First City Monument Bank Plc broke free from three year profit slowdown up till 2021 and registered the highest profit improvement in six years at the end of its half-year operations in June 2022.
The bank’s interim report for the first half of the year shows 81 percent after-tax profit advances year-on-year to N13.7 billion for the period.
This marks the strongest improvement in the bottom line of the bank since its profit tripled to N14.3 billion as far back as 2016. The half-year growth rate beats another top record profit rebound of 73 per cent to almost N15 billion in 2018 from a 40 per cent drop in 2017.
Since 2019, FCMB has seen a sustained slowdown in net profit growth from roughly 16 per cent in the year to 12.5 per cent in 2020 and further to 6.6 per cent to close at N20.7 billion in 2021.
The rebound in profit in the first half of the current financial year reflects largely a similar upswing in revenue. Gross earnings had not improved beyond a single digit since 2017 with a slowdown from 9.4 percent in 2020 to 6.9 percent to close at N212 billion in 2021.
The hhalf-year position shows a towering growth of 34 per cent in gross earnings for FCMB year-on-year to close the six months of trading at over N126 billion. The bank is experiencing the fastest revenue growth since 2013.
Leading the upturn in revenue so far is net trading income that grew by 132 per cent year-on-year to N6 billion, accelerating for the second year from 31 per cent increase at the end of the 2021 financial year.
This is followed by interest earnings – the main revenue line that expanded by 35 per cent year-on-year to N98 billion. This is the strongest improvement in interest income for FCMB since 2013, breaking out from 7 per cent increase at the end of the preceding financial year.
Net fee and commission income maintained a strong growth record at 31 per cent to N17 billion over the period though this is a slowdown from an outstanding growth of 47 per cent in 2021.
The bank added cost savings to revenue gains and succeeded in stretching out profit margin. Its management was able to contain generally rising cost of funds – which grew at a slower pace of 27.8 per cent to about N38 billion than the 35 percent growth in interest earnings.
The cost saving reinforced net interest income, which advanced by 40 per cent year-on-year to close at over N60 billion at half year. This represents a gain of more than N17 billion in net interest income over the review period. This is also a break out performance from the last year’s position when net interest earnings closed flat at about N91 billion.
Further cost saving was extracted from operating expenses, which grew at a moderated rate of 19 per cent to N57 billion at half year. That lowered the claim of operating cost on revenue from 51 per cent in the same period last year to 45 per cent at the end of June 2022.
Cost saving however could not be made from loan impairment expenses as the bank did in the preceding financial year. Net impairment losses on financial assets surged up by 168 per cent year-on-year to N10.7 billion after dropping by 28 per cent to N15 billion at the end of 2021.
The other weak point for the bank is a major downswing from other revenue of N1.9 billion to other losses of nearly N641 million over the review period.
Overall, FCMB grew revenue more than costs increased, which raised profit margin from 8 per cent in the same period in 2021 to 10.8 per cent at half year 2022. This is the highest profit margin the bank has seen since 2015.
The bank ended the first six months of operations with earnings per share of 69 kobo, improving from 38 kobo per share in the same period last year.
The outlook for the second half underscores cost of funds and loan loss expenses as critical determinants of whether or not the bank would sustain the elevated earnings growth momentum to full year.
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