First HoldCo Plc experienced a notable decline in profitability during the first quarter of 2025, reporting a profit of N171.1 billion compared to N208.1 billion in the same period of 2024. This represents a 17.8% year-on-year decrease, primarily attributed to a significant swing in fair value gains from financial instruments and a shift from a foreign exchange loss to a gain. While the foreign exchange gain provided some relief, it was insufficient to offset the substantial negative impact of the volatile fair value adjustments, resulting in a net decrease in profitability.
The group’s financial performance was characterized by a complex interplay of positive and negative factors. While net interest income saw robust growth, driven by increased interest income and partially offset by higher interest expenses, the dramatic reversal in fair value gains from financial instruments proved to be the dominant influence on overall profitability. This highlights the inherent volatility associated with financial instruments held at fair value through profit or loss (FVTPL) and their potential to significantly impact a financial institution’s bottom line.
Despite the challenging market conditions, First HoldCo Plc witnessed positive trends in certain areas of its operations. Fee and commission income experienced a healthy increase, reflecting growth in transaction volumes and other fee-based services. Furthermore, the turnaround in foreign exchange results, from a significant loss in Q1 2024 to a gain in Q1 2025, demonstrates improved management of currency risks. However, these positive developments were overshadowed by the substantial decline in fair value gains and increased operating expenses.
A detailed analysis of the income statement reveals a mixed performance across various expense categories. Personnel expenses remained relatively stable, while depreciation, amortization, and impairment costs saw a moderate increase. However, other operating expenses experienced a more pronounced rise, contributing to the overall pressure on profitability. This increase in operating expenses underscores the challenges faced by financial institutions in managing costs amidst a dynamic economic environment.
The group’s balance sheet remained relatively stable, with total assets experiencing a marginal decrease. Customer deposits showed a slight increase, indicating a stable funding base. However, the group’s total equity declined, reflecting the impact of the fair value reserve contraction and reduced retained earnings growth. This decline in equity highlights the potential impact of market fluctuations on a financial institution’s capital position.
The Q1 2025 results stand in contrast to the strong performance reported for the full year 2024, where First HoldCo Plc achieved a significant increase in gross earnings. This discrepancy underscores the cyclical nature of financial markets and the importance of analyzing performance trends over longer periods. While the Q1 2025 results present a challenging picture, the long-term outlook for First HoldCo Plc will depend on its ability to navigate market volatility and manage its exposure to financial instruments held at fair value.
