FCMB: A Grip On Retail Banking | Independent Newspapers Limited
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FCMB: A Grip On Retail Banking

Posted: May 6, 2015 at 12:35 am   /   by   /   comments (0)

By Andy Nssien


The FCMB Group Plc financial report for the period  ended December, 2014 indicated  that  total assets grew by 16 per cent  to N1.2 trillion; deposits, by 3 per cent to N734 billion; and loans to customers, by 37 per cent  to about N618 billion. The expansion in the Group’s  business was reflected in the underlying financial performance.  Net interest income rose by 26 per cent  to about N73 billion,  profit before tax  increased by 32 per cent from N18.2 billion to N23.9 billion, while profit after tax grew by a similar ratio from N16.0 billion to N22.1 billion.

The gale of achievements was not only limited  to the Group as it swept through its operating subsidiaries  during the year. The pre-tax profit of First City Monument Bank Limited rose 26 per cent to N22.5 billion, whilst those of FCMB Capital Markets Limited shot up by 142 per cent to N1.0 billion, reflecting an exceptional surge in advisory fees. CSL Stockbrokers Limited continued to gain market share and grew its pre-tax profits by 85 per cent to N307.7 million, and CSL Trustees Limited, in its

first year under the Group, delivered pre-tax profits of N54.2 million.

In 2014, CSLS was ranked in second position, with 10 per cent of the value of shares traded on the NSE, as against a third position and 6 per cent recorded in 2013. Furthermore, the value of trades CSLS executed on the NSE increased by 92 per cent from N137 billion (US$ 721 million) in 2013 to N263 billion (US$ 1.38 billion) in 2014. This growth outperformed the 30 per cent growth in the entire market, where the value of traded shares increased from N2.07 trillion (US$ 10.9 billion) in 2013 to N2.69 trillion (US$ 14.2 billion) in 2014.

The special emphasis on retail banking as a major source of profitability and funding for the business,  seems to have paid off. First City Monument Bank Limited continued to expand its retail banking business, winning 481,643 new customers, to bring its total to over 2.7 million, and increasing the amount of its retail loans by N95.3bn.  The Retail banking arm of the group made a profit before tax  of N4.1 billion, representing 18 per cent of total profit. Retail deposits increased by 14 per cent year-on-year  to N166 billion, representing 22 per cent of deposits, while retail loans increased 32 per cent year-on year to N126 billion, representing 20 per cent of total credits. This impacted on  the  net interest margin which rose to 9.14  per cent in 2014.

In spite of the enhanced  interest income which rose  by 14 per cent to N117.9 billion in 2014, this advantage was offset by high interest expense. While interest expense on deposits from banks reduced from N3.6 billion to N342 million in 2014, the cost of borrowing rose by 327 per cent to N6.4 billion in 2014 from N1.5 billion in 2013.

The Group’s Net profit margin which rose  to 18. 7 per cent from 15 per cent in 2013 was not sustained into the first quarter results announced recently.  According to the  activities of the Group for the first three months of the year ended March 2015, net profit margin dropped to 13 per cent, while return on average equity fell by 2.1 per cent year-on-year.

However, capital adequacy ratio rose to 21.7 per cent from 19.1 per cent recorded in the  first quarter 2014. Liquidity ratio was  41.0 per cent rise from 33.3 per cent, just as loan to deposit ratio  increased to  76.6 per cent from 71.8 per cent for first quarter 2014. Also, cost to income ratio fell to 68.1 per cent from 69.4 per cent, while earnings per share  increased to 107k from 97k in the first quarter 2014.

The above ratios  were extracted from profit before tax  of N5.8 billion for the first quarter 2015, up 4 per cent from N5.6 billion for the corresponding period in 2014.

Net interest income of N18.1 billion, for the three months ended March 2015,was an increase of 8 per cent year-on-year (YoY), from N16.7 billion for the same period prior year.

Also, non-interest income of N6.16 billion, for the first quarter 2015, indicated an increase of 9 per cent YoY from N5.63 billion, for the first quarter 2014.

However, the Group needs to clip down on operating expenses which went up by  6 per cent YoY to N16.5 billion, for the three months ended March 2015, from N15.5 billion for the same period prior year.

Commercial and Retail Banking Group activities got a boost of a 15 per cent YoY growth in revenues, though profit after tax grew by a modest 4 per cent YoY. This was partly due to a decline in non-interest income, as a result of further reduction in the Group’s maximum COT rate to 0.1 per cent, low government revenues which affected risk asset growth, as well as a generally slow pre-election period.

The business environment in the first quarter was subdued by the political activities and a degree of un-certainties which have largely cleared-out.   Now that the coast is clear, shareholders and other stakeholders are  eagerly awaiting to see an improved performance of the Group, after plugging the avenue of huge operating expenses and with the Group engaging more in lending than borrowing.