The market has reacted positively to First City Monument Bank) Plc’s stellar performance in the third quarter as they swoop on the shares of the lender.
Lender’s share price gained 9.85 percent to close at N1.45 as at 2:00 pm in commercial city Lagos, while its market capitalization stood at N28.71 billion.
The result was good and l guess that’s why the market has reacted to it but going forward the rally may not continue as investors will be more interest in the full year result of the lender, according to Wale Olusi, equity research analyst with United Capital Research.
For the first nine months through September 2018, FCMB’s net income surged by 107.38 percent to N11.34 billion, the highest in 2 years. Its profit growth is the highest among tier 2 lenders.
The growth in profit was largely driven by a sharp jump in foreign exchange revaluation gains of N10.40 billion in the period under while an increase in noninterest revenue by 77.33 percent to N33.02 billion in the period under review added impetus to the bottom line.
However, interest income dipped by 0.89 percent to N95.41 billion as lenders in Africa’s largest economy have turned off he tap on lending.
FCMB’s is efficient in managing cost while magnifying profit as cost to income ratio fell to 65.93 percent in the period under review from 71.84 percent the previous year.
“FCMB result was quite impressive and we believe the bank is on track to post a solid FY 18 result,” said analysts at ARM Equity Research, in a recent note to client.
“The stock is trading at a P/B of 0.14x, a discount to average P/B (0.15x) of Fidelity (0.28x) and Diamond (0.07x). Our last communicated FVE on FCMB is N2.34 which translates to a BUY rating on the stock. We will revisit our numbers after further analysis and discussion with management,” said analysts at ARM.
FCMB is efficient in utilizing the resources of shareholders’ generating higher profit as return on equity increased to 3.34 percent in September 2018 from 1.96 percent the previous year.
Weighted average cost of funds (WACF) increased to 3.34 percent in the period under review from 1.96 percent the previous year.
“An increase in WACF could mean that the bank is becoming more retail focus and interest expense has reduced. It getting more in savings and current account than fixed deposit,” said Kayode Tunoye, Fund Manager at United Capital Research.
