The Big Bucks of FCMB
How FCBM’s profits hit highest level in recent time , a 56% increase from the previous year , on interest income, fees others
When First City Monument Bank, FCMB ,hit approximately N21billion as its profit after tax at the end of 2021 financial year , some analysts predicted that the bank would soon hit another profitability milestone as it did in 2014 . Although some pessimists had thought it was a joke, those who could read the handwriting on the wall had seen the glimpses of the impending milestone and were unperturbed ; the signals had remained palpable in the last few years within this bank which has the vision of attaining the status of a first tier financial services group. FCMB is used to creating milestones . In 2021 , it had once registered another milestone. According to Proshare, “the leader in Nigeria’s digital market space as of December 2021 was FCMB .
It is with this level of expectations that investors and ,indeed , the financial world waited to see FCMBs full year result for 2022 . The bank did not disappoint as it delivered big bucks .
At the end of the financial year 2022, to their surprise as well as to that of investors and market watchers, the bank surpassed that performance by a healthy N10 billion in the last financial year ending December 2022.
It is the strongest profit improvement since 2018 and the first time it has beaten its existing net profit peak in the recent time . FCMB has not seen such phenomenal growth in a decade and much has to do with the bank’s application of technology, analyst, Proshare revealed.
FCMB rallied all resources to hit net profit of N32.6 billion on the back of healthy earning assets, fast rising fees and commissions. In all, the bottom line reflects a sustained upswing in revenue and some slowdown in costs through the year.
On the Bank’s topline, Gross earnings led the upswing, growing 33 percent to N281.75 billion from N212 billion in the period. This set the tone for other growth factors, especially interest income. Interest income or the earnings from interest based assets including loans and advances marched upwards by 34.5 percent to N217.99 billion from N162 billion in the period under review. This is as the eroding power of interest expenses took a fierce leap of 37.2 percent to N97.58 billion from N71.12 billion. Thankfully, the adventure of interest expenses was in percentage terms not in absolute figures, thus buoying net interest income to N120.4 billion from N90 billion achieved the year before.
The bank took extra care to rev up its loans portfolio to achieve the above results, as the item jumped by 12.3 percent to N1.194 trillion from N1.064 trillion achieved in the previous financial year. The bank dished out more only because its deposits base rose by 26 percent to N1.94 trillion from N1.54 trillion. In doing that, it minimized its credit risk with loans deposit ratio dropping to 61.4 percent from 68.9 percent. So, compared to the previous year, the bank garnered more deposits, gave out more loans and improved its credit risks with one wave of the hand.
Also helping to put the pedal on the bank’s revenue are rising fees and commission income as well as other revenues; fees and commission income were up by 23.7 percent to N44 billion from N35.6 billion. This is as the corresponding expenses were also rising but at a much faster pace to N10 billion from a measly N1.3 billion. The net effect is the 18 percent jump of fees and commission income to N34 billion from N28.7 billion.
Following the upwards rise in all income variables was also net trading income that traced up a movement of 37 percent to N12.84 billion from N9.4 billion.If anything, the result established the bank’s ability to lift revenue from non-core areas. It also demonstrated this in the nurturing of other revenues by a 72.3 percent improvement to N5.9 billion from N3.4 billion.
Give this demonstrated ability of the bank to earn from core and non-core areas did not leave the bank unwary of the potentially adverse effects of rising costs on the bottom line. That it could push up its results from operating activities is a pointer to that as the line item jumped by 63.6 percent to N37.1 billion from N22.62 billion.
Rising operating results pushed up the contribution of efficiency in operations by 13.2 percent compared to 10.67 percent achieved in the previous financial year. There was a concomitant effect of better operating results to pretax results as the item kicked by 63.3 percent to N37.1 billion from N22.62 billion to underline a decent management of long term financial obligations. As a result, pretax profit margin was lifted to 13.6 percent from 10.71 percent.
The above ultimately led to a net profit of N32.6 billion, which is 56 percent better than the N20.9 billion achieved earlier thus taking net profit margin higher to 11.57 percent from 9.86 percent.
The bank seemed to be going for the home run as noticed from the in the third quarter when the bank hit Gross revenue of ₦200.1 billion which was a 33.9% growth from ₦149.5 billion for the same period prior year. That performance was driven by a 33.1% growth in interest income and a 36.1% growth in non-interest income.
Net interest income grew by 42.3% from ₦65.4 billion, for the first nine months of 2021, to ₦93.1 billion in 9M 2022. The bank disclosed that it was driven by a growth in the yield on earning assets from 10.6% to 10.9% which led to an increase in NIM from 6.9% to 7.1%.
“As a proportion of gross earnings, FCMB had the best outcome for 2021, with digital banking income representing 12.31% of its total revenues. The proportion was 250 basis points above FBNH, which saw a ratio of digital revenue to gross earnings of 9.84% (in 9months 2021). UBA pulls behind FBNH at 9.78%. FBNH, which seemed to have slipped from the tier 1 ranking based on a revised calculation for tier 1 status, still pulled strength in the digital warrior league table”.
This mirrors what the bank said last September of its tech enabled performance: We continue to leverage our unique group structure to build a technology driven ecosystem that is fostering inclusive and sustainable growth in the communities we serve. This strategy is enabling us to deliver robust performance in spite of the challenging domestic and global environment, and barring unforeseen circumstances, we believe this performance trend will continue.
Indeed, analysts have recommended FCMB, among other mid-level lenders, as one of the banks to yield solid returns to shareholders because it has“shown the desire to expand their operations and cement their stronghold of the retail market segment of the banking industry”.
Mr. Joshua Odebisi, the SSA Banks Research Analyst at Vetiva Capital Management Limited, said that banks like FCMB have the potential to give more value to shareholders.