FCMB Q4'15 Conference Call & Earnings Presentation: The key takeaways


Thursday, March 31, 2016 5:22 PM / Research

The macro-economic challenges remain daunting; with corresponding strict industry regulations. The new policy by Federal Government on full implementation of Treasury Single Account played a significant role on the liquidity challenges within industry. However, the reduction in harmonized CRR on private and public sector deposit to 20% from 25% for ease of liquidity challenges.

There are strong indications that microeconomic challenges that influenced business outlook in 2015 financial year is likely to persist in 2016. The low oil price, FX scarcity and market volatility would continue to adversely impacts business.

As a result of growing challenges and stiff regulatory environment in the financial year, FCMB Plc delivered mixed and unimpressive performance outlook- the bottom-line experienced a significant plunge despite modest growth in its revenue base.

The PBT plunged by 67.6% to close at N7.76billion against N23.94billion recorded in 2014 FY. The sustained growth in impairment charges coupled with increase in cost of funds and weakness in non-interest income stream depressed the bottom-line significantly, which had translated to decline of 79% in both ROE and ROA respectively.

Also, we observed a significant surge in NPL ratio from 3.6% to 4.2%, representing 14.5% growth in non-performing loans of the bank, despite 4.6% and 4.0% decline in both deposit and loan-book growth respectively. This reveals an impressive posture of risk assets and risk management posture of the bank

In addition, the operating efficiency and cost management plunged further as CIR shoot up to close bloated at 74.8% while LDR at 84.7% further suggests liquidity pressure in the books of the bank.

Summarily, below are the key takeaways from the 12Months earnings presentation as presented by the management of the bank;

         Scarcity of FX remains one of the key challenges that impacted performance

         Growing cost of funds and huge impairment charges impacted bottom-line adversely

         TSA policy increased pressure on deposit base and loan book growth

         Profitability was adversely impacted by two significant defaulting obligators

·         63% of deposit base is made of low cost fund

         Retail lending moved up to 38%, remains key driver of loan book performance

         The bank is refocusing on SME lending with a target loan growth of N10billion

         Aggressive loan recovery is on-going, the bank is actively on target to achieve N6billion loan recovery

         A challenging macroeconomics environment drives weakness in loan book

         Exposure in challenged sectors would be proactively managed

         State bail-out impacts decline in loan-loss expenses by 17.2%


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