Coronation Merchant Bank profit doubles on reduced interest expense

The full year profit of Coronation Merchant Bank (CMB) Limited has doubled amid a slow growing economy, thanks to a tremendous reduction in interest and similar charges.

 

For the year ended December 2015, CMB’s net income increased by 100 percent to N3.22 billion from N1.61 billion in 2014. Net interest income also jumped by 40.63 percent to N3.06 billion as the investment firm continues to introduce innovative products with a view to consolidating its position in the industry.

 

The growth in net income was driven primarily by the reduction in interest and similar charges by 26.88 percent to N6.88 billion in December 2015 as against N8.73 billion at December 2015.

 

BusinessDay calculations shows that a spike in trading income by 44.34 percent to N1.22 billion in the period under review despite a  55.81 percent drop  in operating expenses to N2.01 billion as against N1.29 billion as at December 2015.

 

Analysts beckoned that investment bank’s foray into high yielding interest assets helped it leap frog the unpredictable macro environment since the reintroduction of merchant banking in 2010 by the Central Bank of Nigeria (CBN).

 

Merchant Banks had gone into extinction following the advent of universal banking. A lot these banks gave way during the banking sector reforms of 2005 that mandated all banks in Nigeria to recapitalize.

 

CMB, formally as known as Associated Discount House (ADH) was granted approval for a full merchant bank in 2015, by the CBN.

 

An industry expert  who doesn’t want his name mentioned said CMB’s stellar performance is laudable given its strong asset and earnings base amid drop in oil that has dented the assets quality of lenders due to exposure to the oil and gas sector .

 

A lot of lenders gave out loans to oil companies when oil prices were above $100 a barrel but these collateralized assets lost value as oil prices have fallen below $40 a barrel as at today.

“Bad loans have risen since most companies no longer have the cash flows to pay back loans,” said the industry expert.

 

Despite the challenging environment, CMB is efficient and profitable as net margin increased to 22.64 percent in December 2015 from 11.66 percent in December 2014. Earnings per share EPS jumped to 69k in December 2014 as against 35k in 2014.

 

The investment bank has utilized the resources of shareholders in bolstering the top lines as return on equity (ROE) increased to 15.91 percent in 2015 compared with 9.74 percent in 2014.

 

BALA AUGIE