Tuesday, March 28, 2017/6:36 PM/FBNQuest Research
Event: FCMB Group reports Q4 2016 results
Implications: Neutral reaction expected from the market
Positives: Positive surprise on provisions; other comprehensive income grew by 132% y/y to N2.6bn
Negatives: Profit before provisions fell -10% y/y and surprised negatively
This afternoon, The NSE published FCMB Holdings’ (FCMB) Q4 2016 results which showed that PBT of N2.1bn declined by -60% y/y.
Despite the double-digit y/y decline in PBT, PAT came in flattish y/y, thanks to a 132% y/y growth in other comprehensive income to N2.6bn.
The key drivers behind the marked y/y decline in PBT were a -52% y/y reduction in non-interest income to N2.9bn and, to a lesser extent, loan loss provisions of N1.0bn (this compared with a write-back of N254m in Q4 2015).
As for funding income, it grew by 7% y/y. As such, the -52% y/y reduction in non-interest income proved significant and led to pre-provision profits declining by -10% y/y. Sequentially, both PBT and PAT showed marked improvements over the pre-tax and after tax losses of –N2.1bn and –N2.6bn that the bank delivered in Q3 2016.
Compared with our forecasts, both PBT and PAT came in significantly ahead of our forecasts.
On a full year basis, both PBT and PAT grew markedly, by 109% y/y and 165% y/y to N16.3bn and N18.5bn respectively. The strong y/y growth was underpinned by an 85% y/y growth in non-interest income to N47.7bn.
Although funding income also contributed, its growth was limited to 9%. The full year PBT and PAT were also higher than our forecasts, by 24% and 46% respectively. FCMB’s results imply an ROAE of 10.8%, much higher than the 4.3% that it delivered in 2015.
The bank has proposed a dividend per share of N0.10, which is flat y/y and precisely what we had modelled. The proposed dividend implies a yield of 8.0%.
FCMB’s 2016 PBT of N16.3bn is in broadly in line with 2016 PBT forecast of N16.2bn. As such, we expect to see a broadly neutral reaction from the market.
FCMB shares have outperformed the market year to date. They have gained 13.6% ytd compared with a -5.5% return on the All Share Index.
FCMB Group Q4 2016 results: actual vs. FBNQuest Research estimates (N millions)
1. FCMB Declares N14.34 bn Profit in 2016 Audited Results, (SP:N0.87k)
2. FCMB Group Announces Leadership Changes; Ladi Balogun to Emerge Group CEO
3. FCMB Group Records 168% Growth in Non-Interest Income in Q3'16 Results Due to FX Gains
4. FCMB Declares N12.98 bn Profit in Q3'16 Results, (SP:N1.05k)
5. FCMB Group Loan Loss Provisions Spike by 506 YoY to N10bn in Q2 16
6. FCMB Declares N15.67bn Profit in Q2 16 Result SP N1.41k
7. FCMB Plc - Elevated Provisioning Underpins a Difficult Start to 2016
8. FCMB Funding Income Grows by 13 QoQ in Q1 16 Results
9. FCMB Declares N1.65bn Profit in Q1’16 Result, (SP:1.02k)
10. FCMB is Upgraded to Neutral after Marked Sell-off
11. FCMB Q4'15 Conference Call & Earnings Presentation: The key takeaways
12. FCMB shares have shed -53% YTD, worse than the -11% return on NSEASI