FCMB forecloses capital raise in 2018
By Odunewu Segun
Group Chief Executive Officer of the FCMB Group, Ladi Balogun has foreclosed any form of capital raise for the group this year, noting that the bank intends to manage its capital by keeping its dividend payout conservative.
The group in its financial results for the year ended December 31, 2017, reporting a gross revenue of N169.9 billion. Going by the audited results, the Group recorded a profit before tax (PBT) of N11.5billion, while profit after tax (PAT) was N9.4billion.
The deposits grew to N689.9billion as at the end of December 2017, an increase of 5%, from N657.6billion in the corresponding year.
The Group’s capital adequacy ratio also improved to 16.9% from 16.7%, just as asset base increased to N1.19trillion, compared to N1.17trillion at the end of 2016. Non-interest income as at the end of 2017 was N32billion, while loans and advances stood at N649.8billion.
Speaking on the results, Balogun stated that the bank intends to maintain a relatively flat loan book this year, and also push more into the retail end, while expecting repayment of upstream oil and gas loans.
“The Net Interest Margin (NIM) on oil and gas loans is quite low because the cost of funding the dollar balance sheet required has become increasingly high.”
He said FCMB will also focus on agribusiness and manufacturing. “The large margins from FX sales to retail customers have since evaporated since the spreads have thinned. The bank, however, anticipates an increase in trading income from SME and corporate customers. In addition, the bank will be more active in the local currency fixed income trading space as naira liquidity grows.
Speaking on the Bank’s exposure to the troubled Etisalat, Balogun stated that FCMB took a 50% provision on its loan to 9Mobile amounting to N2.3 billion. “The bank expects the Non-Performing Loan (NPL) ratio to remain in the 5% range, as it expects some write-offs to be made in the course of the year.”
“FCMB expects a double-digit growth in fees and commissions, with significant growth in wealth management. Asset and wealth management divisions will continue to make significant contributions going forward. The two divisions have a Return on Equity (ROE) target for next year.”
He stated that FCMB intends to accelerate the growth of its market share by leveraging on the bank’s network. It has also taken cost control measures, some of which took effect in the first quarter of 2018. It has set a 30-40% growth in Return on Equity (ROE) for this arm.
GCEO Balogun stated that the bank does not see a need to raise capital within the year. The bank intends to manage its capital by keeping its dividend payout conservative. FCMB paid a dividend of N0.10 for the 2017 financial year, same as the previous year.
FCMB which paid a dividend of N0.10 for the 2017 financial year, same as the previous year is currently seeking a UK retail license.
He said while FCMB UK may not contribute much to the bottom line now, it does give the parent access to a diversified funding base. “FCMB UK will have a single digit Return on Equity (ROE) for the next few years, but this will grow going forward,” Balogun said.