April 5, 2018/Cordros Capital
FCMB Group Plc released its FY-2017 financial statement, showing decline in top and bottom line performance in the full year. Gross Earnings declined by 3.66% to NGN169.88 billion (in line with our expectation), while pre-tax and post-tax profits were lower by 29.47% and 34.38% at NGN11.46 billion and NGN9.41 billion respectively. Compared to Bloomberg’s polled estimates, PBT was 10.03% higher than expected, while PAT was short by 12.71%.
Net interest income inched higher by 1.43% to NGN70.53 billion, with interest expense (+11.26%) reporting a faster growth than interest income (+5.79%) during the year. Interest earned on cash and cash equivalents were higher by 17.86%, while interest income via investments in government and corporate securities grew by 7.29% to NGN24.70 billion.
NIM was 20 bps lower at 8.30%, following a 4 bps decrease in asset yield to 15.20%, and a 75 bps upturn in cost of funds to 7.15%.
NIR also came lower by 32.73% to NGN32.12 billion, owing to 57.82% and 51.94% drop in net trading income and other income respectively, despite a 14.40% increase in net fees and commission income. The decline in trading income was largely driven by the significant decrease in forex trading income by 79.51% to NGN28.26 billion, muting the growths recorded in the gains from treasury bills (+81.21% to NGN1.23 billion) and options and equities (NGN28.26 billion gain in 2017, from NGN2.81 billion loss in 2016) trading.
Despite decrease in total loans and advances to customers by 1.84% to NGN647.80 billion, the NPL to total loan ratio was 116 bps higher at 4.90%. However, cost of risk was 145 bps lower at 3.61%, against 5.06% in the previous year.
Total opex increased by 4.51% during the period, while the cost-to-income ratio surged to 67%, against 56.08% in the previous year.
Tax charge was 7.33% higher at NGN2.05 billion, while the effective tax rate rose 614 bps to 17.90%, from 11.76% in the previous year.
A dividend of 10 kobo was proposed for the full year (2016: 10 kobo), translating to a yield of 4.20%.
FCMB, however, posted better performance in the final quarter.Gross Earnings (+23.62% q/q, +43.49% y/y)posted the strongest growth among the other quarters in the year, at NGN51.07 billion – 17.10% higher than our expectations.
Growth in interest income (+6.36% q/q, +13.20% y/y), coupled with a decline in interest expense (-6.42% q/q, -0.52% y/y), buoyed the rise in net interest income (+18.49% q/q, +26.24% y/y).
The NIR (+129.66% q/q, +355.58% y/y) also reported significant growth, as growths in net trading income (+82.36% q/q, -86.82%) and other income (+782.32%, -244.32%), muted the decline in net fee and commission income (-0.99% q/q, +28.23% y/y).
Provision for impairment charges during the period was the highest among the other quarters at NGN10.02 billion – a 273.54% and 877.02% surge from the previous quarter and the same period last year, respectively.
PBT (+68.01% q/q, +130.65% y/y) and PAT (+79.95% q/q, +202.30% y/y) also posted significant growths during the quarter.
While noting the impressive Q4 result, we do not expect positive reaction to the 2017FY numbers, wherein the bank’s performance broadly lagged the previous year’s.
FCMB GROUP PLC FY:2017 FY:2016 YoY Growth Q4 2017 Q4 2016 Q4 q/q % Q4 y/y %
GROSS EARNINGS 169,882 176,330 -3.66% 51,066 35,589 23.62% 43.49%
Interest income 132,357 125,109 5.79% 36,080 31,873 6.36% 13.20%
Interest expense (61,832) (55,576) 11.26% (15,457) (15,537) -6.42% -0.52%
Net interest income 70,525 69,533 1.43% 20,623 16,336 18.49% 26.24%
Fee and commission income 21,630 17,683 22.32% 6,081 4,309 -0.05% 41.12%
fee and commission expense (5,408) (3,502) 54.41% (1,597) (812) 2.67% 96.62%
Net fee and commission income 16,222 14,181 14.40% 4,484 3,497 -0.99% 28.23%
Net trading income 2,399 5,687 -57.82% 673 5,105 82.36% -86.82%
Other income 13,384 27,851 -51.94% 8,223 (5,698) 782.32% -244.32%
Fair value gain on financial instruments 112 22 408.60% 9 35 100.00% -74.60%
Non-interest income 32,117 47,741 -32.73% 13,389 2,939 129.66% 355.58%
Total Operating Income 102,643 117,274 -12.48% 34,013 19,275 46.38% 76.46%
Loan impairment charges (22,668) (35,522) -36.19% (10,015) (1,025) 273.54% 877.02%
Personnel expenses (23,432) (24,804) -5.53% (6,712) (6,102) 28.88% 10.00%
General and administrative expenses (26,071) (25,654) 1.63% (6,993) (6,983) 2.47% 0.15%
Depreciation and amortization (5,260) (4,474) 17.56% (1,349) (1,160) 3.51% 16.27%
Other operating expenses (13,976) (10,841) 28.92% (4,382) (2,202) 2.86% 99.00%
Total Operating Expenses (68,739) (65,773) 4.51% (19,436) (16,447) 10.46% 18.18%
Share of profit/(loss) of equity accounted investee 227 273 -16.91% 227 273 -310.05% -16.91%
Profit before Income tax 11,462 6,252 -29.47% 4,788 2,076 68.01% 130.65%
Income tax expense -2,052 -1,912 7.33% -680 -717 19.96% -5.13%
Profit after Tax 9,410 14,340 -34.38% 4,108 1,359 79.95% 202.30%
RATIOS FY:2017 FY:2016
Current Price 2.38 1.25
EPS 0.475 0.72
P/E 5.01 1.73
P/BVPS 0.25 0.14
Cost to income 67.00% 56.08%
Assets Yield 15.20% 15.29%
Cost of Funds 7.15% 6.40%
NIM 8.30% 8.50%
Cost of Risk 3.61% 5.06%
LTD Ratio 93.33% 100.35%
ROE 4.98% 8.02%
ROA 0.79% 1.22%
NPL Ratio 4.90% 3.74%
Liquidity Ratio 36.60% 31.21%
Earnings yield 19.96% 57.93%
Dividend Paid (Ngn) 0.10 0.10
Dividend Yield 4.20% 8.00%
CAR 16.90% 16.54%
