FCMB to raise N7.5bn bond

FCMB Group Plc has announced plans to raise N7.5 billion in bonds in a bid to strengthen its capital, Peter Obaseki, managing director FCMB Group Plc told investors and analysts last Friday following the release of its third-quarter (Q3) results.

FCMB had said in August it will raise between N10 to N15 billion of Tier II capital, targeting retail investors for the offering.

FCMB Group Plc is the holding firm with subsidiaries including First City Monument Bank (FCMB) Limited, FCMB Capital Markets Limited, CSL Stockbrokers Limited and CSL Trustees Limited.

The banks just released its third-quarter unaudited results for the nine months ended September 30, 2016, showing gross revenue of N140.7 billion, a 29% increase from N109.3 billion for the same period previous year.

Its profit before tax (PBT) rose to N14.2billion, representing an impressive increase by 453% from N2.563 billion recorded in the comparative period of 2015.

The Group also recorded Non-interest income of N44.8 billion which is an increase of 128% when compared with the same period a year earlier. This increase has been predicated on a 612% increase in foreign exchange income, from N5.0 billion for the nine-months ended September 2015, to N35.3 billion for the nine-months ended September 2016.

Non-Performing Loan (NPL) improved quarter-on-quarter (QoQ) driven by loans write-off during the quarter.

“Performance improved year-on-year (YoY) due to significant foreign exchange revaluation gains during the year, while liquidity and capital adequacy ratio (CAR) improved,” Kayode Adewuyi, chief financial officer, FCMB Group Plc told analysts.

But profit before tax declined for the period due to significant impairments, reduced non-interest income and high cost of funds  but was cushioned by a N9 billion from second quarter  foreign exchange gains buffer.

“The macroeconomic headwinds remain challenging and constraining, the outlook for fourth quarter is therefore conservative and subdued. We revise our earlier guidance on cost of risk upward by 300 basis points as a result of significant increase in provisions under collective impairment.”

“The underlying momentum in Retail and Transaction banking will be intensified, as these growth areas are relatively immune from the headwinds. We will continue with our cost optimisation programme; intensify the growth trajectory around our wealth management business,” Obaseki said.

Ladi Balogun, GMD and CEO, FCMB Limited said, in the corporate space, the bank’s more capital efficient product focus –that is transaction banking as opposed to lending –shift away from structured finance to balance sheet lending- has continued to yield dividends with low cost deposits growing by over 25% to N87.1 billion in the corporate bank space year-to-date (YtD). “We expect further corporate banking loan reduction in 2017,” Balogun said.

He noted that intense loan recovery effort has been hampered by illiquid secondary market for collateral. “Hence we have only seen an achievement of about 47percent (N2.8billion) of planned full year recovery as at the third quarter. Further write backs will occur as asset sales are concluded,” the bank CEO added.

On the bank’s credit outlook, Toyin Olaiya, chief risk officer/divisional head, Risk Management said “we will maintain our cautious loan growth strategy with specific focus on lower ticket loans in Agriculture, Retail and high quality SMEs.”

“Risk asset volume is estimated to decline in fourth quarter with tightened risk acceptance criteria, as pay-downs surpass fresh origination. Asset quality is a top priority and we will maintain high provision level to ensure adequate coverage ratio for non-performing loans. Exposures in challenged sectors will continue to be proactively managed and monitored to ensure performance and efficiency,” she said.

 

Iheanyi Nwachukwu