Why First HoldCo shares jumped big after a 92% profit crash

At first glance, First HoldCo’s latest results looked ugly. Nigeria’s biggest banking group by assets reported a 92% collapse in profit for 2025, a headline that would normally send investors running.

Instead, the market did the opposite.

On Tuesday, First HoldCo’s shares rose 8.04% to close at N44.35, its biggest daily gain since December 23, a sign investors see the result not as a warning, but as a turning point.

So what’s really going on?

A deliberate shock

The profit collapse was not caused by shrinking business, falling deposits or a slowdown in lending. It was the result of a deliberate decision to “clean house”.

The bank took a ₦748 billion one-off impairment charge, a spending that covers old bad loans that had lingered on its books for years. Chairman Femi Otedola described it bluntly: instead of pretending problem loans did not exist, the bank chose to absorb the pain all at once.

That move crushed reported profit to ₦45 billion, down from ₦677 billion a year earlier. But investors appear to have focused less on the profit number, and more on what the cleanup means for the future.

In market jargon, this is known as “kitchen sinking”: dumping all the bad news into one period so future results are cleaner and more predictable.

Timing matters. The Central Bank of Nigeria has been pushing banks to stop rolling over bad loans and to strengthen balance sheets ahead of tighter regulatory expectations.

By acting now, First HoldCo is effectively closing the chapter on legacy problems, reducing the risk of regulatory surprises down the line and restoring credibility with investors.

Markets usually reward that kind of clarity.

The business underneath is still strong

Crucially, the cleanup did not break the bank’s core engine.

Even after absorbing ₦748 billion in losses, First HoldCo remained profitable. Key numbers tell the story:

– Interest income rose to ₦2.96 trillion, up from ₦2.4 trillion

– Net interest income jumped 36% to ₦1.91 trillion, providing a huge earnings cushion

– Net fee and commission income climbed nearly 19%, showing diversification beyond lending

In simple terms: customers are still borrowing, deposits are still working, and the bank is still generating cash.

That is why Otedola insists the “business itself is still strong” — and the numbers support him.

The balance sheet also matters.

– Total assets grew to ₦27.06 trillion, even after the loan cleanup

– The bank raised ₦229 billion through a rights issue, boosting capital buffers

– The stock had already climbed from ₦28.05 to ₦47.90 over 2025, suggesting investors were anticipating a reset

Tuesday’s 10% rally shows the market now believes the worst is likely behind the bank, not ahead of it.

Is this a buy?

The bullish case is straightforward. The 2025 profit collapse is artificial — an accounting hit, not a business failure. With the bad loans recognised upfront, 2026 earnings could rebound sharply, driven by a bank generating nearly ₦2 trillion in net interest income annually.

The cautious case remains costs. Operating expenses jumped to ₦809 billion, and personnel expenses rose 25%. If cost control slips in a high-inflation environment, it could blunt the post-cleanup recovery.

First HoldCo did not stumble into a bad year. It chose one.

By swallowing years of hidden problems in a single blow, the bank has made its future earnings clearer, cleaner and easier to trust. That’s why investors cheered a 92% profit crash.

For long-term, value-focused investors, this is a classic “buy the cleanup” moment: painful today, potentially powerful tomorrow.

Editor’s Note: This report is for informational purposes only and does not constitute financial advice.