FUGAZ Re Rating Is FirstHoldco The New Market Darling | Capital Market

Añadido: 2026-05-10

[00:00:01][music] >> Good evening and welcome to another edition of Capital Market live on Channels Television. I'm Ladi Williams.

[00:00:09]The first trading week of May and that's ended at this point and I don't see the vibes. You know what they say about May, it's sell it be and go away. Not seeing that yet but definitely we're still, you know, tracking these markets. But let's see what played out at the markets there. The global markets that we track start with Europe. We see European equity markets finish broadly on Friday after US President Donald Trump threatened much higher tariffs against the EU. The pan-European stock 600 ended the day almost by 0.8% um lower with most sectors in the red and major regional bosses in London, Paris, Frankfurt and Milan all closing in negative territory. That's for Europe and it was a similar picture in Asia. I'll see the Cosby index that was down about up about 0.11% but other indexes most indexes in Asia were uh closing the red. Um that day trade then we see US equities. They rose on Friday following a better than expected April's jobs report. And the traders were also eyeing developments between the US and Iran.

[00:01:20]S&P 500 that advanced 0.84% to end at 7,398 points while the Nasdaq composite climbed 1.71% to 26,247 points. Uh both indexes hit new all-time intraday highs in the session and closed, you know, at records. So definitely not a bad close there. That's for US markets. Then we see for the unlisted markets for the NSI there. That was at 4,158 points up 3.82%.

[00:01:52]That was for the whole trading week.

[00:01:54]Market cap for the NASD that was at 9 trillion. If we look at some of the major movers on the unlisted markets there that's in the unlisted markets. We'll see the major movers there where you know most of the yeah for the volume value and deals traded 2.83 million.

[00:02:15]That's what was traded on the NESD market. A few weeks I think last week we saw the NGX was in the green but the NESD closed in the red. That's for the whole trading week. And we see some news there. NGX Regulation Limited they've tightened compliance requirements for online trading platforms warning that trading license holders deploying digital trading systems without prior regulatory approval could attract sanctions. The revised compliance reminder mandates all brokers operating or planning to launch web-based or mobile trading platforms to obtain written approval from NGX RegCo before deployment, migration, or introduction of any new digital trading infrastructure. Talking about trading, we see for the NGX um All-Share Index closed at 244,000 points 0.71% higher. We see the market cap 157.094 trillion naira. For the activity for the week, we see volume that was in the green there 351 billion.

[00:03:27]That's what was traded higher than the previous week. Deals 474,000. That was also in the green.

[00:03:34]Sectors that we track banking 1.89% higher. Consumer Goods 1.81% Industrial Goods with a very impressive 5.11% advance. That's for the trading week.

[00:03:49]Then we see Insurance that was up 4.01% Oil and gas, even though maybe following or mirroring what played out for oil and gas, that's for Brent WTI, they closed negative. That's for the this trading week, so I guess that's why we see the oil and gas counter on the NGX actually following, you know, that trend for the week. But we see insurance, banking doing much better this week. We did see some, you know, sell activity for bank stocks.

[00:04:24]They did have a bad week, you know, towards the end of April. That was most of those tier one banks being sold off.

[00:04:32]All right, let's unpack what played out in major markets that we track that's for this week.

[00:04:39]We have Mr. Tajudeen Ibrahim, director, research and strategy, Chapel Hill Denham, joins me right here in the studio. It's great to have you on the show, sir. Thank you for sharing your week.

[00:04:52]I know you'd have been having fun somewhere, you know, right now, but thank you so much for coming on. But before we go into the equities market let's start off with major commodities that we track. I've been calling it the star commodity throughout, you know, since we started the war in Iran picked up. We've seen oil prices hitting, you know, new highs. But for the trading week, this past trading week, we see Brent and WTI they're down. They closed the week down, but gold on the flip side, yeah, we see gold on the flip side, 2.15% advance for the trading week. Silver, 6.62% closing at $80.29 per ounce. WTI, $94.

[00:05:39]100, 7.63% down, 8.11, that's for for Brent. So uh this telling us gold is back or or too soon? So so so I think we can say that gold is coming back. I think that is possibly the right expression because what happened last week was indicative of the positive news flow about the US and Iran war. So, each time there's a positive news flow in the about the war, you will see a pullback in crude oil prices. And when there's a pullback in crude oil prices, it means that outlook for inflation is subdued. When outlook for inflation is subdued, what it implies is that interest rate most likely are not going to go higher in the nearest future. And if interest rate is not going higher anytime soon, it implies that the US dollars will be much weaker compared to other major currencies across the world. Other major currencies being sort of stronger than the US dollar means that you are going to see higher demand for gold because gold is priced in US dollars. So, that is largely speaking what explains it. There is always this inverse relationship between interest rate and gold prices. If interest rate goes higher, gold prices are going to fall because higher interest rate implies a stronger dollar.

[00:07:08]A lower interest rate implies a much weaker dollar. So, a much weaker dollar is always favorable to gold to the gold markets because you can buy a lot more units of gold with higher currencies from the European area, from Asia, and from other major markets across the world.

[00:07:27]>> Right. And you know, looking at oil um so far, I can imagine how much it cost you uh to fill up your car. Let me see you drive here, you know, today and I'm like It cost a lot. K- kudos.

[00:07:40]It does cost a lot. And you know, if oil, I don't know if this can can continue, but we're already hearing uh some signs of escalation.

[00:07:49]Yeah, so so so what I think we should expect is a bit of, you know, flip-flop around the development until when everything sort of stabilizes. You know, about 2 weeks ago or there about, there was a bit of positive news flow about ceasefire, but that was not sustained between the US and, you know, Iran. So, inasmuch as you continue to get negative development, you will see higher oil prices above $100 per barrel. But, when there is positive news flow about ceasefire or about a complete end to the war, you will see much lower crude oil prices. And by that time, what will determine the price level will be, largely speaking, genuine demand and supply. This is more of, you know, war-related movement in prices. By the time that problem is over, you will see the true color of the market largely being driven by the level of demand and supply that you have in the market. All right, let's flip over to the markets.

[00:08:53]We we had the tier one banks, that is the FUGAS. I guess they've all released their earnings >> Absolutely, all of them.

[00:09:02]Yes.

[00:09:02]>> 2026. The recent one, the last one, was for First Old Co. Absolutely.

[00:09:08]>> And we did see PBT before tax up 72% year on year.

[00:09:16]>> We also see profit before tax that was 321 billion from 186 billion. Post-tax already at 31.6%.

[00:09:27]So, technically, this is the last of the earnings for Q1 Is the last. for the tier one banks.

[00:09:33]At this point, talk to Tell about your takeaways from this. It's It's a last and and it is indicative of the last and the best.

[00:09:41]Because they are the last to release those numbers and those numbers came in substantially stronger than any other Tier 1 bank, you know, that you can think about. So, the earnings came in with 72% increase in the profits before tax, indicative of two key elements.

[00:10:00]Number one is that we had the interest income, you know, been solid and sort of decent. But, the more compelling factor or driver is the non-interest income leg of their business, which was in this case, we are talking about the non-interest income rising by well over 200%. Sort of more than double over the period and it is indicative of what they have done in terms of trading income, which I believe must have been very solid and also fee and commission income. So, those two key elements were the major drivers of what you saw in the PBT for First Holdco. And if you look at the return on on equity, that is the most compelling return on equity in the banking sector in the first quarter of this year, 31.6%.

[00:10:52]If you take an average of the Tier 1 banks, what you get is 23%, which is a lot more solid compared to, you know, the the Tier 2 the sorry, the Tier 1 bank average. So, I comfortably can say that the first quarter in the First Holdco has been the superstar among the banks in that context.

[00:11:11]>> And I would say that it's been described as a turnaround um story um so far. And I guess investors reacted um to the earnings because they did close up about 9%. If you look at the price the charts there, 9.98%.

[00:11:28]So, we see that big candle right there.

[00:11:31]>> Absolutely. Absolutely. So, it it is indicative of When you have, you know, good results, the market will react positively. And those numbers were very strong, particularly from a profitability standpoint. And also the most compelling ROI in the market among the Tier 1 banks is something that really the market liked and the market was responding positively to that development. All right. So, um fine.

[00:12:03]You know, we get this. Um I guess it's a a turnaround story as they've said and >> Absolutely. you know, reacting um positively and technically almost um immediately um at this point. But, you know, for you, um what is this telling us about the banking industry? Because before now, it was always about the um that's the gains, you know, from FX. You know, is that revaluation or an appreciation? But, it seems we're moving away from that a little.

[00:12:35]>> Sir, we are moving away because, you know, the economy is cyclical in nature.

[00:12:40]You will see the good, the bad, and the ugly yes in every every economy across the world. So, we seem to be like on the good side of, you know, as indicated by economic indicators, particularly when you look at the FX in this case. So, you are going not going to see FX revaluation reserves underpinning that performance. It is more like a year of core banking growth. If you're not into core banking, which is the core activity of lending, or the activity of making investment in securities, or the activities of, you know, you facilitating transactions across Africa, across the continent, particularly also in Nigeria, to generate fees and commission income. As a bank, you most likely will not be you know excelling or performing excellently this year because there is nothing like any buffer from FX revaluation this year. There was none last year. This year is it is going to be the same thing. So, there will be need for the banks to focus more on lending, but they have to de-risk the balance sheets.

[00:13:52]Despite that they want to grow earnings, you have to be mindful of what happens to your balance sheet, monitoring your loan book, monitoring the non-performing loans, and ensuring that anywhere you have gone wrong, you have as much recoveries as you can to stabilize those earnings and put confidence in the minds of investors over time.

[00:14:11]>> Right, and I see most of those banks, you know, looking at some of the loans, you know, the impairments, you know, at this time I I I guess they're going to be going full throttle to try and recover most of those loans.

[00:14:23]>> to recover a lot more. First or for instance disclosed that they recovered about 19 billion naira in the first quarter of this year that are really that is related to oil and gas lending.

[00:14:36]And oil and gas, as we know, is one sector that has been sort of a major problem for the banking sector when you look at, you know, non-performing loan because that is even where the bulk of their loans is sitting. So, if your bulk of your loan is sitting somewhere, and if you look at the world, currently we are seeing higher crude oil prices, which means that oil and gas businesses should be doing well. So, I should be able to come after you, recover my my my loans from you. So, I think First Bank of Nigeria is doing the right thing in that regard, and they're getting the benefits that we expect, which is about 19 billion naira recovery Q1 alone. My sense is that going into the coming quarters, they can actually recover more. You know, if they really, you know, fire on all cylinders to ensure that, you know, they get more from those that are holding it. I'm sure the oil and gas players be watching right now and just be like, "Okay, you know what?

[00:15:27]We need to pay this guy." Honestly, they have to pay because they now have more cash flows. Because with booming oil prices, if you produce, you know, a bit of an uptick in volumes, your cash flow impact is more accretive in that regard because the global development about crude oil prices is more positive than negative.

[00:15:47]>> Right. All right, well, we'll take a quick break now. When we come back, we'll unpack other matters around the banking industry. Um do keep it here.

[00:15:54]We're still watching Capital Market.

[00:15:56]We're back in a moment.

[00:15:57]>> [music] >> All right, welcome back. Still watching Capital Market live on Channels Television. I still have with me Mr. Tajudeen Ibrahim. We've been unpacking the latest earnings right there. Um that's for Q1 for the four guys. We had the last one um recently. And, you know, still looking at um First Hold Co. now.

[00:16:18]Definitely have I've seen um a lot of comments these days about um the chairmanship of Mr. Femi Otedola and how it's uh also adding to that turnaround story. And, I'm wondering, okay, what does a chairman do of a bank? Okay, leads the board, oversight, governance, long-term direction, supervises management. So, I guess the chairman has a lot to do. He does. He is is that he's doing a lot and everything that he's doing is doing them very well. That is the way I interpret it because it takes a solid and strong leadership of a bank to assume duty and then begin to implement strategies, plans, and execute ideas that can drive growth. The first thing is he he he championed the cleaning of the balance sheets. So, which means that, you know, the The sheet for FBNH is now a lot, you know, cleaner compared to previously.

[00:17:20]That is the first thing that, you know, Femi Otedola did when he became the chairman of the board. And if you see any bank that is, let me say, technically speaking, sick. And I say sick in the sense that you have plenty non-performing loans in your in your book. You have to clean it up first. So, the process of cleaning is something that, you know, was found painful by the market, but the reality is that he did it. That's the first thing. The second is now to ensure that there is a solid growth trajectory for the bank, which is the next thing that I believe he's doing. And it is reflected in the Q1 numbers, where we saw very solid non-banking income growth of, you know, more than two times the level last year. So, that's to my mind is reflecting the results of his leadership.

[00:18:15]is for sustained efficiency in that regard, and an improvement in those numbers going forward. The loan book is still carrying non-performing loan ratio of about 13.4% but my sense is that his leadership is competent enough over time to ensure that that number comes down substantially over time. Because I'm wondering, you know, what exactly did he have to do to because it it's a painful process in the end of the day. And I guess that also gets into the dividend payment story. Most of the tier one banks not not paying, you know, dividends. Is that what is also >> so I think I think what he did actually is to say, "Look, we have to take a painful decision."

[00:19:00]And that is something that not all leaders of a bank in particular can take, in my view. When you had to write off, you know, close to 1 trillion naira or there about, you know, in in in payment charges because of bad loans. And you say, "Look, guys, let's clear this balance sheet up and let's sort of start on a more solid or you know, clean did. So, it is more of willingness to do the right thing at the right time. Those Those books Those bad loans were in the books and they've been there for years, you know, without being, you know, sort of cleaned out. But we came and said, "Look, let's clean this now and let's know the real realistic number that we have. Just imagine, how do you clean out bad loans? So, so you have to make provision for it. That's what it means.

[00:19:45]You have to assume that, you know, we have lost this money. Technically speaking, you have not lost it, but you have to write it down and make provision for it as if the money is lost and will possibly not come back. And then you now begin to go back go after your credit your your your debtors. Those that you lend money to as a bank, you begin to chase them to recover over, you know, the money. That is what I said about recovery of, you know, the banking sector the the the banks alone in the first quarter that is 19 billion Naira traceable to the online gas sector. So, what he is doing is to even take some sort of legal actions against borrowers that are defaulting. So, it is permissible, it is allowed in the banking space. If you have someone who is owing you, a business is owing you and they are not forthcoming in repaying you, then you have to go after them.

[00:20:39]After going after them and there's no results, then you can go to the court.

[00:20:43]Can charge them to court, take legal actions against them to recover all of the, you know, the the the the loans that you lent to them that has gone bad.

[00:20:51]So, do you think the the market, you know, seeing what played out on Friday, are they reacting to the numbers or are they reacting to the turnaround story of the of the leadership?

[00:21:01]>> I think it's a combination of both because if it was not, um, you know, sort of bent on ensuring that they have a lot cleaner balance sheet, the market will have little or no confidence in First Holdco. But, because he has demonstrated that by taking those steps of clean cleaning up the book, the market is now a lot more confident in First Holdco versus previously. And that, combined with that solid result that they delivered in the first quarter, made the market to do what we call a re-rating of First Holdco on Friday. So, my sense is that in the next couple of trading days, the sentiment about First Holdco will remain solid because those numbers are very good. All right, so definitely talking about the numbers, the Q1 earnings. When you look at most of these earnings, there's always a bullish side and a bearish side.

[00:21:59]>> yeah. Um, you know, for the bullish side. You know, according to you, First Holdco recorded the fastest growth in earnings.

[00:22:09]Um, we also see Q1 26 analyzed ROE of 31.6%.

[00:22:15]Uh, break it down for me, you know, the bullish and bearish So, so very solid numbers. When you look at, you know, the the earnings, that is the fastest, you know, growth rate in Q1 earnings among the FUGAS banks. That's number one.

[00:22:29]Number two, we have a situation where what we call the cost-to-income ratio dropped down to 45.2%.

[00:22:37]That is also a very good development.

[00:22:40]The third development, and the the creamiest part of it, is the 31.6% return on equity by First Holdco in the first quarter, which is more compelling than any other bank in the FUGAS space.

[00:22:56]More compelling than the average of 23% you know, for the FUGAS, you know, banks in the first quarter. There are downsides to the results. The first is around the MPL ratio. It is still high and above the, you know, the recommended limit of the CBN at 13.4% is higher than last year numbers. Number two, it is way above the 5% recommended by the by the CBN. And what that may result into is that the banking at the bank, First Bank in this case, may not be able to generate dividends from the banking subsidiary.

[00:23:35]They may not be It has happened before, but they may be able to still pay dividends, but that will come from the non-bank subsidiaries because they don't depend on just, you know, the bank. The second thing that is also a major problem for me um is the breach of the capital adequacy ratio. The capital adequacy ratio came in um at around 13% level, which is below the 15% 16% level for a systemically important bank like First Bank. So, it is something that, you know, we we we see as a downside.

[00:24:09]>> the the big picture takeaway um at this point um the FUGAZ are transitioning from beneficiaries of naira devaluation um to institutions competing on operational strength. That's talking about all five of the FUGAZ. I guess I guess that's a good place to anchor the show at this time. We've run out of time, but thank you so much, Mr. Tajudeen Ibrahim. Always a pleasure having you and, you know, giving us your Saturday. Thank you so much. Thank you for having me on the show. All right.

[00:24:39]So, that's the show today. Um we'll bring you more updates. Um we'll keep tracking the markets for the week on Business Morning at Business Incorporated. Thank you for watching today. I'm Ladi Williams. Bye for now.

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