FCMB cuts 2016 loan growth, look outside for opportunities

FCMB has revised down its guidance for loan growth this year to 5 percent from 9 percent as it tries improving the quality of its loan book and refrain from riskier assets, its chief executive said.

The mid-tier lender said recently it will shift its focus to better managing the loan book rather than growing aggressively, after 2015 pre-tax profit fell 68 percent, Ladi Balogun told an analysts’ call.

Its pre-tax profit of 7.77 billion naira ($39.08 million), down from 23.94 billion naira a year earlier, followed a profit warning FCMB issued last month citing Nigeria’s tough economic environment.

“We are not going to drive our corporate banking aggressively this year we are holding back to improve the quality of our book,” said Balogun, adding that the bank had tightened its risk criteria.

Balogun, whose tenor as CEO expires next year, said he expected corporate loans to be flat this year as the bank focuses on fee income and price reviews instead to boost its revenues.

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The bank expects growth in its retail business to account for around 50 percent of revenues driven through low-cost deposits and transaction fees, while it will close about 23 branches this year to cut costs by around 5 billion naira.

It also plans to expand in at least two African countries as the plunge in oil prices reduces opportunities and income for banks.

“We have identified a key market in East Africa and another key market in West Africa,” Chief Financial Officer Patrick Iyamabo said in an interview at the company’s headquarters in Lagos, declining to identify the nations as the information is confidential. “While Nigeria is having trying times, the other markets can be doing great.”

The expansion, which is planned over the next three to five years, will enable FCMB to “smooth revenue and profit volatility,” he said. With a return on equity that compares or exceeds what you have in Nigeria, “greater value can be created for shareholders,” Iyamabo said.