FCMB GROUP PLC Q1'22 Earnings Release - Profits rise 45% y/y on strong earnings growth

Profits rise 45% y/y on strong earnings growth                                                  

"FCMB recently released Q1’22 results, where the company reported a 35% y/y jump in Gross Earnings to ₦58.3 billion. This impressive growth was thanks to a 41% y/y rise in Interest Income to ₦46.7 billion, as Interest earned on loans grew 31% y/y. Non-Interest Revenue (NIR) also grew 14% y/y to ₦11.6 billion, thanks to a 34% y/y increase in fees and commissions, which helped offset foreign currency revaluation losses of ₦1.4 billion.

Conversely, the bank’s expenses were 17% higher than Q1’21 at ₦30 billion, driven by a 23% hike in AMCON levy and 32% rise in NDIC Insurance premium. Meanwhile, Impairments soared y/y by over 100% to ₦4.1 billion, as loan loss provisions were up 42% y/y, which offset the impressive 94% rise in write-backs on previously written-off loans. This led to a PBT of ₦6.0 billion (+42% y/y) and PAT of ₦5.2 billion, a 45% y/y improvement.                                                         

2022 projections improved over strong Interest Income growth

Despite reporting a 57% y/y rise in Interest Expense to ₦18.5 billion, the figure still came in below our initial estimate (₦19.6 billion), thanks to lower interest paid on interbank deposits. As a result, FCMB’s Net Interest Income was up 33% y/y to ₦28.1 billion. By our estimate, Net Interest Margin improved to 8.1% from 5.7% in the same period of 2021, as higher interest charged on loans positively affected the bank’s income line. Furthermore, higher yields in the Fixed Income market also supported earnings in Q1, thus we project a higher Interest Income line of ₦186 billion for 2022 (Previous: ₦174 billion). Therefore, we adjust our FY’22 forecast for Net Interest Income to ₦111 billion (Previous: ₦96 billion).  Conversely, we lower our NIR forecast to ₦49 billion (Previous: ₦50 billion) on the back of Q1’s miss. Cost-wise, the bank’s heavy loan loss impairments in Q1 occasioned an upward revision of our FY’22 projection to ₦8 billion (Previous: ₦6 billion). This gives us a new PBT projection of ₦34 billion (Previous: ₦26 billion) and PAT of ₦29 billion (Previous: ₦22 billion).