Wednesday, April 04, 2018 /3:49
Event: FCMB Group reports Q4 2017 results
Implications: Likely upward revisions to consensus 2018 estimates and positive reaction from the market
Positives: PBT grew by 123% y/y, driven by solid growth in non-interest and funding income
Negatives: Significant spike in loan loss provisions
This afternoon the NSE published FCMB Group’s (FCMB) Q4 2017 results which showed a remarkable growth of 123% y/y to N4.6bn. The marked growth in PBT was underpinned by a 76% y/y growth in pre-provision profit. The strong double-digit growth on this line completely offset a significant spike (+877% y/y) in loan loss provisions and an 18% y/y rise in opex.
Although both revenue lines contributed to the strong growth in pre-provision profits, non-interest income which grew by 356% y/y was the major driver. Funding income also advanced by 26% y/y. Moving below the P&L, the growth in PAT came in at 38% y/y because of a -40% y/y reduction in other comprehensive income (OCI). Sequentially, PBT grew by 53% q/q. Similar to the y/y trends, the strong q/q growth on both revenue lines was the key driver. However, thanks to a 7.0x increase in OCI, PAT grew much faster at 106% q/q.
Compared with our forecasts, PBT and PAT beat by 18% and 57% respectively, largely because of positive surprises in non-interest income and funding income. The strong results in OCI (for which we had no estimate) also amplified the extent of the positive surprise in PAT relative to our expectation.
On a full year basis, PBT and PAT declined by -30% y/y and -37% y/y respectively, mainly because of a decline in non-interest income. The bank has proposed a dividend of N0.10 per share, in line with our DPS forecast of N0.11 but slightly higher than consensus DPS forecast of N0.08. On it Q3 2017 conference call, management had stated that the spike in NPLs was mainly due to one name in the oil and gas services sector. On a y/y basis, the sector’s NPL grew by 2,141% to N5.1bn. We would expect this line to be a key focus for investors on the bank’s conference call which is slated to hold later this week.
FCMB’s Q4 2017 PBT also came in well ahead of consensus 2017 PBT forecast of N9.8bn. As such, we expect to see upward revisions to consensus PBT forecast and a positive reaction from the market.
FCMB shares have outperformed the index year-to-date. The shares have gained 51% ytd vs. the 7% ytd gain delivered by the index.
We rate the shares Underperform.
Our estimates are under review.
FCMB Group Q4 2017 results: actual vs. FBNQuest Capital Research estimates (N millions)
Source: NSE; FBNQuest Capital Estimates