Five Directors at FCMB Group Plc bought 12,377,379 shares at 4.000NGN. The significance rating of the trade was 52/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two years cl...
Higher interest rates drive strong Profit growth In FCMB’s recently released H1’22 results, the company reported a 34% y/y growth in Gross Earnings to ₦126.2 billion. This came as a result of expansion across both Interest Income (+35% y/y) and Non-Interest Revenue (+31% y/y) lines. The growth in revenue was mainly driven by a jump in income from investment securities, which more than doubled y/y. On the other hand, growth in Interest Expenses...
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...
In this report, we highlight four key trends that will shape Nigeria’s banking sector in 2022. We also roll our models forward to 2026 and make changes to our valuation inputs, by raising our cost of equity to better reflect higher interest rates compared to 2020 and the appropriate risk premium for Nigerian equities. Overall, we expect our coverage to deliver an average ROE of 14.5% in 2022, vs 14.8% previously. The marginal drop in our forecast is based on slower expected growth in margins,...
FCMB released its unaudited FY’21 results, reporting Gross Earnings of ₦208.5 billion, 5% higher than 2020 performance. The rise in earnings was primarily the result of a 7% y/y rise in Interest Income to ₦161.6 billion, driven by a 30% increase in Income from loans and advances, which mirrored the improvement in the bank’s loan book in that period as well. On the other hand, the bank reported flat Net Interest Income of ₦90.5 billion as a result of higher Interest Expenses for the year, which p...
Nigeria's banks face three main headwinds in 2022: 1) continued regulatory hurdles; 2) declining profitability; and 3) the growing threat of fintechs and telcos. The banks that succeed will be those that can amend their strategy and adapt to the new environment. In this report, we highlight two banks – Stanbic IBTC and Standard Chartered – that have done just that, moving to embrace financial technology and digitalisation. STANBIC IBTC BUILDING ITS OWN FINTECH The diversified financial holdin...
FCMB Group reported a 42% yoy increase in profit to NGN6bn for Q3 21, far better than our expectation of a 29% drop. The most significant driver of its profit growth was lower loan impairment costs (down 90% yoy), a trend noticeable with other peers. This is expected, given the improved outlook for business activities compared to what was obtainable in 2020. Across the group's revenue lines, it performed better than expected. We had expected the group's net interest income to decline 25% as a...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
For Q2 21, FCMB reported a profit decline of 20% to NGN4bn, worse than our expectations for a 15% drop. The group's numbers were negatively affected by an increase in funding costs (up 15% yoy), outweighing the positive interest income (up 5% yoy), which grew due to increased income from retail lending. Management noted that the bank was severely hit by aggressive and rapid cash reserve requirement (CRR) debits during the quarter, which led to sourcing of funds from the expensive, short-term ...
Weaker profits amid lower trading and investment volumes Yesterday, FCMB released its unaudited H1’21 results, reporting Gross Earnings of ₦94.2 billion (-4% y/y). The decline in earnings came as the result of a 5% fall in Interest Income (II) to ₦72.7 billion, caused by a 56% decrease in income from investment securities. However, it is important to note that income from loans and advances actually improved by 22% y/y to ₦63.1 billion. Meanwhile, Non-...
We previously wrote on how Nigeria banks are pursuing holding company structures (holdcos), to access new markets where they have strong competitive advantages. There have also been push factors, such as the regulatory difficulties associated with traditional banking (especially the punitive cash reserve ratio (CRR) debits), compressed margins and the growing threat from fintechs. Additionally, the holdco structure has the advantage of keeping bank CEOs around for longer when their mandatory ...
The Nigerian banking system was able to avoid widespread deterioration in asset quality – a key concern for investors apart from rising interest rates – due to the CBN’s forbearance measures. Although Covid-induced moratoriums have now expired, continued regulatory support, pick-up in economic activity and extended forbearance on intervention loans are likely to keep NPL ratios from rising substantially. Rising crude oil prices are also positive for oil and gas loans, which form a huge portio...
Nigeria’s macroeconomic picture remains bleak, with high inflation and unemployment, sub-par real GDP growth and a weakened local currency. These issues, alongside a difficult regulatory environment, have had negative implications on banks, as well as their heavily discounted valuation. In this report, we look at how the rising rate environment is a double-edged sword for Nigeria banks, as it provides the opportunity to expand NIMs, but minimises room to book large trading gains. This is part...
FCMB, one of theholding companiesin our Nigeria banks coverage, recently published its Q1 21 results. The group's profitability declined, on the back of weaker net interest income, trading revenue and an uptick in operating costs. Asset quality remained relatively healthy, while capital ratios weakened during the period. The group continues to look for avenues to expand its non-banking subsidiaries via the acquisition of a pensions business expected this month, accelerate the adoption of its ...
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-bill...
We maintain our 12-month target price on FCMB at NGN3.6, but at the current share price this now offers an expected total return of 25%. Hence we upgrade our recommendation to Buy. FCMB’s FY 20 net attributable profit grew 13% yoy to NGN19bn, outperforming both our estimate and Bloomberg consensus by 6%. The group declared a final dividend of NGN0.15/share, translating to a modest payout of 15% – similar to the preceding year and in line with our expectation, as the group continues to retain...
2020 was a challenging year for Nigeria banks, as a mixture of a harsher regulatory climate, weak economic prospects, and an ultra-low interest rate environment weighed on financial performance. As Q4 20 earnings season (as well as FY 20) draws closer, we highlight the top factors likely to shape the numbers: 1) THE LOW YIELD ENVIRONMENT A direct outcome of the Central Bank of Nigeria (CBN)'s expansionary policy actions has been the downward pressure in net interest margins, which will be ref...
In this report, we present our general expectations for Nigeria banks in Q4 20, as well as key trends noted in the Q3 20 earnings season. KEY EXPECTATIONS FOR Q4 20 PERFORMANCE Net interest margins will remain pressured: In line with the low yield environment and the CBN’s expansionary policies, NIMs in Q4 20 will remain pressured like Q3 20, when only one bank in our coverage (Access) recorded an increase in NIM. Although, the effect of the reduction in rates on savings deposits in September...
FCMB, one of the holding companies in our Nigeria banks coverage, is looking to expand its non-banking subsidiaries and accelerate the adoption of its digital banking channels. Q3 profit growth reflected positives from the group’s enlarged base of interest-earning assets and cost savings from the pandemic restrictions. Management held an investor call recently, which we summarise below. We still have a Hold recommendation on FCMB, but update our forecasts following these results. We raise our...
Profits jump 29% y/y amid strong earnings growth Half-year profits soar despite economic woes FCMB recently released its H1’20 results, reporting a 9% y/y growth in Gross Earnings to ₦98.2 billion, 3% ahead of our estimate. This was mainly due to an 8% y/y growth in Interest Income to ₦76.1 billion driven by a 15% growth in income from investment securities, and a 14% y/y jump in Non-Interest Income to ₦22.0 billion. Net Interest I...
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