In its recently released unaudited Q1-25 financials (April 29), First HoldCo Plc (FIRSTHOLDCO) delivered a performance that underscores the current macro-financial tightrope many Nigerian financial institutions are walking. The Group posted earnings per share (EPS) of NGN4.72, representing a 17.9% decline from NGN5.76 in the same period last year—dragged chiefly by a steep 60.0% year-on-year decline in non-interest income.
Interest Income Rises on High-Yield Tailwinds
Despite the profit dip, FIRSTHOLDCO demonstrated strong momentum in its core lending and investment operations. Interest income surged 40.2% year on year to NGN625.28 billion, driven by higher returns on loans and advances to customers (+42.4%year on year) and investment securities (+54.7% year on year). Elevated interest rates and a modest 1.5% year-to-date (YTD) expansion in earning assets helped boost these figures. However, income from loans and advances to banks declined by 17.0% year on year.
Interest expenses also climbed, up 18.6% year on year to NGN260.09 billion, largely due to increased payments on customer deposits (+24.1%), financial institutions (+14.7%), and borrowings (+3.2%). Additionally, the Group’s Current and Savings Account (CASA) ratio deteriorated to 80.9%, down from 86.2% in Full Year-2024, indicating a tilt toward more expensive funding sources.
Still, after accounting for NGN37.25 billion in credit impairment charges, FIRSTHOLDCO recorded a strong 77.3% year on year increase in net interest income (ex-LLE), affirming the resilience of its core banking operations.
Non-Interest Income: The Achilles’ Heel of Q1
The true pressure point in Q1 was the dramatic decline in non-interest income, which plummeted 60.0% year on year to NGN104.04 billion. While net fees and commissions rose 22.5% and FX trading income grew 6.8%, these gains were overshadowed by a 27.6% drop in gains from investment securities and a fair value loss of NGN57.11 billion.
As a result, operating income slipped 2.9% year on year to NGN431.98 billion, despite strength in interest-based revenue streams.
Costs Surge, Margins Squeezed
Operating expenses spiked by 16.5% year on year, fueled by rising personnel costs (+4.6%), a dramatic 396.0% jump in advertising and corporate promotion spend, and steep increases in regulatory fees, including AMCON (+40.6%) and NDIC (+63.2%) contributions. This rise in OPEX outpaced income growth, pushing the Group’s cost-to-income ratio (ex-LLE) to 52.3%, from 43.3% in Q1-24—an efficiency dip that warrants management focus.
Bottom Line: Profit Slides
Ultimately, FIRSTHOLDCO’s pre-tax profit fell 20.4% y/y to NGN186.48 billion, while after-tax profit declined 17.9% to NGN167.39 billion, following an income tax expense of NGN19.09 billion.
Investor Takeaways:
Core Strength Holds: Strong interest income growth affirms the Group’s ability to exploit a high-yield environment and asset expansion.
Non-Interest Income Volatility: A 60% crash in non-funded income signals the need for improved diversification and risk management.
Funding Cost Pressure: CASA deterioration suggests rising reliance on expensive funding, warranting funding mix recalibration.
Cost Management is Key: Surging OPEX, especially in promotional and regulatory expenses, threatens operating leverage.
Strategic Outlook: Continued focus on asset yield optimization is expected to support topline growth. However, mitigating volatility in investment valuations and managing cost efficiency will be critical to reversing the profit downtrend.
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