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

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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.

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Federal Mortgage Bank of Nigeria disburses N440 billion, delivers 39,000 homes since 1993 – Shehu Osidi

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2 days ago

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July 25, 2024

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Federal Mortgage Bank of Nigeria disburses N440 billion, delivers 39,000 homes since 1993 – Shehu Osidi

Federal Mortgage Bank of Nigeria disburses N440 billion, delivers 39,000 homes since 1993 – Shehu Osidi

The Federal Mortgage Bank of Nigeria (FMBN) has revealed it has disbursed N440 billion and delivered approximately 39,000 new homes under the National Housing Fund (NHF) scheme since its re-establishment in 1993.

This achievement was highlighted by the bank’s Managing Director and Chief Executive, Mr. Shehu Osidi, during his presentation at the 18th Africa International Housing Show in Abuja.

His presentation, titled “Financing the Housing We Need: A New Dawn at FMBN as an Institutional Enabler,” detailed the bank’s accomplishments in housing finance.

Osidi noted that, in addition to the N440 billion disbursed and the 39,000 new homes delivered, FMBN has provided around 25,500 mortgages and extended over 120,000 micro-housing loans, all offered under a single-digit interest rate lending regime.

“Since its re-establishment in 1993, the Bank has delivered about 39,000 new homes, about 25,500 mortgages and over 120,000 micro housing loans, all within a single-digit interest rate lending regime.

“Under the National Housing Fund (NHF) Scheme, it has registered 26,350 organisations and over 5.8 million cumulative contributors with over 1 million accounting for the self-employed sector.

“The Bank has disbursed the cumulative of N440 billion under its various loan windows to drive affordable housing finance for the Nigerian economy,” Osidi said.

Additionally, the FMBN Managing Director disclosed that in compliance with the provisions of the National Housing Fund Act, the bank has refunded N84.8 billion to 492,604 contributors who exited the scheme.

More insights
Highlighting more achievements of the Federal Mortgage Bank of Nigeria (FMBN), Osidi noted the recovery of N12 billion from the Federal Ministry of Finance.

This recovery was part of the N19 billion in wrongful deductions of National Housing Fund (NHF) contributions, which had been previously misconstrued as revenue under the 40% deduction regime. He further mentioned that FMBN continues to engage with relevant authorities to halt these deductions and recover the remaining balance of the trapped NHF funds.

Additionally, he explained that FMBN has expanded its loan products from mortgage financing to include housing construction, micro-housing financing, and rent-to-own options. New additions such as Home Improvement and Rent Assistance loans specifically target the non-salaried informal sector.

Osidi highlighted that the bank’s clientele now includes primary mortgage banks, real estate developers, housing cooperatives, and individual NHF contributors. Despite modest numbers, he emphasized that FMBN remains a key player in the housing sector.

He also outlined the executive management’s seven-point agenda, which focuses on enhancing automation, promoting cost efficiency, improving credit quality, effective project management, and expanding strategic partnerships to transform FMBN into a responsive and reliable institution.

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Analysis: Fidelity Pension Managers 2023 audited company and fund accounts

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3 days ago

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July 24, 2024

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Analysis: Fidelity Pension Managers 2023 audited company and fund accounts

Analysis: Fidelity Pension Managers 2023 audited company and fund accounts

Fidelity Pension Managers recently published its 2023 audited accounts, providing a summary overview of its financial health and fund performance.

This report provides a summary review and presents key financial highlights, financial ratios, fund performance, and the trend in the number of Retirement Savings Account (RSA) holders.

Financial Highlights
Total Revenue: Total revenue for the company rose 23% to ₦2.59 billion in 2023, up from ₦2.1 billion in 2022. From the reports, this increase is attributed majorly to higher fee income generated from the pension funds it has under management.
Profit After Tax (PAT): PAT rose 26% to ₦666 million, up on the previous year’s 21% rise.
Operating Expenses: Operating expenses rose slower than revenue and PAT by 22% to ₦1.76 billion from ₦1.44 billion, leading to a slight drop in the company’s cost-to-income ratio, which fell to 67.98% from 68.57%. The company seems to be relatively prudently managing financial resources, amidst rising costs and inflationary pressures.
Shareholder’s Funds: The company’s shareholders funds ended the year at ₦5.95 billion in 2023 up 5% from the ₦5.64 billion in 2022.
Return on Equity (ROE): ROE was a very low 11.21%. Whilst this is a slight improvement on 2022’s 9.41%, the company does not seem to be efficiently deploying shareholders’ equity to generate profits.

 

Financial and Fund Highlights

Corporate Audited Annual Results

Financial Ratios

Fund Performance Highlights
RSA Funds Performance: Fidelity Pensions offers six of the seven regulated RSA pension funds to the public. Notably, all six funds put in a better performance than the previous year, whilst only four funds out-performed the industry benchmark returns (see our article on benchmark returns here).

5-Year Audited Pension Funds Performance

Number of RSA Holders
RSA Growth: The growth in the number of RSA holders was another highlight of the year. Fidelity Pension Managers saw an increase of 2.48% in RSA holders, adding 8,005 new accounts to close the year at 331,124 RSA holders.

Demographic Analysis
Age Distribution: The majority of 330,000 RSA holders (83.9%) registered in 2023 fell within the age bracket of <30 years to 39 years, indicating a young and growing industry subscriber base. Of the 2023 registrations, Fidelity Pension Managers recorded 2.43% of this growth.


Conclusion
Fidelity Pension Managers has demonstrated improved financial growth in 2023, marked by increased revenue, higher profitability, and a growing RSA customer base. However, the company remains constrained by low assets under management, which limits its fee-generating potential. To overcome this challenge, Fidelity Pension Managers must focus on enhancing the performance of the funds it manages and attracting more RSA holders. Improved fund performance will not only benefit current RSA holders but also make Fidelity Pensions an attractive option for those looking to transfer their pensions.

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Zenith Bank maintains its position as Nigeria’s top bank in terms of Tier-1 capital for the 15th consecutive year.

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5 days ago

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July 22, 2024

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Zenith Bank maintains its position as Nigeria's top bank in terms of Tier-1 capital for the 15th consecutive year.

Zenith Bank maintains its position as Nigeria’s top bank in terms of Tier-1 capital for the 15th consecutive year.

Zenith Bank Plc for fifteenth consecutive year has retained its position as the Number One Bank in Nigeria by Tier-1 Capital in the 2024 Top 1000 World Banks’ Rankings, published by The Banker Magazine.

This ranking places Zenith Bank Plc as the 565th Bank globally with a Tier-1 Capital of $2.01 billion. The rankings, published in the July 2024 edition of The Banker Magazine of the Financial Times Group, United Kingdom, recognise Zenith Bank’s continued financial strength and stability.

They are based on the 2023 year-end Tier-1 capital of banks globally and remain the primary source for global bank financials used by most international organisations in their assessments of banks.

Tier-1 Capital describes capital adequacy, the core measure of a bank’s financial strength from a regulator’s perspective. According to the ranking, Tier-1 Capital, as defined by the latest Bank for International Settlements (BIS) guidelines, includes loss-absorbing capital, i.e., common stock, disclosed reserves, retained earnings, and minority interests in the equity of subsidiaries that are less than wholly owned. A strong Tier-1 capital ratio boosts investor and depositor confidence, indicating the Bank is well-capitalised and financially stable.

Commenting on this achievement, the Group Managing Director/CEO of Zenith Bank Plc, Dame (Dr.) Adaora Umeoji, OON, said, “We are deeply honoured to be recognised as the Number One Bank in Nigeria by Tier-1 Capital for the fifteenth consecutive year.

“This recognition is a testament to our strategic focus on sustainable growth, innovation, and customer satisfaction. It also emphasises our resilience and strength in navigating the ever-evolving financial landscape.

“Our dedicated team of professionals has remained steadfast in ensuring that we maintain our position at the forefront of the banking industry.” She extended her profound and sincere appreciation to the Founder and Chairman, Dr. Jim Ovia, CFR, whose visionary and transformative leadership has played a pivotal role in cultivating a resilient and thriving establishment.

“She also expressed her deep appreciation for the board’s insightful governance, the staff’s relentless dedication, and the unwavering loyalty of the bank’s esteemed customers to the Zenith brand.

Zenith Bank’s financial performance for the year was driven by a remarkable triple-digit growth of 125% in gross earnings, from N945.6 billion reported in 2022 to N2.132 trillion in 2023.

This growth led to an improved market share in both the retail and corporate segments despite a persistently challenging macroeconomic environment. The increase in gross earnings was primarily due to growth in interest and non-interest income. Interest income growth was attributed to the increase in the size of risk assets and their effective repricing, while non-interest income was driven by significant trading gains and gains from the revaluation of foreign currencies.

Zenith Bank recently commenced recapitalisation efforts with the conclusion of its Capital Markets Day held on 11th July 2024. It aims to raise the least amount of capital amongst its peers at N230 billion, considering it already maintains a robust capital base of N270.7 billion.

The Bank remains dedicated to supporting the growth of the Nigerian economy and providing its numerous customers with innovative and efficient banking solutions.

Zenith Bank’s track record of excellent performance has continued to earn the brand numerous awards, with these latest accolades coming on the heels of several recognitions. These include being recognised as the Number One Bank in Nigeria by Tier-1 Capital for the fourteenth consecutive year in the 2023 Top 1000 World Banks Ranking, published by The Banker Magazine.

The Bank was also awarded the Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards for 2020 and 2022; and Most Sustainable Bank, Nigeria in the International Banker 2024 Banking Awards.

Further recognitions include Best Bank in Nigeria for three consecutive years from 2020 to 2022 in the Global Finance World’s Best Banks Awards and Best Commercial Bank, Nigeria for three consecutive years from 2021 to 2023 in the World Finance Banking Awards.

Additionally, Zenith Bank has been acknowledged as the Best Corporate Governance Bank, Nigeria, in the World Finance Corporate Governance Awards for 2022 and 2023, and ‘Best in Corporate Governance’ Financial Services’ Africa for four consecutive years from 2020 to 2023 by the Ethical Boardroom.

The Bank’s commitment to excellence saw it being named the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands for 2020 and 2021, and Retail Bank of the Year for three consecutive years from 2020 to 2022 at the BusinessDay Banks and Other Financial Institutions (BAFI) Awards.

The Bank also received the accolades of Most Sustainable Bank, Nigeria, in the International Banker 2023 Banking Awards, Best Commercial Bank, Nigeria and Best Innovation in Retail Banking, Nigeria, in the International Banker 2022 Banking Awards.

Zenith Bank was named Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Bank of the Year 2021 by Champion Newspaper, Bank of the Year 2022 by New Telegraph Newspaper, and Most Responsible Organisation in Africa 2021 by SERAS Awards.

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