First HoldCo leans on trading gains, lower loan losses as core income weakens in H1 2026

First HoldCo Plc, the Lagos-based financial services group and parent company of FirstBank, delivered a strong headline performance, but with underlying pressures in its core banking operations and a growing reliance on less predictable income streams.

While the group, which currently ranks as Nigeria’s most capitalized lender with a market capitalization of N5.89 trillion ($4.31 billion), benefited from a sharp reduction in credit losses and a surge in non-interest income, its traditional lending engine showed limited momentum, raising questions about the sustainability of current earnings levels.

Core income softens despite stable funding costs

Interest income declined slightly by 2.74% to N1.4 trillion ($1.02 billion) from N1.44 trillion ($1.05 billion) in the same period of 2025, reflecting muted growth in the group’s primary revenue base.

Interest expense also eased to N518.92 billion ($380 million), but not enough to prevent a contraction in net interest income, which fell to N879.13 billion ($643 million).

The trend highlights continued pressure on margins and suggests that balance sheet expansion or asset repricing has yet to translate into stronger core earnings.

Lower impairments mask underlying pressure

A significant portion of the group’s resilience stemmed from a sharp decline in impairment charges, which fell to N116.14 billion ($85 million) from N185.40 billion ($136 million) a year earlier.

This reduction lifted net interest income after impairment to N762.99 billion ($558 million), helping offset the weakness in pre-impairment income. However, the improvement also introduces a degree of uncertainty, as lower provisioning may not be sustained if credit conditions tighten.

Trading and investment income drive performance

Non-interest income emerged as the primary support for earnings during the period. Net fee and commission income rose to N178.51 billion ($131 million), indicating stronger transaction volumes and continued growth in digital banking activities.

More notably, trading and investment lines recorded a significant turnaround. Gains on investment securities increased sharply to N60.62 billion ($44 million), while financial instruments at fair value through profit or loss swung to a gain of N65.79 billion ($48 million) from a loss in the prior year.

These gains provided a substantial boost to income, but their dependence on market conditions introduces volatility into the group’s earnings profile.

Foreign exchange gains declined to N44.15 billion ($32 million) from N73.54 billion ($54 million), suggesting reduced support from currency movements compared to the prior year.

Spike in other income raises sustainability questions

Other operating income rose sharply to N136.67 billion ($100 million) from N13.15 billion ($10 million), representing one of the most significant shifts in the income statement.

Without detailed disclosure at the headline level, it remains unclear whether this increase reflects recurring revenue or one-off items, raising concerns about the durability of this income stream.

Costs rise faster than core income

Operating expenses continued to climb, with personnel costs increasing to N180.26 billion ($132 million) and other operating expenses rising to N384.55 billion ($281 million).

The growth in costs, driven by inflationary pressures and operational investments, outpaced the movement in core interest income, reinforcing signs of margin compression within the underlying business.

Earnings quality under scrutiny

The composition of First HoldCo’s earnings in H1 2026 suggests a shift away from core banking income toward market-driven and potentially non-recurring sources. However, Total assets currently stand at N30.65 trillion ($22.42 billion) while retained earnings climbed by 37% to N921,72 billion ($674.15 million).

While improved asset quality and rising fee income provide some structural support, a significant share of performance was driven by trading gains, lower impairment charges, and a surge in other operating income.

This mix raises questions about how sustainable current earnings levels would be in a less favorable market or credit environment. First HoldCo enters the second half of 2026 with stronger reported performance, but underlying trends point to a need for deeper growth in its core lending business.

Sustained earnings expansion will likely depend on the group’s ability to rebuild momentum in interest income, manage rising costs, and maintain credit discipline, while reducing reliance on volatile income streams.