Interest, Non-interest Income Drive FCMB Group’s PAT

Kayode Tokede

The FCMB Group’s unaudited interim financial statements for period ended September 30, 2022 showed a further pace in profit growth, hitting an all-time profit after tax high N22.9 billion as against N13.8billion reported in the corresponding period.  

The bank’s closing profit at the end of the nine months of 2022 is already ahead of the full-year profit of less than N21 billion in 2021. It represents a top record growth of 66 per cent year-on-year from N13.8 billion in the same period last year to register the biggest profit for FCMB in its post-consolidated history.

The marked improvement in the bottom line remains the strongest the bank has seen since its profit tripled to N14.3 billion as far back as 2016. It also beats the existing net profit peak of N22.1 billion the bank registered as far back as 2014.

The bank’s galloping profit growth reflects an upswing in gross earnings and a slowdown in  operating costs.

The group’s gross earnings have maintained a major upswing from 6.9 per cent growth at the end of 2021 to an almost 34 per cent increase to N200 billion at the end of the nine months of 2022 from N149.47billion reported in nine months of 2021.

 This was driven by a 33.1per cent growth in interest income and a 36.1per cent growth in non-interest income.

Earnings growth drivers for the year are other revenue – which is recovering from a 50 per cent drop last year and fee and commission income which is maintaining a strong upturn for the second year.

Other gross earnings multiplied more than 20 times to N1.9 billion, recovering from a loss position of N641 million at the half year. Also, fee and commission income expanded by 35 per cent to N34.6 billion over the review period.

Interest earnings – the main gross earnings line of the bank maintained a strong growth at 33 per cent year-on-year to N154 billion in nine months of 2022 from N115.75billion reported in nine months of 2021. 

This remains the strongest improvement in interest income for FCMB since 2013, breaking out from a seven per cent increase at the end of the preceding financial year.

Net trading income lost its lead in revenue growth at half year but retained a strong growth record for the second year at 29.5 per cent to N8.6 billion over the period.

The bank stepped up cost savings in the third quarter, which reinforced revenue gains and stretched out profit margin further. The cost of funds slowed down from 28 per cent growth at half a year to 21 per cent to stand at N61 billion at the end of the third quarter. This afforded the bank a wider margin compared to the 33 per cent increase in interest earnings.

The improved margin reinforced net interest income, which stepped up from a 40 per cent increase at half year to over 42 per cent growth year-on-year to close at N93 billion at the end of the third quarter. This represents an increase of close to N28 billion in net interest income over the review period.

Net interest income for the nine months of the year has already exceeded the full-year figure of about N91 billion in 2021.

Cost saving from operating expenses was maintained in the nine months of 2022, which stepped down from a 19 per  cent increase year-on-year at half-year to 18 per cent to N86 billion at the end of the third quarter.

That lowered the claim of operating cost on revenue from 49 per cent in the same period last year and from 45 per cent at the end of June to 43 per cent at the end of September 2022.

The challenge for the bank remains loan impairment expenses that have already surpassed the full-year numbers over the past four years.

Net impairment losses on financial assets swelled from N10.7 billion at half a year to N18.7 billion at the end of the nine months of 2022. This is an upsurge of 292.5 per cent year-on-year, accelerating from a 168 per cent increase at half a year and already ahead of the full-year figure of N15 billion in 2021.

FCMB Group strengthened its position where gross earnings its growing and costs are slowing, which improved net profit margin from 10.8 per cent at half year and from 9.2 per cent in the same period last year to 11.4 per cent at the end of the third quarter. This remains the highest profit margin the bank has seen since 2015.

The bank ended the nine months of operations with earnings per share of N1.16, improving from 70 kobo per share in the same period last year. It earned N1.05 per share at the end of 2021 and paid a cash dividend of 20 kobo per share.

Financial position

The group reported N1.2trillion loans and advances to customers as of September 30, 2022, representing an increase of 22.5 per cent from N967.5billion in 2021 financial year, while Customer deposits grew by 25.3per cent from N1.5 trillion in 2021 to N1.8 trillion in September 2022

It brings the group’s total assets to N2.9trillion in September 2022 from N2.4trillion. Assets Under Management grew by 48.2per cent from N510 billion to N756 billion in September 2022

Achievements

The bank in the period under review said it acquired over 1.2 million customers, taking its customer base to 10.4 million customers. FCMB Capital Markets raised and advised on investments totaling N599.8 billion in the first nine months of months of 2022, compared to N463.9 billion in nine months of 2021. This delivered an 88per cent growth in fees from capital raising and financial advisory services over the period.

According to the management, “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.