FCMB Group: Impressive performance amid macroeconomic challenges
By Kayode Tokede
FCMB Group plc audited result and accounts for financial year ended December 31, 2020 showed impressive performance amid numerous macroeconomic challenges that faced the banking sector last year.
The management in the period under review grew gross earnings and non-core banking operations to drive profitability and returns to shareholders.
Despite the low yield environment, during the period, the Group was able to improve on its interest and discount income that impacted positively on Net Interest Income.
With double-digit growth in profit, the management of FCMB Group proposed a dividend of N0.25 per share for every 50 kobo ordinary share, payable to shareholders.
The management of FCMB Group had paid shareholders N0.14 per share for every 50 kobo ordinary share in its 2019 result and accounts.
The Group’s audited results for the period under review shows a stable performance in balance sheets position as customer deposits and gross loans advance by 33 per cent and 15 per cent respectively, to drive total assets to N2.06trillion in 2020 from N1.67 trillion reported in 2019.
The solid financial performance for the period ended December 31, 2019 affirms FCMB Group’s as one of the leading banks in terms of profits, resilience and consistency in achieving its strategic objectives despite the challenging business environment.
The 2020 result and accounts revealed a number of positive performance as the management continued to create value for shareholders and transform businesses.
Increase in non-core banking operations drive profit
FCMB Group for the period under review reported 10 per cent increase in gross earnings to N199.4billion in 2020 from N181.2billion in 2019.
The Group’s interest income also increased by about 10 per cent to N151.02billion in 2020 from N137 billion reported in 2019.
Our correspondent gathered that gain in interest income was primarily driven by increasing interest generated from loans and advances from customers to N105.63billion in 2020, a 12.2 per cent increase over N94.17billion reported in 2019 and 15 per cent gain in investment securities at FVOCI to N20.72billion in 2020 as against N18.04billion reported in 2019.
FCMB group interest expense thus, dropped by 1.9 per cent to N60.3 billion in 2020 from N61.47billion in 2019, attributable to lower expenses on borrowing interest to N28.27billion in 2020 as against N38.5billion reported in 2019.
Continuing the trend during the year, Net interest Income was stronger in 2020, gaining 20 per cent to N76billion in 2020 from N75.98billion in 2019
In the period under review, the group’s fee and commission income moved from N6.9billion in 2019 to N30.16billion in 2020 while fee and commission expenses closed 2020 at N10.61billion from N9billion reported in 2019.
Consequently, net fee and commission income closed 2020 at N19.56billion, below N20.72billion reported in 2019.
The group in 2020 reported N10.54billion in non-core banking operation, 158.6per cent increase over N4.01billion reported in 2019.
Our correspondent gathered that N10.54billion income from foreign exchange gains in 2020 from N4.1billion reported in 2019 drive non-core banking operating in the year under review. Foreign currency evaluation gain represents gains realized from the revaluation of foreign currency-denominated assets and liabilities held in the non-trading books.
The group reported N22.3billion impairment losses on financial instruments in 2020 as against N13.75billion reported in 2019.
On the cost side, Operating expenses rose 10per cent year-on-year to N84.3 billion for the full year 2020 from N76.9billion reported for the full year 2019.
The breakdown of operating Expenses (Opex) showed personnel expenses dropping by 0.29 per cent to N29.5billion in 2020 from N29.6 billion in 2019, while Depreciation and amortization expenses rose by 12.8 per cent to N7.5billion in 2020 from N6.7billion in 2019.
In addition to OPEX, the group reported N30.48billion general and administrative expenses in 2020 from N31.89billion reported in 2019 while other operating expenses rose significantly by 93 per cent to N16.78billion in 2020 from N8.69billion in 2019.
Consequent on the muted Opex growth relative to operating income growth, cost-to-income ratio settled lower at 65.6 per cent in 2020 from 69.4per cent relative to 70.7per cent in the prior year.
Notwithstanding the challenging business environment in Nigeria, the group’s Profit Before Tax was impressive at N21.9 billion in 2020, 8.84 per cent increase over N20.13 billion in 2019.
Furthermore, the Profit After Tax rose by 13.1 per cent to N19.61billion in 2020 from N17.34 billion in 2019.
Impressive performance in profits drove Earnings Per Share(EPS) to N0.98 in 2020 from N0.87 in 2019.
Stronger total assets amid CBN lending policy
The Group closed the year with 23 per cent increase in total assets to N2.06 trillion in 2020 from N1.67trillion reported in 2019 (N1.43 trillion in 2018) following a impressive performance in gross loans and advances to customers and customers deposits.
The Central Bank of Nigeria (CBN) had mandated commercial banks to lend 65 per cent of the deposit to support real sectors of the economy and FCMB Group last year did a loans and advances that grew by 15per cent Year-on-Year and four per cent Quarter-on-Quarter to N822.8 billion in 2020 from N715.88billion reported in 2019
FCMB Group’s customer deposits rose by 33per cent Year-on-Year to N1.25 trillion in 2020 from N943.08billion reported in 2019.
This reflects increased customer confidence, enhanced customer experience, early wins from the ongoing business transformation programme and the deepening of its retail banking franchise.
Furthermore, FCMB Group’s Total equity moved from N200.67billion in 2019 to N227.12billion reported in 2019 while assets under management grew by 23per cent to N95.2 billion in 2020.
The financial institution continued to maintain a disciplined and prudent approach to loan growth in line with its Risk Management framework.
Conclusion
Despite the macro-economic challenges, alongside CBN’s monetary tightening policy which constrained most banks’ income generation and resulting in high cost of funds within the financial system, FCMB Group has outperformed beyond general expectation.
The financial institution’s prospect last year was to drive for low cost and appropriately mixed deposit base to fund credit and money market transactions.
At 17.7 per cent, Capital Adequacy Ratio (CAR) has increased and is above regulatory threshold of 15 per cent.
The management of FCMB group plans to accelerate the digital transformation of personal and business banking which will improve scale, profitability and customer experience.
In response to the twin challenges of a global pandemic and a sustained drop in oil prices, the financial institution has developed a comprehensive response to keep employees and customers safe, business going and support those affected by this pandemic.
Also, the management plans to alter its working practices in the longer term to reduce its carbon footprint and improve employee satisfaction through remote working.
