FCMB Group Plc achieved an accelerated growth in earnings in the second quarter during which a foreign exchange gain of roughly N51 billion quickened further the high speed growth with which it began the financial year in the first quarter.
The huge inflow powered an outstanding growth of 88.7 per cent in gross earnings to over N238 billion and after tax profit soared two and half times to close in excess of N35 billion at half year.
However major challenges arising from soaring cost of funds and surging loan losses have remained. Without the foreign exchange gain, the cost incursions from the two expense lines could have worked a slowdown on the bottom line.
The bank’s unaudited accounts for the half year ended June 2023 show that a much stronger year is in the making for FCMB in earnings performance than the impressive leap of 56 per cent in profit to the region of N33 billion at the end of 2022.
Therefore, with the profit figure for the half year operations, the bank has already beaten its full year profit figure in 2022. The second quarter produced more than N26 billion or about 74 per cent of the closing profit figure at half year.
Profit growth sped up from 85 per cent to N9.3 billion in the first quarter to 159 per cent at half year.
Pressure from rapidly rising interest expenses poses a challenge, as the bank’s management is paying a lot more to generate the naira of interest income than in the preceding financial year. Cost of funds rose twice as fast as interest earnings at half year to the detriment of margins.
At N149 billion at the end of half year operations in June 2023, interest income grew by close to 51 per cent year-on-year. Over the same period, interest expenses rose by over 102 per cent to N76.7 billion.
The cost-income imbalance jerked up the average interest expense for generating the naira of interest income from less than 39 kobo to over 51 kobo during the review period.
A good part of the increase in interest income was therefore claimed by interest expenses, which limited the increase in net interest income at 20 per cent to N72 billion at half year. The margin is nevertheless an improvement from 12.7 per cent increase in net interest income to N31.7 billion at the end of the first quarter.
The second line of operating pressure from the side of cost for the bank came from net loan loss expenses, which multiplied more than four times from N10.7 billion to N47 billion over the review period.
The loan impairment charges are already approaching twice the N25 billion figure the bank recorded for the entire 2022 financial year.
The loan losses poured in in the second quarter to swell up the net loan loss expenses of N5 billion at the end of the first quarter operations.
Overwriting the cost incursions from interest and loan loss charges is an exceptional growth in other revenue, which was driven by the foreign exchange gain to rebound from another loss of about N641 million in the same period last year to stand in excess of N52 billion at the end of June 2023.
The huge inflow spurred an accelerated growth in gross earnings from a 50 per cent leap to N87.4 billion in the first quarter to the high jump by 88.7 per cent at half year. The bank has grown gross earnings by 33 per cent to N282 billion at the end of 2022.
The bank’s management made some cost savings from operating expenses, which moderated at an increase of 23.6 per cent at half year to close at N70.6 billion.
Operating cost margin went down from 45.2 per cent in the same period last year to 29.6 per cent at the end of June 2023. The cost saving and the robust growth in revenue combined to tide the bank over the pressure from rising cost lines and yet stretched out the profit margin.
There was a strong improvement in net profit margin from 10.8 per cent in the same period in 2022 to 14.9 per cent at the end of June 2023.
FCMB closed the half year operations with earnings per share of N3.58, advancing from N1.38 per share in the same period last year.
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