First City Monument Bank’s [FCMB] profit slowdown in the second quarter extended into a
decline in the third quarter. It was expected at the end of half-year that profit performance
would weaken in the second half. This has happened more than envisaged – which has changed
the full-year outlook for the bank from moderate profit improvement to a likely drop.
decline in the third quarter. It was expected at the end of half-year that profit performance
would weaken in the second half. This has happened more than envisaged – which has changed
the full-year outlook for the bank from moderate profit improvement to a likely drop.
The bank’s profit growth records have followed random up and down turns since it returned to
profit in 2012. Last year was the upturn with a leap of 74 percent in profit, while the 2019
financial year is set for a downturn.
The bank’s management has been unable to grow revenue since 2016 and this has extended
into the 2019 financial year. A step up in gross earnings to 7 percent recorded at half year
slipped back to 2 percent at the end of the third quarter – the slowest quarterly growth rate so
far in the year. The expectation of seeing the best revenue growth record in three years is out
of the way for now.
Rising interest expenses continued to pose a challenge to the bank in the current financial year.
Compared to a decline last year, cost of funds has continued growing ahead of interest income
this year. This has slowed down the growth in net interest income from the improved record of
10 percent at half year to less than 6 percent at the end of the third quarter.
A major drop in loan impairment losses on risk assets is happening for FCMB for the second
year. It afforded the bank a big cost saving last year that powered the big profit lifting achieved
in 2018. The favourable development is being repeated so far in the current year with an
accelerated drop of 46 percent at the end of the third quarter.
Third-quarter operations ended with gross earnings of close to N136 billion for FCMB, a
slowdown from 7 percent growth year-on-year at half year to 2 percent at the end of the third
quarter. This is the slowest revenue growth rate on a quarterly basis so far this year.
The drawback came from non-interest income, which dropped by 9 percent at the end of
September 2019. The drop was driven by other income – which fell by 43 percent during the
period. Furthermore, interest income slowed down in the third quarter from over 9 percent
growth at half year to 6.7 percent.
Based on the slowdown in the third quarter, gross earnings outlook for the full year has
dimmed from a 7 percent improvement earlier indicated to flat. Gross income forecast is
revised from N190 billion to N181 billion for FCMB at the end of 2019. This would be a worse
growth record than the 4 percent increase the bank recorded last year.
Interest expenses grew by 8 percent year-on-year at the end of the third quarter, which is
ahead of the 6.7 percent improvement in interest income. That made fresh incursion into
interest income, which slowed down net interest earnings from almost 10 percent at the end of
June to 5.6 percent – amounting to over N56 billion at the end of September 2019.
Compared to the preceding years, it is nevertheless a strengthening of net interest income from
a marginal increase of 2.9 percent at the end of 2018. Net interest income was flat in 2017.
The bank’s loan recovery force gained speed in the third quarter, which lowered the growth of
net impairment loss on financial assets. Net loan loss expenses dropped by 46 percent to N7.85
billion at the end of the third quarter, accelerating from 25 percent drop at half year.
This is a continuing decline in credit losses for the bank for the third year running after
recording drops of 38 percent in 2018 and 36 percent in 2017. The prospects for recording the
lowest loan loss expense in many years remains in focus for FCMB for the 2019 financial year.
The bank closed the third quarter with an after tax profit of N10.79 billion, a decline of about 5
percent against a growth of 31 percent at half year. The decline follows the weakening of
revenue growth in the third quarter. The bank lost profit margin from 8.5 percent in the same
period last year and 8.4 percent at half year to 7.9 percent at the end of September 2019.
The profit outlook for the bank has moderated and the full year projection is revised from N16
billion to N13 billion for FCMB at the end of 2019. That will be a drop of 13 percent from the
net profit figure of close to N15 billion in 2018. FCMB has experienced alternating rise and fall
in profit performance for several years and this year so far is set for a downturn.
The bank earned 54 kobo per share at the end of the third quarter trading in 2019, down from
57 kobo per share in the same period last year. The full year expectation is 65 kobo per share
for FCMB in 2019.
It closed last year’s operations with earnings per share of 76 kobo and gave out a cash dividend
of 14 kobo per share to shareholders. Earnings and dividend per share remain well below their
2014 highs of N1.12 and 25 kobo respectively.
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