First City Monument Bank [FCMB] got a critical earnings leap in the final quarter that averted a possible profit drop at the end of the year. The bank’s full-year management accounts show that it generated an after-tax profit of over N7 billion in the final quarter.
The final quarter profit accounted for 34 per cent of the full-year group profit of about N21 billion the bank has posted for the 2021 financial year. It is the saving grace for the bank that closed the third quarter with profit slightly down year-on-year at N13.8 billion.
This is in line with our outlook for the bank at the end of the third quarter operations that an upturn in the final quarter is critically needed if the bank is to close the year on the side of positive profit growth.
The bank’s management geared up on the earnings growth momentum in the second half and succeeded in leveling up a 22 per cent drop in profit at half a year and pushing up to a 6.5 per cent growth at full year. Close to 64 per cent of the year’s closing profit was generated in levelling half of the year.
The bank’s main challenge in 2021 was an unhealthy growth between interest income and expenses. The growth disparity heightened in the third quarter when interest expenses rose by close to 56 per cent quarter-on-quarter against an increase of about 20 per cent in interest income over the same period.
The imbalance narrowed down in the final quarter with interest earnings stepping up and interest expenses slowing down. Yet the disparity remained at the full year with interest expenses growing by 18 per cent to N71 billion while interest income improved by 7 per cent to N161.6 billion.
Nevertheless, the improvement in the final quarter propped up net interest income from a year-on-year decline of about 4 per cent at the end of the third quarter to close flat at N90.5 billion for the year.
Another major factor for the fourth quarter earnings boost came from other revenue, which advanced from less than N94 million at the end of the third quarter to over N3 billion at full year.
Other improvements on the side of revenue include an increase in fee and commission income and a drop in the attaching expenses. That led to top record growth of nearly 43 per cent in net fee and commission income to almost N28 billion at full year.
The bank also gained further strength from an outstanding growth of 174 per cent in other income, which amounted to N1.6 billion at the end of the year.
The revenue gains in the final quarter enabled the bank to step up gross earnings from an increase of 2 per cent at the end of the third quarter to 4.6 per cent to stand at N208.5 billion at the end of December 2021.
The bank’s management supported the gains on the side of revenue by keeping some major cost items of the bank down in the final quarter. It achieved the biggest cost saving from net impairment loss on financial assets, which dropped by 59.4 per cent to N9 billion at the end of the year.
This provided a good avenue for management to partly make up for the increased incursion of interest expenses on earnings in the year. The drop in loan impairment charges meant a reduction of as much as over N13 billion in the year.
A favourable pattern of transactions income and declining fee and commission expenses was reinforced in the final quarter. Fee and commission income extended its growth from 15 per cent at the end of the third quarter to 16.7 per cent at full year. Over the same period, fee and commission expenses extended the rate of decline from 26.5 per cent to 29.4 per cent.
The result is that net fee and commission income accelerated from 36 per cent growth at the end of September to roughly 43 per cent to stand at about N28 billion at the end of the year.
Through the extended revenue gains and cost savings in the final quarter, FCMB made much-needed progress in dealing with the challenges of revenue constraints and rising cost it faced in the financial year.
The positive changes made the difference in the bottom line from the flat position at the end of the third quarter to an increase of 6.5 per cent in after-tax profit to N20.9 billion at full year.
FCMB was therefore able to sustain its recovery journey that followed a huge profit drop of 78.5 per cent in 2015. The bank’s profit rebuilding trend has run for the fourth straight year to 2021. Its closing profit for the year however remains below the peak profit figure of over N22 billion registered as far back as 2014.
The bank earned N1.04 per share for the 2021 full-year operations, an improvement from 98 kobos per share in the preceding financial year.
Comments are closed.