For FY'25, we maintain the view that FIRSTHOLDCO's earnings dynamics will highlight the rising shift towards interest income. This tilt should reflect sustained increases in interest-earning assets amid the elevated yield environment. The improvement in interest income is expected to flow through to Net Interest Income (NII)— assuaging pressures from interest expenses and softening the impact of the material contraction in Non-Interest Revenue (NIR) as FX-induced gains on derivative holdings wanes. For context, even the material 60.0% YoY decline in NIR resulted in only a 3.6% contraction in operating income in Q1'25 due to the 61.0 YoY growth in NII.
On the bank's asset quality, the notable 5.4 ppts increase in Non-Performing Loans (NPLs) in FY'24 has prompted some cautiousness, and led to a reassessment of our outlook. While management confirms proactive credit monitoring measures, we expect that additional provisioning is likely to be booked in subsequent quarters to improve Expected Credit Loss (ECL) coverage.
Elsewhere, the capital verification process for the first phase of the capital raise has been concluded, and a total of N150.0 billion was confirmed by the bank over its FY'24 analyst call, providing support for capital adequacy, business development, and growth
