FCMB Group Plc H1 2017 Conference Call & Earnings Presentation - The Key Takeaways


Tuesday, August 01, 2017 4:35PM / Proshare Markets

FCMB Group Plc held its H1’17 Investors and Analyst Conference Call Earnings Presentation. Proshare NG participated along with leading market analysts and professionals.

The bank stated that improvement in interest income and fees and commission was dampened by high interest cost regime, high non-earning assets in CRR, drop in FX income as well as lower than expected recoveries while increase in CRR despite reduction in deposits continues to reduce liquidity as well as earnings capacity. The bank’s liquidity ratio stands at 30.1% in Q2 2017 from 31.9% in Q1 2017.

However, continued automation investments and cost optimization by the bank led to a 5% QoQ reduction in OPEX while improvement was recorded in the bank’s investment banking arm  particularly brokerage and asset management businesses as capital market activities picked up slightly during the quarter.

All group entities were profitable in 2Q17, except, Microfinance bank which is expected to be profitable at full year. Banking group saw 77% PBT decline YoY while income analysis revealed that QoQ decline in earnings caused decline in other income as higher yields on earning assets were doused by rising cost of funds.

Key performance indicators of the bank showed that Capital improved marginally, cost of risk remained flat, however, profitability ratios declined while liquidity was tight, albeit above regulatory minimum. Loans declined marginally by 1% QoQ while increase in CRR in spite of drop in customers deposits suggests technical “excess” in cash reserve of N23bn.

The bank recorded 7.6% decline in deposits due to Personal Banking fixed deposits moving to treasury bills and improved foreign exchange liquidity.

In a nutshell, below are the key takeaways from the H1 2017 earnings presentation made by the bank’s management;

  • The bank plans to maintain cautious loan growth strategy with modest reduction in loan book as the year progresses and also maintain prudent provision levels to ensure adequate coverage ratio for nonperforming loans as well as challenged sectors.
  • The bank’s cost of risk is estimated at about 3% for the year.
  • Commercial and Retail Banking activities will remain key determinant of group performance.
  • The banks expects OPEX to reduce marginally in subsequent quarters; and
  • Improved performance expected from non-bank subsidiaries as economy/ capital markets activities pick up, and microfinance and asset management initiatives unfold.

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