FCMB UNDER LADI BALOGUN : TOO SMALL TO BE TIER 1, TOO COSTLY TO BE LOVED

Otunba Subomi Balogun wanted a bank that would outlive him and outrank everyone – a Tier 1 giant in size and in efficiency. Since 2007, his son appears to have done the opposite. Ten years as MD of the bank and later Group CEO of the holdings company to date, Ladi Balogun has grown FCMB from N262bn to N7.63trn in assets and N1.13trn in gross earnings, yet it is still too small to sit with Zenith, GTB and Access, all younger than it, and too costly to be loved by investors who now price Fidelity and Wema higher. Its performance between 2007 and 2025 and the first half of 2026 proves it beyond argument: a factory that raises expensive money, spends expensively to keep it, and provisions expensively when loans go bad – big on history, poor on industry and efficiency.

The price of its inability to live up to the expectations of its founder is palpable in the judgment of stock investors. At ₦11.10 and a ₦732-735bn market cap in late September 2026, FCMB looks formidable only on the surface, because its valuation tells the real story of a Tier 2 bank stuck in the middle. Trading at 2.6x-3.0x P/E and 0.65x P/B, it suffers a severe structural discount that even a 54% PAT surge in Q2 cannot erase, precisely because the market does not price earnings, it prices efficiency. Against FUGAZ at ₦35-₦85, P/E 3.5x-5.5x and P/B 0.8x-1.2x, FCMB is too small to command a liquidity and international balance sheet premium, with no offshore engine to defend its margin when rates turn and N1.19trn sitting dead as CRR. Against Tier 2 peers Fidelity, Sterling and Wema at ₦4-₦20, P/E 2.5x-4.5x and P/B 0.5x-0.9x, it is too costly to be loved, because its multiples are compressed into the same band but its factory is heavier, with cost-to-income near 87%, impairments of N81.7bn, and expensive bank funding of N1.01trn financing a loan book that flatlined at N2.36trn. So FUGAZ gets paid for scale, Tier 2 peers get paid for leanness, FCMB gets punished for both — asset-rich but capability-poor, earnings up but EPS diluted by endless recapitalization, trading below book not because it is cheap, but because investors know its growth does not compound.

 Its travail in the hands of stock investors may not be far-fetched. A company that would live up to the above expectations is expected to be led by a management with the power to think differently and possess what it takes to be a strategic entrepreneur, where foresight meets architecture. The world-class leader does not just chase opportunity; he builds advantage around it. With foresight, he sees the tipping point before the market — Steve Jobs seeing the phone as a computer, Bezos seeing retail as logistics and cloud, Jim Ovia and Segun Agbaje seeing banking not as branches but as a low-cost CASA factory and technology ecosystem. With strategic architecture, he designs the firm to own that future — Apple’s ecosystem and supply chain that makes the iPhone uncopyable, 3M’s 15% rule that industrializes intrapreneurship, Zenith and GTB building 10 million retail customers and 70% CASA, Access using Intercontinental not to buy assets but to buy capability and distribution. Then comes stretch and leverage: stretch to dream far bigger than resources, leverage to orchestrate scarce resources — brand, trust, customer data, partnerships, open innovation — to do more with less, so every new product, market or acquisition adds both size and efficiency, exploration feeding exploitation, innovation feeding defensibility, growth that compounds because the factory gets cheaper as it gets bigger.

The opposite is what happens when a company mistakes denominator management for strategy, as FCMB has done from 2007 to 2025 and H1 2026. Instead of strategic entrepreneurship, it practiced financial engineering to look bigger: raise N87bn premium in 2008, double share capital to N21.3bn by 2025, balloon share premium to N267.5bn, grow assets to N7.63trn and gross earnings to N1.13trn on paper, while the factory stayed broken. It bought scale without capability — Co-operative, Midas, Nigerian-American, FinBank — provisioning the distress instead of curing it, N81.7bn impairment in 2025 alone, N830bn off-balance sheet acceptances waiting to become NPLs. It replaced cheap CASA that fled after 2014 with expensive bank deposits N1.01trn and borrowings N509bn, trapped N1.19trn as CRR dead money, so size never translated to margin. It let personnel and G&A costs explode to N107bn and N135bn, cost-to-income 87% vs 37% for best peers, so record PAT N177bn in 2025 still produced EPS N3.99 lower than N4.48 in 2023. The consequence of no foresight, no architecture, no stretch and leverage is a loop: raise capital, grow loans, lose cheap deposits, impair, crash, recover slightly and repeat — too small to be Tier 1 because its expensive funding can’t exploit scale, too costly to be loved because its expensive operation can’t keep profit.

He perfected a very expensive skill. Getting bigger on historical benchmarking while getting poorer on the two yardsticks that truly test strategy, industry benchmarking and efficiency benchmarking.

On historical terms, Ladi grew the bank. That much is true. Assets moved from N262.8bn in April 2007 to N908bn in 2012 after FinBank, to N1.17trn in 2016 as Group, then N2.49trn in 2021, N3.78trn in 2022, N4.49trn in 2023, N7.05trn in 2024, and N7.63trn in 2025, up 206 percent since 2021 alone.

And with that size came the illusion of transformation. Customer deposits jumped from N1.55trn in 2021 to N1.95trn in 2022, N2.56trn in 2023, N4.30trn in 2024, N4.42trn in 2025, up 184 percent. Gross earnings exploded from N212bn in 2021 to N281bn in 2022, N490bn in 2023, N794bn in 2024, N1.13trn in 2025, up 434 percent. Net interest income followed, N125bn in 2021, N149bn in 2022, N200bn in 2023, N283bn in 2024, N505.9bn in 2025. PAT went from N20.9bn in 2021 to N32.6bn in 2022, N93bn in 2023, N73.3bn in 2024 after N17.6bn windfall tax, to N177.27bn in 2025 with N7.5bn windfall tax and N4.8bn minimum tax still inside, PBT N202.1bn in 2025 vs N34.4bn in 2021.

On paper, that is giant steps. In reality, that is merely historical benchmarking. You are better than your own past. It fails the two other tests that the market uses to price a bank.

First, it fails the industry yardstick. Every Tier 1 bank younger than FCMB, Zenith licensed 1990, GTB 1990, Access 1989, is now bigger than FCMB in every size metric that counts, assets, deposits, loans, equity, profit, and better valued.

How did FCMB try to get big? It raised N87bn fresh premium in 2008 taking share premium from N20.9bn in 2007 to N108.3bn in 2008, later to N267.5bn in 2025 after doubling share capital to N21.3bn in 2025 from N9.9bn in 2021, and equity to N835.4bn in 2025 from N239bn in 2021, with AT1 sustained at N46.6bn in 2024 and 2025. But that capital was used to look bigger, not to become cheaper.

It spent N10.8bn by 2009 buying Cooperative Development Bank, Midas Bank, Nigerian-American Bank, culminating in FinBank in 2012. It bought scale without capability. While Access used its 2012 Intercontinental acquisition to build a retail CASA factory and GTB used zero acquisitions to build 10 million retail customers and 70 percent CASA, FCMB stayed wholesale-funded and loan-heavy.

The consequence was immediate and structural. Customer deposits peaked at N733.7bn in 2014 and bled N76bn in two years to N657.6bn in 2016 as CASA fled to GTB and Zenith. It replaced cheap deposits with expensive money, borrowings from N26.9bn in 2012 to N132bn in 2016, interbank from N52m to N24.7bn.

And the same expensive funding addiction dominates the last five years. Deposits from banks spiking to N160bn in 2021, N385bn in 2022, N444bn in 2023, N719bn in 2024, N1.01trn in 2025. Borrowings N221bn in 2021, N260bn in 2022, N397bn in 2023, N617bn in 2024, N509bn in 2025. Debt securities N71bn in 2021, N68bn in 2022, N86bn in 2023, N136bn in 2024, N142bn in 2025, plus on-lending N116bn in 2021 to N153bn in 2025, total expensive funding N805bn combined in 2025. Customer deposits now fund only 58 percent of balance sheet in 2025 vs 62 percent in 2021, 53 percent in 2022, 57 percent in 2023, 61 percent in 2024. Restricted reserves, dead money at CBN, is N329bn in 2021, N444bn in 2022, N622bn in 2023, N584bn in 2024, N1.19trn in 2025.

This is why FCMB is never big enough to exploit size advantage. Because its funding is expensive, its size does not compound.

Second, it fails the efficiency yardstick, and the five-year cost and impairment line proves it. FCMB could originate loans but not manage them. PBT peaked at N18.4bn in April 2008, crashed 96 percent to N724m in Dec 2009. Rose to N18.5bn operating profit before provisions in 2011, then posted N11.35bn pre-tax loss and N9.9bn after-tax loss after N29bn to N32.5bn AMCON impairments, forcing a 3-for-20 bonus instead of cash dividend. Peaked again at N23.87bn PBT in 2014 with N22.06bn PAT, called perpetual profitability, then crashed 67 percent to N7.76bn PBT and N4.76bn PAT in 2015, EPS from N1.12 to N0.24. Between 2017-2021 at HoldCo PAT averaged only N3.4bn, N1.52bn, N3.55bn, N3.60bn, N3.06bn, N5.08bn. Even the best year 2021 was only 22 percent of 2014 peak.

In the last five years the same loop repeated at larger scale, only the numbers got bigger. Loans and advances to customers N1.06trn in 2021, N1.19trn in 2022, N1.84trn in 2023, N2.36trn in 2024, N2.36trn in 2025, flat in 2025 because impairments consumed growth. Net impairment on financial assets N9.2bn in 2021, N36.6bn in 2022, N57bn in 2023, N41.2bn in 2024, N81.7bn in 2025, double 2024 and higher than any year since FinBank acquisition, cumulative N71.9bn between 2016-2019 including N35.7bn in 2016 alone. Impairment allowance grew only 33 percent from N38.5bn to N51.4bn between 2019-2022 while loans grew 65 percent from N754bn to N1.24trn. NPL ratio improved from 4.3 percent in 2019 to 3.5 percent in 2020 not because of recovery but because of write-offs, H1 2020 impairment charges jumped 40.8 percent to N7.74bn. Other asset impairment N21.2bn in 2021 and N28.7bn in 2022, other assets at Company level N446bn in 2021 to N68bn in 2025 showing cleanup is possible but at Group level still heavy. Acceptances and guarantees, off-balance sheet that can become NPL, N281bn in 2021, N326bn in 2022, N507bn in 2023, N871bn in 2024, N830bn in 2025, almost tripled.

The Achilles heel from buying distressed banks was provisioned, not cured. And that provision culture now meets regulatory taxes that will test whether 2025 is a peak, N17.6bn windfall tax in 2024, N7.5bn in 2025, minimum tax N4.8bn, plus CRR at N1.19trn structural drag on liquidity.

Then cost killed what impairments left. Cost-to-income was 75.4 percent in Sept 2019, 71 percent in H1 2020, 87 percent per CBN vs best bank at 37.63 percent and worst at 86.29 percent, ROAE 5.8 percent in Sept 2019 vs double-digit peers.

In the five years, personnel expenses N34.7bn in 2021, N41.9bn in 2022, N59.3bn in 2023, N79.2bn in 2024, N107.1bn in 2025, up 35.2 percent in 2025 alone. General and administrative N36.9bn in 2021, N50.3bn in 2022, N66.7bn in 2023, N87.5bn in 2024, N135.3bn in 2025, up 54.6 percent. Net interest income more than doubled to N505.9bn in 2025 but was consumed before it reached the owner, which is why value was destroyed in transit from top-line to bottom-line even in 2019 when pre-tax margin fell 13.3 percent between June and September when interest income fell 1.9 percent while interest expense rose 1.4 percent and fee income fell 4.8 percent.

In 2025 interest expense is N145bn in 2021, N124bn in 2022, N207bn in 2023, N395bn in 2024, N499bn in 2025, up 26 percent despite high rates, and if rates reverse the N505bn net interest income will compress exposing non-interest income volatility, net trading income N44.2bn in 2021, N26bn in 2022, N86bn in 2023, N53.6bn in 2024, N37.7bn in 2025 down 29.7 percent, other gains N1.8bn in 2021, N23bn in 2022, N35.8bn in 2023, N39.5bn in 2024, minus N12.1bn in 2025 swing due to FX. Fee and commission income N45bn in 2021, N55bn in 2022, N62bn in 2023, N82bn in 2024, N111bn in 2025, growing but not enough to diversify. Asset utilization 14.8 percent in 2025, gross earnings N1.13trn on N7.63trn assets, same failure as 2014-2019 when assets grew to N1.62trn but gross earnings stuck at N171bn. Debt-to-equity went from 90.3 percent in 2014 to 141.4 percent in 2019 to 190.2 percent in June 2020.

That cost and impairment drag explains the market verdict, why efficiency matters more than size. Despite N177bn record PAT in 2025, EPS is N3.99 in 2025, lower than N4.48 in 2023 when PAT was only N93bn, and lower than N4.55 peak, because share capital doubled to N21.3bn in 2025 and share premium to N267.5bn through offers that diluted per-share return.

Dividend tells the same story. From 25k in 2014 to 10k 2015-2017, 14k 2018-2019, and even in record year payout is weak. ROE 9.1 percent vs industry 12.3 percent, ROA 1.0x vs 1.1x, P/E 2.4x vs 6.4x, P/B 0.2x vs 0.4x. Price fell 9.45 percent in a week Dec 2019, down 29 percent Sept 2018 to Sept 2019, down 57 percent by Feb 2016 to 89k, trading at 43 percent discount to book.

Today Fidelity, Stanbic IBTC, even Wema are better valued in absolute share price than FCMB, because investors do not price size, they price how cheaply you make and keep money. FCMB is road-heavy and factory-light, with branches, history, and subsidiaries in microfinance, investment banking, UK and fintech, but no industrial cluster that compounds, no low-cost CASA factory that stays, no blue-chip corporate franchise that pays recurring fees, no ruthless cost engine.

And that brings us back to governance, how the founder’s wish was aborted. The HoldCo Ladi designed in 2013 concentrated 89.7 percent of HoldCo assets in 2021 in one line, Investment in Subsidiaries at N127.3bn. The HoldCo does not create value, it waits. Other assets ballooned 947 percent from N748m in 2017 to N7.84bn in 2021, other liabilities exploded 360 percent to N7.5bn, cash swung from N19m in 2019 to N818m in 2020. That is classic founder-led HoldCo governance where the Bank is the only dividend engine and wealth management historically 24 percent ROAE vs 7.5 percent for commercial banking never became fee cluster.

Investment securities N370bn in 2021, N363bn in 2022, N822bn in 2023, N1.65trn in 2024, N2.03trn in 2025, up 447 percent since 2021, could have been optimized to replace risky loan growth, but was funded with expensive bank deposits. FCMB called itself digital because it launched an app, but credit still took 14 days and recovery was still a phone call. No business was killed, no focus forced.

So from 2007 to 2025 FCMB has run the same loop. Raise capital, grow loans fast, lose cheap deposits, book huge impairments, crash profit, recover slightly, and repeat. N177bn in 2025 changed nothing because the factory behind it is still broken.

Subomi’s wish was a bank that would outlive and outperform him in size and efficiency. His son passed the historical benchmarking test of growing assets from N262bn to N7.63trn, but failed the industry benchmarking test and the efficiency test. And in banking those two are the only ones that honour a father’s wish, leaving FCMB stuck in the middle, too small to be Tier 1, too costly to be loved like Tier 2, asset-rich, capability-poor, history-heavy, with giant steps that go nowhere, motion mistaken for progress.