FCMB Group: Stronger performance in loans, deposit drive total assets
By Kayode Tokede
FCMB Group plc recorded stronger performance in loans & advances to customer and deposit that impacted positively on total assets.
The group’s performance for half year ended June 30, 2021 is coming on the heels of macro-economy challenges that eroded company’s profits and assets.
Amid these challenges, the financial institution was able to grow loans & advances and deposits from customers by 11.4per cent and 6.5per cent respectively.
As at June 30, 2021, the group’s loans & advances moved to N916.7billion from N822.8billion reported in 2020FY, while deposits from customers also moved from N1.26billion in 2020FY to N1.34trillion as at June 30, 2021.
The Increase in deposits was driven by sustained focus on retail banking, as Low-cost deposits now account for 76per cent of total deposits.
The bank’s low-cost deposits remained flat Quarter-on-Quarter (QoQ) and grew 14per cent Year-on-year (YoY), while Retail (Personal and SME Banking) deposits now constitutes about 88per cent of total deposits grew seven per cent QoQ and 20per cent YoY.
According to the bank, “Personal Banking contributed 52 per cent (a 19 per cent QoQ growth), as we remain on course with our strategy of using innovation and technology to increase retail transactions.
“The segment has a strong deposit base with a stable liability mix, which continues to position the business for sustainable growth and profitability.
“We have also seen the growing acceptance of our innovative propositions, designed with a “Customer First” approach and digital agility.
“We will continue to use product innovation and technology to grow transaction volumes, improve cost efficiencies and enhance customer experience.”
However, the interplay between the Holdings’s loans & advances and deposit thrust the group total assets to N2.24 trillion, an increase of nine per cent from N2.06trillion recorded in full year ended December 31, 2020.
Growth in QoQ performance profit,FCMB Holding’s overall second quarter (Q2 2021) performance, thus, improved QoQ but dipped YoY. The YoY dip is as a result of lower net interest margins, reduced trading income and dip in foreign exchange income. However, fees & commission income, and loan recovery improved YoY.
Earnings analysis showed that Gross earnings of N94.2 billion for the H1 2021, a four per cent decline from N98.2 billion for the same period prior year. Gross earnings performance in QoQ performance gained 18.2 per cent to N51.04billion in Q2 2021 from N43.22billion reported in Q1 2021.
Interest income also dropped by 4.6per cent to N72.67 billion in H1 2021 from N76.15billion in H1 2020 but closed Q2 2021 at N39.6billion, 20 per cent increase when compared with N33.03billion reported in Q1 2021.
Also, interest expenses dropped by 3.6 per cent to N29.67billion in H1 2021 from N30.77billion in H1 2020. The Group, thus reported 51.4 per cent increase in interest expenses on its QoQ performance to N17.87billion in Q2 2021 from N11.81billion reported in Q1 2021.
Consequently, Net interest income dropped by 5.2 per cent to B42.99billion in H1 2021 from N45.38billion reported in H1 2020. The decline in net income was due to decline on net revenue from funds as a result of increased cost of funds.
However, non-interest income grew by two per cent to N17.87 in H1 2021 from N17.52billion reported in H1 2020. On a flip side, non interest income in QoQ performance rose by 19 per cent to N9.7billion in Q2 2021 from N8.16billion reported in Q1 2021.
The breakdown of net fees & commissions revealed that for the half year period under review rose by 34 per cent to N17.87billion from N17.52billion period in the prior half year while trading income dropped by 33 per cent to N2.63billion in H1 2021 from N3.93billion reported in H1 2020.
Foreign exchange income also dropped by 59.7 per cent to N1.33billion in H1 2021 from N3.3billion reported in H1 2020 as other non-interest income rose significantly by 61.2 per cent to N971million in H1 2021 from N603million reported in H1 2020.
The group’s operating income dropped by 3.2 per cent to N60.87billion in H1 2021 from N62.89billion reported in H1 2020.
Also from the profit & loss figures, FCMB reported 8.9 per cent increase in operating expenses to N47.95billion in H1 2021 from N44.05billion reported in H1 2020.
Increase in operating expenses of FCMB Holdings was driven by regulatory costs and general inflationary pressures. Regulatory costs NDIC & AMCON grew by 24 per cent and accounted for 18per cent if OPEX in H1 2021. Technology cost grew by 36 per cent and accounted for eight per cent of OPEX in H1 2021.
Impairment charges also increased by 24 per cent QoQ but dropped by 48 per cent to N4.01billion in H1 2021 from N7.74billion reported in H1 2020.
Profit Before Tax dropped by 19.5 per cent in H1 2021 from N11.07billion reported in H1 2021 while QoQ performance showed that Profit Before Tax gained 11 per cent to N4.69billion in Q2 2021 from N4.23billion reported in Q1 2021.
Profit After T ax also dropped by 22.2 per cent to N7.6billion in H1 2021 from N9.7billion reported in H1 2020. The profit had gained 711.6 per cent QoQ to N3.98billion from N3.57billion reported in Q1 2021.
The Managing Director, FCMB Ltd, Mrs. Yemisi Edun in a presentation to investors/analysts said the bank’s 2021 Retail and SME banking priorities is to improve the digitisation of products and services across payments, remittances, customer acquisition, consumer and SME lending.
She said, “Maintain positive trend in electronic fees and commissions for revenue diversification; Leverage data to improve the quality and quantity of digital credit origination in Consumer and SME and Leverage our digital competencies to increase customer acquisition, CASA and digital adoption.”
The lender reported digital payment’s revenue of N6.7billion – represents 11per cent of gross earnings and 51per cent of gross Fees & Commissions.
According to her, “Mobile, cards and alternate channels payments are driving the strong retail digital revenues and will continue to see traction. We see a lot of market opportunities from our Merchant Solutions and Web Payments, as we replicate the retail side’s success to our SME, commercial and corporate customers.”
The Executive Director, FCMB Group Plc, Mr. Femi Badeji while highlighting the Corporate & Investment Banking (CIB): roadmap to Recovery disclosed that, “Focus and deepen our presence in high growth sectors that offer better margins e.g. technology and healthcare and Increase cross-sell opportunities and transaction banking activity to boost Non-Interest Income
Others are increase NIM by increasing low-cost deposits using tech enabled solutions to support client collections and value chain finance and strategically increase loan volume growth.
Chief Executive Officer: FCMB Asset Management Ltd, Mr. James Ilori in his presentation said, “We forecast a 37% year-on-year increase in the Group’s full year AUM, to N677 billion. This includes the expected year-end AUM for AIICO;
“Contribution to AUM from Collective Investment Schemes and Wealth Management should account for 21per cent of total year-end AUM, down from 26per cent at the end of 2020, reflecting the impact of consolidation of AIICO’s AUM under our Pensions business line; Full year PBT is projected to increase by 17per cent, to N2.37 billion, with our Pensions business contributing 63per cent of the total. The estimated N1 billion annual PBT impact from the AIICO acquisition will start to reflect from next year.
“We plan to increase collaborations with external parties and will make equity investments, where they align with our inorganic growth strategy.”
On outlook, Group Chief Executive – FCMB Group Plc, Mr. Ladi Balogun said, the group is expecting a stronger and more sustainable performance in H2, driven by, “NIMs to improve in H2 supported by acquisition of over 400,000 customers, low cost deposit growth, loan growth in SME and personal banking.
