FCMB nets N9.6bn profit in six months

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FCMB Group Plc has reported an increased revenue earning of 11 percent Year on Year (YoY), to N77.4 billion for the first six months of the year, even as its pre-tax profit dropped by 14 percent to N9.6 billion.

The period also saw increased business momentum, with total assets growing 15 percent YoY to N1.22 trillion and up five percent Year-to- Date (YTD).

Customer’s confidence in FCMB remained strong, as deposits grew by four percent during the period to N785.8 billion, just as the diversification of FCMB across commercial banking, investment banking and wealth management, provided some cushion as earnings from non-banking activities proved more resilient.

FCMB Ltd, the commercial and retail banking subsidiary of FCMB Group Plc, continued to validate its increased drive into retail contributing 21 percent (N1.7bn) of FCMB Ltd’s Profit Before Tax.

The retail group also grew deposits 21 percent YoY to N431.2bn, or 54 percent of total deposits.

The bank continued its drive of inclusive lending, granting just over 9,100 new loans to micro-enterprises, even as its credit card offering saw increased patronage, with over 17,000 cards issued in the first half of this year.

Corporate banking activities were however constrained by scarcity of foreign exchange and tight monetary policy, which affected trade finance, foreign exchange trading and lending activities.

In the first half of 2015, the bank’s UK wholesale banking subsidiary, FCMB Bank (UK) Ltd, broke even after 14 months of operations as a deposit-taking institution.

The investment banking group of FCMB Group Plc – comprising of financial advisory (FCMB Capital Markets Ltd (FCMB-CM)) and stockbroking (CSL Stockbrokers Ltd (CSLS)) – delivered a six percent YoY increase in Profit After Tax (PAT) of N414 million, driven by financial advisory, equity capital raising and asset management fees.

On the operating side, FCMB-CM had notable accomplishments, including winning lead adviser and structure mandate to a US$445 million term facility for a key gas provider.

Also, FCMB-CM was mandated as adviser and arranger of debt facilities, with an aggregate value of over $520 million for clients, in the oil & gas and power sectors.

Additionally, FCMB-CM was mandated as financial adviser to raise an aggregate value of $30 million equity finance on behalf of clients in the health and agro- allied sectors and, on a scheme of merger by a client in the fast-moving consumer goods sector.

Managing Director of FCMB Group Plc, Peter Obaseki, acknowledged that the “The economy has entered a higher risk level with inflation climbing to 9.2 percent, fiscal and trade deficits.

“Declining GDP growth rate below four percent as at Q1 2015 from 5.94 percent as at Q4 2014; broad money supply (MM2) contracted by N380 billion in June, from N19.19 trillion in May, to N18.81 trillion.

“The group results for H1 2015 reflects a deliberate conservative stance aimed at maintaining robust capital buffers in the face of a tough macro-economic and regulatory environment.

“Capital adequacy ratio remains strong at 19.8 percent despite proactive jump in non-performing loan ratio from 3.6 percent as at FY14 to 5.2 percent at the end of H1; gross revenue went up 11 percent on H1 2014 and return on average equity slowed down to 10.3 percent.

Obsequy said that the underlying retail franchise is getting stronger, while capacity exists to take on sizeable pipe-line transactions in H2.

Ladi Balogun, Group Managing Director/ CEO of FCMB Ltd, said that the “H1 2015 was characterised by significant macro-economic and policy headwinds.”

Balogun stressed that limited supply of foreign exchange had a major impact on the commercial & retail banking group’s (CRBG) trade finance and foreign exchange trading income.

“The harmonisation of the cash reserve requirement to 31 percent led to a significant rise in our restricted reserves and consequently constrained lending and put pressure on net interest margins.

“Asset quality was adversely affected by the effect of declining government revenue on contractors and employees, which saw our NPL ratio climb to 5.2 percent compared to 3.6 percent at the end of FY14.

“In spite of the inflationary pressures , operating expenses saw a modest rise of five percent in the CRBG, thanks to our ongoing channel optimisation programme.

“Also encouraging is the steady migration of customers towards card-based and digital channel transactions. The business is on a sound footing and is increasingly diversified.

“The foundations for a strong rebound are in place as the country adapts to a lower oil price environment and we look forward to a more sustainable macro-economic and monetary policy environment,” Balogun said.

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