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FCMB’s 2023 9M Report: Impressive profitability growth amid rising risks



FCMB Reports Nearly N1billion Loss To Fraud And Forgery

FCMB’s 2023 9M Report: Impressive profitability growth amid rising risks

First City Monument Bank (FCMB) recently released its 9M 2023 results, recording impressive profitability and returns to shareholders evidenced by notable bottom-line growth and a strong return on average equity.

However, the other side of the coin presents a picture of an uptick in risk factors. The bank experienced an increase in impairment charges, net risk assets, and cost of risk, coupled with a decline in the capital adequacy ratio.

But it is imperative to note that despite the decline in the capital adequacy ratio attributed to a heightened risk environment, FCMB disclosed in its analyst and investor presentation report that both Capital Adequacy and Liquidity Ratios remain above regulatory thresholds closing at 15.3% and 42.3% respectively

More details of FCMB’s 9M 2023 results:
The disclosed 9M unaudited interim financial statements results seen by Nairametrics show a significant 108% year-on-year increase in profit before tax, amounting to N55.141 billion.

This figure not only reflects a remarkable increase but is also noteworthy as it stands 49% higher than the full-year figure of N37.105 billion recorded in 2022.

The bottom-line impressive performance can be attributed to a combination of factors; the growth in net interest income and non-interest income.

During the period under review, net interest income grew by 29.46% year-on-year increase, to N120.471 billion, while non-interest income grew even higher by 167% year-on-year, reaching N103.153 billion.

The banking group provided insight into the drivers behind this robust growth in net interest income and non-interest income. According to the group’s investor/analysts’ presentation report:

“Net Interest Income grew by 19% and 29% QoQ and YoY, respectively, as a result of growth in YoY yield on earning assets from 12.6% to 15.9%.”
“Non-interest income grew by 167% YoY largely driven by growth in Foreign Exchange revenues, service fees and commissions and trading income.”
Foreign exchange gains accounted for 53% of the total non-interest income, underscoring their pivotal role in driving substantial growth in this income category.

Away from the FX gains, let us look at how the bank fared in its primary business lending activities. The increase in LDR from 54.1% in 9M 2022 to 59.4% in 9M 2023 indicates that the bank deployed a higher proportion of its deposits toward lending activities and that contributed to increased interest income, which rose by 55% YoY to N239.052 billion.

Moreover, FCMB demonstrated effective management of interest rate spreads, exemplified by the noteworthy 13% year-on-year growth in the Net Interest Margin (NIM), closing at 8% in 9M 2023.

The growth in NII and NIM reflects the bank’s success in generating more income from its interest-earning assets.

This positive performance in interest income generation and interest rate spread management often indicates effective lending practices and adept management of interest rate fluctuations.

However, it’s essential to acknowledge that achieving such growth in interest income might not be without certain associated risks.

The Bank’s Risk Profile and Financial Health:
The expansion in profitability is not without recognition of the changing risk environment.

FCMB’s 9M 2023 results underscore a rise in impairment charges primarily linked to heightened provisioning. As stated by the bank,

“Impairment charges surged by 186% YoY due to increased provisions on risk assets yet saw a substantial 97% QoQ decline.”
This substantial increase in impairment charges can be attributed to the 10% YoY growth in loan to deposit ratio to 59.4%.

Overall, this drove the cost of risk higher by 179% year-on-year, reaching 3.9% with a corresponding QoQ decline of 101% to -0.1%.

The increase in the cost of risk implies that the bank is allocating a higher percentage of its resources to cover potential credit losses.

While an increase in the cost of risk reflects the bank’s proactive approach to managing credit risk, it also raises considerations about its impact on earnings, interest coverage ratio, return on average equity and capital adequacy ratio.

The elevated cost of risk is reflected in the bank’s capital adequacy ratio, which declined by 8% YoY to 15.3% in 9M 2023.

However, it is important to highlight that, despite this decline, the capital adequacy ratio still stands above the regulatory requirements.

Also, the interest coverage ratio quarter-over-quarter (QoQ) experienced a decline of 32%, dropping to 101.17% in Q3 2023 compared to 146.5% in Q2 2023.

However, it is essential to note that a coverage ratio above 100% signifies that the bank is still generating enough income to cover its interest and debt payments.

This becomes particularly relevant when linked with a growth in return on average equity, which increased by 68% YoY to 20.3% in 9M 2023.

When combined with an interest coverage ratio above 100%, it signals to investors that not only is the bank generating healthy returns on its equity, but it also possesses the financial capacity to comfortably meet its interest and debt obligations.

Overall, the growth in net interest income and net interest margin reflects the bank’s success in earning more from its interest-earning assets.

However, the increase in the loan-to-deposit ratio, the marginal rise in the NPL-to-total loan ratio, the consequent increase in the cost of risk and the decline in capital adequacy ratio, highlight the need for the bank to continue to strike a balance between profitability/return and risk.

Investor confidence is likely to hinge on the bank’s ability to proactively address risk factors while sustaining profitability.

The share price at a YtD gain of 79.22% has outperformed the broad market NGXASI YtD 39.59% as of the close of trading on Friday; December 8, 2023.

Adding to investor appeal is the bank’s consistent dividend payments over the past five years. This fosters an expectation among investors for a continuation of this trend, contributing to the overall attractiveness of the bank’s shares.

The bank’s ability to meet or exceed investor expectations, particularly in terms of dividends, will play a crucial role in sustaining and further enhancing investor confidence.


Fidelity Bank started recapitalisation before CBN made it compulsory –Amuchie




Fidelity Bank started recapitalisation before CBN made it compulsory –Amuchie

Fidelity Bank started recapitalisation before CBN made it compulsory –Amuchie

Recently, the Central Bank of Nigeria (CBN) raised the capital base of commercial banks and set the tone for recapitalisation. But one bank that was already working on recapitalisation prior to that is Fidelity Bank Plc.

Revealing this in an interview, Fidelity Bank’s Executive Director, Chief Operations and Information Officer, Mr. Stanley Amuchie, said the bank had in August last year got its shareholders’ nod to recapitalise, only for the CBN to unveil the programme in March 2024.

He said Fidelity Bank was ahead of its competitors in knowing the right thing to do at every point in time.

He spoke on this and other things.

With CBN recapitalisation programme, which affects all banks, where you are on this?

The Central Bank of Nigeria, on March 28, 2024, announced recapitalisation for the banking industry. If you look at Fidelity Bank, we got the approval of our shareholders on August 11, 2023. That shows that, as a bank, we understand our business as well as the environment. We have done what we call Capital Needs Assessment. Based on that, therefore, we went out to seek approval of our shareholders to raise capital. And what we are trying to do is to issue 10 billion units of shares in public offering at N9.75k per share; and 3.2 billion units of shares by way of right issue to existing shareholders at N9.25k per share. That process has been in play. The signing ceremony is a step towards opening to the market. And that was why, a few days ago, on June 5, we had the signing ceremony. Of course, the processes involves getting all the parties together.

Who are these parties?

The parties will be the people at the issuing houses, the receiving banks, the reporting accountants and then the stockbrokers. Those are the people that will make up the parties to the offer. We have gone through the processes of getting all the people together, as well as prepared documents for the Securities and Exchange Commission (SEC) for approval. We have also secured approval of the Nigeria Stock Exchange Commission (NSEC) and that of the Nigeria Exchange Limited (NGX) and then held the signing ceremony. The next step is to secure the final approval of SEC to open the offer to the market. And we hope to open the offer on June 20 this year. It will be open for 28 working days. What it means is that, we will close on July 29, 2024.

It looks like you want to go into the market before others and ensure you get your shares before the competition gets stiff…

Like I said, we started this process earlier, because ours is based on strategy. This is because we are looking at our current business. We believe we had enough capital to do our business but we are looking at growth, which is why we are projecting growth. We believe that, if you want to grow, you must have what it takes. I want to liken capital to what oxygen is to human beings. If you don’t have enough oxygen, you will suffocate. Therefore, we looked at the growth process and what we needed to do, hence we started ours quite early. We didn’t wait. Remember, we were not reacting to CBN’s pronouncement. We have been very proactive about our capital base. That is what we are doing.

Ir seems there are some jitters, maybe not so much, but when the news about the revocation of Heritage Bank’s license came out, banking stocks dropped, people were asking questions, and now you are going to the market. How do you convince the people that Fidelity Bank is safe?

Let me say this again. Fidelity Bank Plc is very safe. This is a bank that has shown capacity and growth over the years. For instance, in the last five years, if you look at the stock, which is what we are talking about, you will appreciate the value our bank has created between May 2019 and May 2024. The value or the share price of Fidelity has grown by 507 percent or at N1.68k as at 31st of May, 2019, to N10.20k as at 31st of May, 2024. That is 507 per cent growth. What this means is that we have grown at an average of over 100 percent for every year.


You hit a new record high, over one hundred and four thousand, for the all-share index?

Yes. For all that has happened, you will see that our bank grew more than two times the all-share index. Even if you talk about the banking index, which is what tracks the value of shares of the banking industry, our bank did four times.

What are the chances of mergers, or are you looking at acquiring some banks?

Everything is on the table. For now, what we are trying to do is to get additional capital at the level where we are today. And by the time we get that, we will be in a very good position to look at what is ahead of us.

What of acquiring banks that need help, which will also increase your branches and assets?

Those are very possible. Like I said, everything is on the table for us. Our plan is to put ourselves in that position where you can think clearly and then be able to take any decision. And if we need to acquire, there has to be value. We will look at those who bring that synergy we will need. That is what we are looking at. But aside from that, we are well positioned. For the offer that is about to open, we are already getting feelers that people are seeing the investments in Fidelity and what it has done over the years. That is why they are very eager to be part of what is happening in Fidelity.

What is the major drive for capital that you are looking to get from the market?

When you are in business, at every point in your business, you need to sit back and look at where you are going to. We have seen a lot of growth in Fidelity in the last three to five years, in almost all the indices. If you look at indices like gross earnings, we’ve seen growth from N206 billion in 2020 to N556 billion in 2023 on gross earnings. That is a cumulative average growth rate of about 39 per cent. Similarly, our Profit Before Tax (PBT) grew from N28 billion to N124 billion by the end of 2023. That is a cumulative growth rate of 64 per cent. Moreso, savings accounts and deposits have also grown, significantly.

So, almost all the performance Indices have been on trajectory of growth. Therefore, you appreciate the kind of businesses you are seeing on the horizon at this moment. In this regard, what we have done, essentially, is to look at the Capital Needs Assessment, because we are getting more businesses, which is why we need to increase our capital, to be able to take on more businesses so that we do not get businesses we cannot handle. And like I said, capital in business is like what oxygen is to human beings.

Small business owners do say that commercial banks are not their friend at all. Do you think this new capital will get to small businesses?

Fidelity Bank has always been known for supporting small and medium enterprises (SMEs). Our bank has won several awards for SMEs support and there are probably only a few banks, if any, that have supported SMEs the way Fidelity has done. Our bank is more like an SMEs’ bank. We’ve grown new champions in the market and that is what we are known for. I can assure you that we will continue to do that, even better in the years ahead.

Recently, the Independent Project Monitoring Company recognised Fidelity Bank. What is the bank doing diffetently in Environmental, Social and Governance to warrant such recognition?

We are doing a lot. Today, we are one of the banks in Nigeria that have taken ESG to a greater level. We are doing a lot on the environment, staff (socials), and corporate governance. Therefore, if you talk about governance board, of course, ours is recognized as one of the strongest boards in the banking industry in Nigeria. We have people from different facets of the economy: oil and gas, investment banking and others. It goes to show that the quality of the board and its discussions are very strong. Then talk about the environment; we are doing paperless office, green financing and all. These are the things they have seen and that is why they recognised us.

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Guaranty Trust HoldCo Proposes N500bn Share Offering




Guaranty Trust HoldCo Proposes N500bn Share Offering

Guaranty Trust HoldCo Proposes N500bn Share Offering

Guaranty Trust Holding Company (GTCO) Plc, said it has filed a preliminary ‘red herring’ prospectus with the Securities and Exchange Commission (SEC) to raise N500 billion.

The Company in a notice said the number of ordinary shares to be offered and the price range for the proposed offering have not yet been determined.
The notice said “this is issued in reliance on Rule 283 of the Rules & Regulations of SEC, Nigeria. The notice read in part, this does not constitute an offer to sell or the solicitation of an offer to buy any securities.

“Any offer, solicitation or offer to buy, or any sale of securities will be made only by a prospectus duly registered by the Securities and Exchange Commission, Nigeria (SEC) in accordance with the provisions of the Investments and Securities Act, No. 29, 2007 (the Act) and the rules and regulations of the SEC made pursuant to the Act (the SEC Rules).”

Stating the purpose of the proposed offering, the notice further said that, “the net proceeds of the proposed offering will be used for the growth and expansion of the GTCO Group’s businesses. Such planned growth and expansion will be effected through investments in technology infrastructure to fortify existing operations, the establishment of new subsidiaries and selective acquisitions of non-banking businesses; and the recapitalisation of Guaranty Trust Bank Limited.”

It added that “the proposed offering is structured as an institutional offering targeted at eligible investors and a retail offering within Nigeria and a private placing to persons reasonably believed to be qualified institutional buyers outside Nigeria (the international tranche).”

It noted that the proposed offering is anticipated to open by July, 2024, adding that the filing of the red herring prospectus was undertaken with a concurrent filing of a preliminary universal shelf registration statement.

“The universal shelf registration will permit GTCO to establish a multi-currency securities issuance programme (the Programme) to issue various types of securities, or any combination of such securities, in one or more offerings, from time to time, to raise proceeds in an aggregate amount of up to $750 million or equivalent amount in Nigerian naira) in the Nigerian/international capital markets during the validity period of the Programme.”

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Wema Bank concludes 1st tranche of capital raise programme




Wema Bank concludes 1st tranche of capital raise programme

Wema Bank concludes 1st tranche of capital raise programme


Wema Bank, Nigeria’s foremost innovative bank and pioneer of Africa’s first fully digital bank, ALAT, has successfully concluded the first tranche of its recapitalisation exercise having secured all relevant regulatory approvals for the allotment of its N40bn Rights Issue which was initiated in December 2023.

In view of macroeconomic conditions, the Central Bank of Nigeria (CBN) in March 2024, launched a recapitalisation programme requiring commercial banks to raise fresh capital in alignment with the minimum requirement for their respective banking licenses, within a 24-month timeline spanning April 1, 2024, to March 31, 2026.

The goal of this recapitalisation programme is to simultaneously boost the Nigerian economy and strengthen the Nigerian financial services industry.

As a forward-thinking and pioneering bank, Wema Bank in December 2023 launched a N40bn Rights issue which has now been approved by the Central Bank of Nigeria and the Securities and Exchange Commission (SEC). With this remarkable development, Wema Bank has now successfully raised N40bn of the N200bn minimum requirement laid down by the CBN.

In a statement made to the public by the Bank, Moruf Oseni, Wema Bank’s Managing Director and CEO, iterated the Bank’s resolve in retaining its Commercial Banking license with National Authorisation, adding that the N40bn Rights Issue is a step in that direction.

“We are delighted to announce the conclusion of the 1st tranche of our Capital Raise Programme, after obtaining the relevant approvals of all regulatory authorities. Our move to commence our Capital Raise Programme very early demonstrates our push for excellence and with a strong emphasis on our digital play, we are set to amass more successes in the coming months.”

“We were impressed by the vote of confidence given by our shareholders during the 1st Rights Issue exercise as our shares were fully subscribed. In addition, we obtained the approval of shareholders at our 2023 Annual General Meeting (AGM) to raise an additional N150billion to meet the capitalisation threshold set by the CBN. The process is expected to be completed within 12-18 months. We are committed to providing optimum returns for every stakeholder and the successful conclusion of this N40bn Rights Issue is a bold step in the right direction.”

In addition to the upward trend in the Bank’s financial performance and the success recorded so far in its recapitalisation exercise, Wema Bank’s corporate rating was recently upgraded to BBB+ by Pan African credit rating agency, Agusto and Co, and retained at BBB by international rating agency, Fitch.

Over the medium to long term, Wema Bank is positioned to dominate not only the digital Banking space but also the Nigerian financial services industry at large as it translates its industry leadership to significant market share.

Wema Bank is a leading financial services entity with banking operations across Nigeria, its leadership position in the digital banking space speaks to its aspirations to liberate Nigerian businesses and entrepreneurs by making digital platforms widely available.

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