FCMB Group Maintains Neutral Rating in Q4 2020 and Q1 2021 Results Review

Proshare

Friday, May 07, 2021 / 09:03 AM / By FBNQuest Research / Header Image Credit: FCMB

 

16% cut to our price target due to +150bp adjustment to risk-free rate

FCMB's Q1 '21 PBT of NGN4.2bn was in line with our forecast. However, PAT missed by a wide margin because of a negative result of -NGN1.6bn in other comprehensive income (OCI). On its conference call, management was optimistic of an improved earnings performance in FY '21 compared with FY '20. However, it did not provide specific guidance on key metrics. Going forward, we expect earnings to benefit from improved asset yields and double-digit loan growth (of c.12%).

 

Regardless, we have cut our FY '21f EPS forecast by 5% because of the negative result in OCI. However, our new price target of N3.27 is about -16% lower because we have increased our risk-free rate by 150bps to 12.5% to reflect the rise in government bond yields. Although the acquisition of AIICO pensions which should be concluded later this year will contribute modestly to FY '21 earnings, the contribution will be tempered by one-off restructuring charges (of an undisclosed amount) related to the acquisition. Beyond 2021, the acquisition could add another N270m to Group PBT. With respect to asset quality, we are encouraged to see that FCMB's NPL ratio declined by 10bps q/q to 3.2%. Also, its provision coverage ratio (including regulatory risk reserves) remains healthy at c.179%.

 

However, with a CAR (including transition arrangement) of 16.5%, the bank's capital buffers are precipitously close to the regulatory minimum of 15%. Its liquidity buffers are also under pressure at c.33.5% (vs. 30% regulatory minimum). Following our earnings revisions, we now expect FCMB to deliver PBT of NGN22bn, or flattish growth y/y. Having shed -12.9% ytd vs -2.9% for the NSE ASI, FCMB shares are trading on a '21f P/B multiple of 0.2x for 9.1% ROAE in '22f. These represent a considerable discount of c.60% to the 0.6x multiple for 14.3% ROAE that our universe of banks stocks is trading on. Our new price target of NGN3.27 implies a potential upside of c.13% from current levels. Nevertheless, we keep our Neutral rating on the shares because of the bank's weak capital and liquidity buffers.

 

Q1 '21 and Q4 '20 PBT down by -22% y/y and -17% y/y respectively

Pre-provision profit declined -7% y/y, driven by reductions of -8% y/y and -5% y/y in funding and non-interest income respectively. Following the y/y reduction in revenues, PBT fell -22% y/y to NGN4.2bn. PAT after other comprehensive income (OCI) fell by a wider margin of -59% y/y to NGN2.0bn, because of a negative result of -NGN1.6bn in OCI vs +N106m in Q1 '20. In Q4 '20, PBT fell -17% y/y to NGN6.1bn because of increases of 52% y/y and 33% y/y in loan loss provisions and opex respectively. Below the tax line, the decline in PAT narrowed to -4% y/y, thanks to a positive result of NGN6.9bn.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Related News

  1. FCMB's Priceless Gift of Sight: Over 300,000 Nigerians with Eye Defects Benefit
  2. Shareholders Applaud FCMB, Approve Dividend of N2.97bn at AGM
  3. FCMB Declares N19.6bn PAT in 2020 Audited Results, Proposes 15K Final Dividend; (SP:N2.98k)
  4. FCMB Introduces Paperless and Cardless Transactions at Branches, ATMs and POS Terminals
  5. Peter Obaseki Retires as Chief Operating Officer of FCMB Group Plc
  6. FCMB Approves 2020 Results and Payment of Final Dividend, Awaits Regulatory Approval
  7. FCMB Appoints Yemisi Edun as Acting MD; Adam Nuru Proceeds on Leave
  8. FCMB Issues Official Statement on Media Stories Regarding Its Managing Director
  9. FCMB Notifies of Dealing in 20m Volume of Shares by Primrose Investments Ltd
  10. FCMB: Solving Problems and Delivering Value in A Recession
  11. FCMB Notifies of Dealing in 0.4m Volume of Shares by Balogun Olasubomi
  12. FCMB Deepens Financial Inclusion, Opens Ultra-Modern Cash Centre At Ikorodu, Lagos
  13. FCMB Suspends Issuance of Commercial Papers
  14. FCMB Notifies of Issuance of Commercial Paper
  15. FCMB Group Q3 2020 Results Review: ROAE Still Hovering Around 10%
  16. FCMB Declares N13.9bn PAT in Q3 2020 Results, (SP:N3.01k)
  17. FCMB Notifies of Board Meeting Date
  18. FCMB wins "Best SME Bank in Africa" Award
  19. Banks in H1 2020: Deconstructing Banks' H1 2020 Individual Performances - FCMB
  20. FCMB Notifies of Delay in Filing of Q3 2020 Results
  21. FCMB Forum: Stakeholders Believe Nigeria Can Leverage Agritech To Achieve Competitiveness
  22. FCMB Clarifies Position on N573 Million Transfer
  23. FCMB Group Q2 2020 Results Review: Valuation at a Sizable Discount to Sector

Proshare Nigeria Pvt. Ltd.

 

 

READ MORE:
Related News
SCROLL TO TOP