FCMB Group Plc accelerated further, its galloping pace of profit growth in the third quarter, hitting an all-time net profit high of almost N23 billion in the nine months of the 2022 financial year.
The bank’s interim financial report at the end of September 2022 shows that after-tax profit keeps accelerating from N5.2 billion in the first quarter to N8.5 billion in the second, and further, to N9.2 billion in the third.
The bank’s closing profit at the end of the third quarter is already ahead of the full-year profit of less than N21 billion in 2021. It represents a top record growth of 66 percent year-on-year from N13.8 billion in the same period last year to register the biggest profit for FCMB in its post-consolidated history.
The marked improvement in the bottom line remains the strongest the bank has seen since its profit tripled to N14.3 billion as far back as 2016. It also beats the existing net profit peak of N22.1 billion the bank registered as far back as 2014.
The bank’s galloping profit growth reflects an upswing in revenue and a slowdown in costs. Gross earnings have maintained a major upswing from 6.9 percent growth at the end of 2021 to an almost 34 percent increase year-on-year to N200 billion at the end of the third quarter. This is the highest revenue growth rate for the bank at any time since 2013.
Earnings growth drivers for the year are other revenue – which is recovering from a 50 percent drop last year and fee and commission income which is maintaining a strong upturn for the second year. Other revenue multiplied more than 20 times to N1.9 billion, recovering from a loss position of N641 million at the half year. Also, fee and commission income expanded by 35 percent to N34.6 billion over the review period.
Interest earnings – the main revenue line of the bank maintained a strong growth at 33 percent year-on-year to N154 billion at the end of the third quarter. This remains the strongest improvement in interest income for FCMB since 2013, breaking out from a 7 percent increase at the end of the preceding financial year.
Net trading income lost its lead in revenue growth at half year but retained a strong growth record for the second year at 29.5 percent to N8.6 billion over the period.
The bank stepped up cost savings in the third quarter, which reinforced revenue gains and stretched out profit margin further. The cost of funds slowed down from 28 percent growth at half a year to 21 percent to stand at N61 billion at the end of the third quarter. This afforded the bank a wider margin compared to the 33 percent increase in interest earnings.
The improved margin reinforced net interest income, which stepped up from a 40 per cent increase at half year to over 42 percent growth year-on-year to close at N93 billion at the end of the third quarter. This represents an increase of close to N28 billion in net interest income over the review period.
Net interest income for the nine months of the year has already exceeded the full-year figure of about N91 billion in 2021.
Cost saving from operating expenses was maintained in the third quarter, which stepped down from a 19 percent increase year-on-year at half-year to 18 percent to N86 billion at the end of the third quarter. That lowered the claim of operating cost on revenue from 49 percent in the same period last year and from 45 percent at the end of June to 43 percent at the end of September 2022.
The challenge for the bank remains loan impairment expenses that have already surpassed the full-year numbers over the past four years. Net impairment losses on financial assets swelled from N10.7 billion at half a year to N18.7 billion at the end of the third quarter. This is an upsurge of 292.5 percent year-on-year, accelerating from a 168 percent increase at half a year and already ahead of the full-year figure of N15 billion in 2021.
FCMB strengthened its position where revenue is growing and costs are slowing, which improved net profit margin from 10.8 percent at half year and from 9.2 percent in the same period last year to 11.4 percent at the end of the third quarter. This remains the highest profit margin the bank has seen since 2015.
The bank ended the nine months of operations with earnings per share of N1.16, improving from 70 kobo per share in the same period last year. It earned N1.05 per share at the end of 2021 and paid a cash dividend of 20 kobo per share.
The behaviour of the cost of funds and loan loss expenses remain critical factors for the bank in the final quarter.
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