Key Performance Indicators
Key Performance Indicators (KPIs)
Financial KPIs
To support the Group's strategy and ensure that the Bank's performance can be monitored, management utilises a number of financial KPIs. The table overleaf presents these KPIs for the period up until December 2009. At a business level, the KPIs are complemented by a range of benchmarks that are relevant to the planning process and to reviewing business performance. FirstBank has a number of key targets against which future performance can be measured.
Non-Financial KPIs
FirstBank has chosen three non-financial KPIs, which are important to the future success of the Group in delivering its strategic objectives. These non-financial KPIs are currently reported internally within the Bank, and not on a Group basis.
- Financial KPIs
- Non-financial KPIs
Management believes that financial KPIs must remain relevant to the business even though they may change over time to reflect changes in the Group's composition and the strategies employed.
- Net operating income growth
- Net operating income mix
- Cost to income
- Credit performance
- Shareholder returns
Description
Net operating income growth provides an important guide to the Group's success in generating business. In December 2009, the Bank's total net operating income grew to N119.2 billion (Group: N130.5 billion), reflecting the resilience of FirstBank's income-generating capabilities in these exceptionally turbulent economic circumstances.
Performance
Total net operating income growth
December 2009:
Bank
N119.2 billion
Group
N130.5 billion
- Group
- Bank
| Mar 06 | Mar 07 | Mar 08 | Mar 09 | Dec 09 | |
|---|---|---|---|---|---|
| Group % | 17.9 | 26.8 | 70.5 | 29.7 | (18.9) |
| Bank % | 22.6 | 23.5 | 64.0 | 30.1 | (15.4) |
The percentage increase in net operating income before loan impairment and other credit risk charges since the previous year.
Strategy
Group
Delivering on our growth ambitions will require a structure that supports development of segment and functional specialists. We will restructure internally for growth, organising around business groups and market segments.
Bank
Grow and effectively deploy risk assets to drive increased revenue and profit growth. The Bank will extend its franchise into new market segments such as corporate and consumer lending.
Description
Net operating income mix represents the relative distribution of revenue streams between net interest income, net fee and commission income and other income. It is used to understand how changing economic factors affect the Group, to highlight dependence on balance sheet utilisation for income generation and to indicate success in cross-selling fee-based services to customers with loan facilities. This understanding assists the Bank's management in making business investment decisions. Comparison of the revenue mix between 2006 and 2009 shows a downward trend of the other income component.
Performance
| Mar 06 | Mar 07 | Mar 08 | Mar 09 | Dec 09 | |
|---|---|---|---|---|---|
| Net interest income | 53.5 | 47.8 | 55.6 | 74.3 | 73.7 |
| Net free income | 30.4 | 28.8 | 22.9 | 21.1 | 21.5 |
| Other income | 16.1 | 23.4 | 21.5 | 4.5 | 4.8 |
| Mar 06 | Mar 07 | Mar 08 | Mar 09 | Dec 09 | |
|---|---|---|---|---|---|
| Net interest income | 55.1 | 45.7 | 53.1 | 73.4 | 74.6 |
| Net fee income | 30.5 | 27.7 | 21.6 | 20.7 | 20.6 |
| Other income | 14.4 | 26.6 | 25.3 | 6.0 | 4.8 |
Strategy
Group
There will be a renewed emphasis on strong growth businesses such as investment banking/asset management and insurance. In addition, we will leverage the synergies and cross-selling opportunities between banking and other financial services sectors to improve fee and commission income.
Description
Cost to income is a relative measure that indicates the consumption of resources in generating revenue. Used to assess the success of technology utilisation and, more generally, the productivity of the Group's distribution platforms and sales forces. There has been a consistent effort to reduce this ratio. The budget for the year was 60% and the Bank achieved 72% (71.85% ex-LLE).
The Group's cost-to-income ratio rise was driven predominantly by rising wage cost on keen competition for skills, higher administrative and general expenses reflecting the inflationary environment and also from massive provisions made for impaired assets during the period.
Performance
Group's cost-to-income ratio
December 2009:
73.43%
March 2009: 66.4%
| Mar 06 | Mar 07 | Mar 08 | Mar 09 | Dec 09 | |
|---|---|---|---|---|---|
| Group % | 73.1 | 71.6 | 63.7 | 66.8 | 73.4 |
| Bank % | 73.7 | 72.1 | 64.5 | 67.4 | 72.0 |
Strategy
Bank
Continue with our ongoing transformation programme, particularly in the area of cost optimisation. Key initiatives include the rollout of the centralised processing centre, including leveraging the new selfservice options; optimisation of our manning structure; and internal process re-engineering focused on extracting value from our technology investments and centralisation and/or outsourcing of support services where it makes sense. Our efforts in improving fee and commission income will also impact the cost-to-income ratio significantly.
Description
Credit performance, as measured by risk-adjusted margin, is an important gauge for assessing whether credit is correctly priced so that the returns available after recognising impairment charges meet the Group's required return parameters. The ratio for December 2009 was 6.0% for the Group (March 2009: 10.6%) as loan impairment charges rose at a faster rate than income on higher average risk-weighted assets. This situation arose from efforts made by the Bank to adequately provide for impaired capital market assets and also additional provisions arising from the CBN's special examinations conducted during the review period.
Performance
Credit performance as measured by risk adjusted margin
December 2009:
Bank
7.2%
March 2009: 11.8%
December 2009:
Group
6.0%
March 2009: 10.6%
| Mar 06 | Mar 07 | Mar 08 | Mar 09 | Dec 09 | |
|---|---|---|---|---|---|
| Group % | 18.8 | 16.4 | 13.8 | 10.6 | 6.0 |
| Bank % | 17.5 | 16.4 | 15.5 | 11.8 | 7.2 |
As measured by risk adjusted margin.
Strategy
Group
Throughout the Group, ensure that portfolio oversight of key functions, including risk and shared services are established.
Bank
Risk management systems and processes will be strengthened to optimise portfolio quality and to ensure that margins reflect and adequately compensate for risk. This includes deliberately managing our risk asset portfolio and adopting a pricing model that reflects variations in the risk profile of various credits to ensure that higher risks are compensated by higher returns.
Description
The Bank aims to deliver sustained dividend per share growth for its shareholders. Based on the year to which the dividends relate rather than when they were paid.
Total shareholder return (TSR) is a key performance measure in rewarding employees and used as a method of assessing the overall return to shareholders on their investment in FirstBank, and is defined as the growth in share value and declared dividend income during the relevant period. In calculating TSR, dividend income is assumed to be invested in the underlying shares. The TSR benchmark is an index set for the purpose of comparing the Bank's range and breadth of activities with the performance of a group of competitor banks. The Bank aims to be in the top quartile of this index.
Performance
Total dividend
December 2009:
Bank
N0.10
March 2009: N1.35
Based on the year to which the dividends relate rather than when they were paid.
| Mar 06 | Mar 07 | Mar 08 | Mar 09 | Dec 09 | |
|---|---|---|---|---|---|
| Group % | 24.0 | 22.0 | 10.4 | 3.7 | 1.0 |
| Bank % | 24.0 | 21.0 | 8.9 | 9.9 | 0.4 |
Strategy
Group
Sequence growth priorities over three growth 'horizons' to ensure adequate focus on the right set of initiatives at the right time.
Bank
Improve return on equity by optimising the deposit mix to lower the cost of funds. There will be a strong emphasis on low-cost current and savings deposit mobilisation. In addition, we continue to seek growth in assets that flows through to increased revenue and profit growth, and which ultimately grows shareholder value.