….NPLs fell to 3.74 percent in FY16
A foreign exchange gain of N29.31 billion has spurred First City Monument Bank (FCMB) to growth as the lender recorded an improvement in assets quality.
The FX gains helped subdued the effects of huge impairment on loans on bottom lines (profit) as lenders in Africa’s largest economy continue to write off loans of defaulting customers, hit by a slow growing economy.
The bank’s consistent upswing in earnings and its expansion plans has paid off as its shares have outperformed the market. They have gained 6.86 percent compared with -0.02 percent All Share Index (ASI).
For the year ended December 2016, FCMB’s net income surged by 201.05 percent to N14.33 billion from N4.76 billion the previous year.
FCMB’s ratio of total Non-Performing Loans (NPLs) to gross loans fell to 3.74 percent in the period under review from 4.15 percent the previous year.
FCMB’s ratio of total Non-Performing Loans (NPLs) to gross loans fell to 3.74 percent in the period under review from 4.15 percent the previous year.
Nigerian banks have benefitted from the central bank’s decision to weaken the naira last year as dollar denominated assets soared.
GTBank, Zenith and UBA racked in N87.13 billion N25.58 billion and N15.13 billion in FX gains, according to data compiled by BusinessDay.
While early earnings results showed banks have recorded positive numbers, rising NPLsor poor assets quality still possess great threat to lenders, especially the midsized and small banks.
NPL growth was largely due to delays in payment of salaries and contract sums to civil servant and contracts and default from oil and gas firms.
An economic downturn as a result of a sudden drop in the price of oil in mid-2014 crimpled the cash flow of companies and to further exacerbate the already anemic position of these firms is a severe dollar shortage.
The bad-debt ratio at Nigerian banks rose to 13.4 percent last year, according to data from the Apex bank.
Analysts say the illiquidity in the system and the central bank unpredictability as regards the value of the currency will continue to hurt the industry.
In spite of the monumental challenges bedeviling the industry, FCMB’s gross earnings increased by 15.65 percent to N176.35 billion; thanks to interest on loans and advances to customers, upswing in commission income and reduced interest expense.
FCMB’s cost control mechanism installed by management has paid off as total operating expenses reduced 1.79 percent to N65.76 billion in December 2016 as against N66.96 billion the previous year.
The Nigerian lender’s loans and advances to customers rose by 11.29 percent to N659.93 billion in the period under review while deposits from customers were down 6.79 percent to N657.60 billion.
The bank has proposed a dividend per share of N0.10, which is flat y/y and precisely what we had modeled. The proposed dividend implies a yield of 8.0 percent.
FCMB’s share price closed at N1.17 on the floor of the exchange, valuing the bank at N24.75 billion.
BALA AUGIE
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