First Bank Nigeria Holdings PAT rises 129% y/y to ₦362.2bn in 2023

First Bank Nigeria Holdings has reported a remarkable 129 per cent year-on-year increase in Profit After Tax (PAT) to 362.2 billion naira in 2023, according to the bank's unaudited financial report. The net interest income also saw a significant rise, reaching 530 billion naira. Meanwhile, the Central Bank of Nigeria (CBN) has directed banks to sell excess dollar stocks by today's deadline. Joshua Odebisi, FI Credit Analyst at Rand Merchant Bank Nigeria, shared insights during an interview on CNBC Africa about the banking sector's full-year earnings and the implications of the CBN's directives. Discussing the CBN's directive for banks to sell off excess dollar stocks, Odebisi noted that while banks may comply with the mandate by selling some assets, the major players have substantial leeway and methods to manage their positions without flooding the market with liquidity. He emphasized that the banks could redistribute assets across their subsidiaries due to their economies of scale. The move is aimed at ensuring compliance with regulatory thresholds without causing market disruptions. In the long term, the directive could lead to banks regularly sourcing foreign exchange from the market, eliminating any net open positions to cover liabilities. Odebisi highlighted the importance of banks managing liquidity and FX rates to avoid significant trading losses. Further, the CBN's decision to remove the cap on FX rates quoted by International Money Transfer Operators (IMTOs) aims to provide more autonomy in the market and attract foreign investors with transparent pricing. This move is seen as a step towards enhancing market confidence and facilitating smoother transactions for investors. Reflecting on the recent earnings reports from several banks including Jais Bank, Fidelity, and Stambic, Odebisi indicated that the results, mostly driven by FX revaluation gains, exceeded expectations. While the profitability surge in 2023 was impressive, he cautioned that the CBN restrictions prevent immediate dividend payouts to investors, as a significant portion of profits must be retained to bolster capital adequacy. Looking at the stock market dynamics, industrial goods have outpaced banking stocks recently, but the outlook for the banking index remains optimistic, pending audited results and dividend declarations. Odebisi underscored the anticipation surrounding upcoming financial announcements and their potential impact on market performance. As the banking sector grapples with regulatory directives and market dynamics, stakeholders are closely monitoring developments to navigate the evolving landscape and capitalize on growth opportunities in a challenging yet promising environment.