FCMB GROUP PLC Q1'21 Earnings Release - Profits dip amid drop in Investment Securities earnings
| FCMB recently released Q1’21 results, reporting a 12% y/y drop in Gross Earnings to ₦43.2 billion. The decline came as a result of a 14% fall in Interest Income to ₦33.0 billion, which was caused by a 60% decrease in income from investment securities. Non-Interest Revenue (NIR) also fell 6% y/y to ₦10.2 billion, amid an 83% decline in income from T-Bills trading. Notably, this decline offset gains made in FGN bonds and FX trading, which grew 92% and 124% respectively. The decline in T-bills earnings across both Interest and Non-Interest income lines is directly linked to the low yield environment in the FI space, most especially on short-dated papers which have been yielding negative real returns since Q2 of last year. However, it was more positive on the expenses side, as the bank reported a tame 2% y/y increase in Opex to ₦25.4 billion, despite a 27% rise in AMCON charges, the biggest y/y growth. Meanwhile, Impairments dropped 51% to ₦1.8 billion, thanks to a 16% decline in net impairments on loans and a 37% increase in write-backs on previously written-off provisions. Ultimately, the bank declared PBT of ₦4.2 billion (-22% y/y) and PAT of ₦3.6 billion - a 24% y/y decline, yielding an EPS of ₦0.21. | |||||
| FY’21 projection lowered amid weaker NIMs forecast Despite reporting a 22% y/y decline in Interest Expense to ₦11.8 billion, FCMB’s Net Interest Margin (NIM) declined 43bps to 6.9% from 7.3% in FY’20. However, it is important to reiterate that the decline in Interest Income was solely due to weaker yields on Investment securities - income from loans and advances actually increased 12% y/y. With short-dated securities likely to continue to return low yields in the medium term, we expect this to negatively impact the bank’s NIMs for the rest of the year. Therefore, we forecast FY’21 NIMs of 7.0%, and Net Interest Income of ₦84.9 billion (Previous: ₦97.9 billion). Also, whilst we do expect the bank to continue booking FX revaluation gains, we believe the weak return on securities trading is likely to persist for majority of the year. Thus, we lower our forecast of NIR to ₦48.9 billion (Previous: ₦52.3 billion). Conversely, as the Nigerian economy continues to recover through the year, we believe that the bank will report further write-backs on loan losses, so we lower our Impairment projection to ₦12.8 billion (Previous: ₦18.3 billion). These adjustments give us a new PBT projection of ₦19.7 billion (Previous: ₦30.3 billion) and PAT of ₦16.9 billion (Previous: ₦26 billion). |
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| FCMB Group Plc is a non-operating financial holding company, regulated by the Central Bank of Nigeria ("CBN"). FCMB Group Plc was formed in response to the CBN's regulation on the scope of banking activities and ancillary matters ("Regulation 3"), which requires banks to divest their non-banking businesses, or retain them under a holding company ("Hold Co.") structure approved by the CBN. |
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