The Elephant In the Room

Good morning and how are you doing? Welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.

The title of this week’s newsletter mirrors the elephant in the logo of FBN Holdings.

The newsletter is divided into two: 

• Green White Green—focused on the Nigerian stock market. 
• Star-Spangled Banner—focused on the US stock market.

Green White Green 

Last week, FBN Holdings (parent company of the popular First Bank) released its results for the 2021 full-year and the first quarter (first three months) of 2022. 

For FY 2021, it made ?757 billion in gross earnings (up 28.2% from the previous year). Profit for the period rose by nearly 99.9% from ?75.6 billion in 2020 to ?151 billion in 2021. 

One of the reasons for the sharp jump in profit was the ?141 billion in recoveries it made in 2021. Strip away that number, and it would have had a much lower profit compared to 2020. 

Shareholders may be a bit unhappy as the firm decided to cut its dividend from 45 kobo paid for 2020 to 35 kobo proposed for 2021.

In the last decade, FBN Holdings has struggled with impairments (provisions for loans that it may not be able to recover and interest due).

For FY 2021, it made ?91.7 billion in provisions, up 48.3% from the ?61.8 billion it made in 2020. 

Impairment charges need to come down. The large impairments are one of the factors behind the relatively small dividend it pays compared to its peers. 

Star-Spangled Banner Last Week 

After weeks of back-to-back losses, the sun smiled on the US stock market. The S&P 500 which measures the average performance of the biggest 500 companies in the US gained 6.58%. 

Star-Spangled Banner This Week 

This week, Amazon’s 20 for 1 stock split takes effect on Friday. For every 1 share that you own, you would get 19 more shares. Since there will be 19 more shares, 1 share for instance that costs $2,302, would go for around $115. 

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