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FCMB GROUP PLC FY'16 - Impressive earlier quarters boost y/y performance

​Impressive earlier quarters boost y/y performance
FCMB released its FY’16 performance, reporting a 16% y/y growth in Gross Earnings and an over 200% y/y rise in PAT (supported by low base of FY’15). Whilst we highlight the modest bottom line recovery in Q4’16 (PAT: ₦1.4 billion) following the ₦2.7 billion loss recorded in Q3’16, we note that Q4’16 Gross Earnings came in significantly weaker (down 32% q/q) – pressured by a dismal Non-Interest Income of ₦2.9 billion vs. Q3’16: ₦18.8 billion and Vetiva estimate: ₦17.2 billion. Consequently, despite the 16% y/y rise in Gross Earnings to ₦176.4 billion, the figure lagged our ₦188.5 billion estimate by 6%. However, following consistent cost cutting strategies and improvement in deposit mix, Interest and Operating Expense both moderated y/y to closely track our estimates.

We note that save for marked deviations in Non-Interest Income and Loan Loss Provision, FCMB’s result came well in line with estimate. We estimate a mild 5% loan growth for FY’17 – pressured by credit risk environment as well as the weak deposit accretion (FY’16: deposit down 5% y/y and loan to deposit ratio at 100%). Consequently, we estimate a marginal rise in CoF amidst tight competition. Whilst we estimate a modest 4% y/y rise in Interest Income, we foresee notable normalization in Non-Interest Income due to our expectation of a more stable exchange rate environment. Also, we estimate a loan loss provision of ₦25.8 billion for FY’17 – translating to a CoR of 3.8%. Overall, we forecast a PAT of ₦15.6 billion for FY’17– translating to an EPS of ₦0.79. FCMB trades at an FY’17 P/E and P/B of 1.6x and 0.1x respectively.