope that answers your question. There's a question on interim dividends from [indiscernible]. For dividends, when should we be expecting a return to interim dividends.

Thank you, [indiscernible], for that question. The jury is out about the significance of the value that comes with that. We will decide at the appropriate time. But honestly, we're committed to pay handsome dividends to our shareholders. And like I said, dividends for 2026 financial year will be quite strong and robust. At that time, we'll decide whether we want to pay interim dividends. Obviously, we didn't pay this year. But next year, we can look at it. Honestly, the jury is out about the value. What you find out when you go to the AGM is when you pay the interim dividends, people have forgotten about it and they focus on what you pay at the full year. But what you can take to the bank is that we will return to paying very to our shareholders in 2026. Thank you.

Thank you, Wale. And yes, further question here from Gloria. Less than 5% seems a wide range. I'm assuming cost of risk should be significantly lower given a largely derisked balance sheet.

Gloria, I don't have -- I can't sit here and see -- it could be 1% or 2% [indiscernible] forbearance and mis.anuary,'m now. for me to say I think that by the time we get to Q1 next year or Q2 next year to be clear where we are going. We've seen develop in the economy in the last 90 days that I'm not sure we all expect. But they all point to positive direction. If you look at what happened to FX rates, interest rate, exchange rate inflation I'll get the [indiscernible].

More questions.

Yes. Thank you for that question on [indiscernible]. We had guided at the last investor call that the capital will be raising will be injected into further strengthening the flagship subsidiary that First Bank. And we are also exploring new business [indiscernible]. And I can assure you that that capital will be deployed into those new areas of business that we are working on. And really to be quite frank, I would say we are at some advanced stages in terms of those discussions. So how we will allocate the capital has been well laid out and agreed upon, and we will be coming to the market at the appropriate time to advise you of transactions that we see. I hope that addresses your question.

Thank you, All right. There's a question here from [indiscernible]. And [indiscernible] wants to know that with the loan book increase in loan book of 9% in which sectors did most of the growth outperformed

The 9% growth across all the lines. So we have oil and gas downstream. And you can see that with the increase in production in the last 12 months, you see increased value of that. We also have coming oil and gas upstream side, not because of growth but because of transmission also affecting oil and gas upstream. We have some telecoms generally speaking...

Thank you again. So question how does the impact the bank in terms of loan growth and liquidity.

Yes we have about NGN 4 trillion in [indiscernible]. Okay. We must understand that the fact that [indiscernible].

So I hope that clarifies on the question, please. Okay. Do we have any other questions? Any further questions either in the Q&A.? There are no further questions at this time. So in the absence of any further questions, I'll then invite Wale to provide his closing remarks.

Okay. Thank you, everyone. Thank you for signing in. Thank you for participating in this investor call. Our message to you is that our core business fundamentals are very strong. We've grown significantly, and we'll continue to sustain that momentum while repairing and strengthening our balance sheet. As we've already indicated here, we would have dealt with our forbearance loans at the end of the year. And 2026 looks to be a very promising year for the franchise. I really like to appreciate you for following us through the year and seeing us transform as we move forward. And assured of our commitment to ensuring that we enhance shareholder value. Be assured also that as we receive capital from the market, it will be deployed in a way and manner that will further enhance value. Just to say a very big thank you to you. I wish you all a pleasant day. Thank you very much for your time.

Thank you very much. And then this concludes the First HoldCo 9 months 2025 results earnings call. Thank you for participating. Thank you for joining and do have a good year ahead. You may now disconnect.