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FCMB Group Sustains Growth

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FCMB
  • FCMB Group Sustains Growth

Some stakeholders who had expressed concerns that FCMB Group, comprising First City Monument Bank (FCMB) Limited, FCMB Capital Markets Limited, CSL Stockbrokers Limited and CSL Trustees Limited, delayed the release of its 2016 nine months results were delighted last week when the Group released the audited results, which showed improved performance.

Other banks had announced their results showing mixed performance. While some recorded improved bottom-lines, some witnessed declined in profitability.

However, FCMB Group, in its audited results for nine months made available last week, posted improved results, thereby raising hopes of shareholders to smile home at the end of the current financial year.

Nine months financial performance

FCMB Group Plc recorded gross earnings of N140.7 billion up by 28 per cent from N109 billion in the corresponding period of 2015. Interest income fell marginally by 1.2 per cent to N93.2 billion from N94.4 billion in 2015, while Interest expenses also fell by 9.8 per cent to N40 billion, from N44 billion. FCMB ended the period with net interest income of N53.2 billion in 2016, showing an increase of 6.3 per cent from N50 billion in 2015.

Net fee and commission income rose by 2.6 per cent from N10.4 billion to N10.6 billion, while total net non-Net interest income rose by 9.2 per cent from N48.7 billion to N53.2 billion. Total net non-interest income rose by 128 per cent from N19.6 billion to N44.8 billion resulting from a 612 per cent increase in foreign exchange (FX) income, from N5.0 billion in 2015, to N35.3 billion in 2016.

Net impairment loss on financial assets soared by 125 per cent to N34.4 billion, from N15.2 billion in 2015.

The group reported a profit before tax (PBT) of N14.2billion, showing a jump of 453 per cent from N2.563 billion recorded in the comparative period of 2015, while profit after tax (PAT) recorded higher growth of 595 per cent to N12.9 billion from N1.866 billion. FCMB Group grew its total assets to N1.241 trillion, from N1.159 trillion in 2015.

Management’s comments

Commenting on the results, Managing Director of FCMB Group Plc, Mr. Peter Obaseki, said: “The audited nine months results for the period ended September 2016, reflects our focus on key soundness ratios and the need to maintain buffers against a sustained adverse operating environment. Accordingly, capital adequacy and liquidity ratios have held up at 17.6 per cent and 36.8 per cent, respectively.

Overall, PBT came in at N14.2 billion, a 453 per cent growth, translating to earnings per share (EPS) of 87 kobo, up 30.6 underlying revenue momentum remains strong while cost optimisation programme led to a two per cent drop in operating expenses, despite inflationary spiral respectively.

The macro economic conditions in the final quarter remain challenging; we will keep up a conservative stance.”

Also speaking on the performance, Group Managing Director of FCMB Limited, Mr. Ladi Balogun said: “The audited results of the bank reveal that the extraordinary performance of Q2 2016 offset the loss recorded in Q3 of N2.4 billion, thereby resulting in strong year-on-year profit growth of 913 per cent.

In order to avoid an unsustainable, non-cash, spike in earnings from further revaluation gains in Q3, the bank also significantly stepped up its loan loss provisions.”

He added that the macroeconomic climate is taking a significant toll on the bank’s borrowing customers across all segments.

“Accordingly, the bank will maintain high provision coverage ratios (currently 131 per cent), continue to strengthen our capital adequacy ratio (currently 16.9 per cent) and our liquidity ratio (currently 36.8 per cent),” he said.

Balogun said while the bank’s prudential ratios should continue to strengthen into Q4 (modestly buoyed by a tier 2 capital injection of N7.5bn in November), the bank does not anticipate improvement in the fourth quarter earnings.

“Nonetheless, we are pleased with the gains we continue to record in growing our business in areas such as retail banking (with a 315 per cent growth in profitability) and increasing our share of banking activities in the agricultural sector. In spite of the fact that we have seen several revenue lines diminish due to external factors – as we build a more resilient balance sheet, we will be well positioned for a strong rebound in core earnings in the medium term,” he said.

The CEO assured that FCMB would to continue to distinguish itself by delivering exceptional services, while enhancing the growth and achievement of the personal and business aspirations of its customers and all stakeholders.

Analysts’ Assessment

Assessing the results, analysts at FBN Quest, said although profit before provisions grew by a healthy 57 per cent year on year( y/y), the expansion in loan impairment charges proved more significant.

“To put the magnitude of the impairments taken in Q3 into context, it is around 212 per cent higher than the average quarterly provision run rate of N6.7 billion for H1 2016. Returning to pre-provision profits, the other income line which grew by 168 per cent y/y to N18.8 billion (on the back of fx gains) was the key driver. Although funding income also grew, its impact was modest. Sequentially, the pre-tax and after tax losses compare with PBT and PAT of N14.1 billion and N16.6 billion respectively in Q2 2016. The earnings also surprised negatively relative to our PBT and PAT forecasts of N8.6 billion and N7.3 billion.

Similar to the y/y trends, the wide variance between our PBT forecast and actual was due to the negative surprise in loan loss provisions which came in around 218 per cent higher than what we were modelling.

Above the provisions line, profit-before-provisions beat our forecast by 10 per cent because of the positive surprise in other income,” they said.

FBN Quest explained that the spike in impairments was primarily due to oil & gas exposures (particularly downstream) which already accounted for around 22.3 per cent of non-performing loans (NPL’s) in Q2 2016.

“Since most of these loans are denominated in foreign currency, the prevailing exchange rate of N315 per United States dollar versus around N200 previously most likely necessitated the marked increase in impairments. State governments’ loans, which accounted for around 25 per cent of the bank’s loan book, may also have contributed.

The impairment charge for nine months 2016 implies a cost-of risk of 7.5 per cent. Management had stated on its Q2 2016 conference call that it expects to restructure around 25 per cent of its loan book, resulting in tenor extensions of between 1-2 years,” the analysts said.

They said they believe that restructurings and write-off of NPLs most likely explain the improvement in the NPL ratio to 3.4 per cent (4.7 per cent as at Q2 2016).

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Merger and Acquisition

United Kingdom Ordered Meta, Formerly Facebook, to Sell Giphy

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The United Kingdom’s Competition and Markets Authority (CMA) has instructed Meta – formerly known as Facebook – to sell Giphy, the American search engine that allows users search for and share short looping videos which are without sound, that are similar to animated GIF files.

The CMA stated that the merger deal could possibly be harmful to social media users and advertisers in the UK. It also found that the deal would further boost Meta’s already strong market power, as it would limit other platforms’ ability to use Giphy GIFs, which will, in turn, drive more traffic to sites owned by Facebook (WhatsApp, Instagram and Facebook).

According to the CMA, Meta’s sites dominated social media usage time up to around 73 percent, and could eventually outperform social media rivals like TikTok, Twitter and Snapchat by leveraging Giphy. The Authority then added that before the merger, Giphy had launched ”innovative advertising services” which brands like Dunkin’ Donuts and Pepsi which it could possibly have brought to the United Kingdom.

The CMA also stated that at the time the merger was made, Giphy’s advertising services were terminated by Facebook. That move removed a vital part of potential opposition in the market. The CMA was concerned by this move, calling it particularly concerning considering that Facebook is in control of about half of the £7 billion display advertising market in the UK.

Facebook had acquired Giphy for a reported fee of $400 million, with an aim of integrating the service into Instagram. After a month, the CMA started an investigation into the merger and decided in August that Facebook could hinder social media rivals such as TikTok and Snapchat from tapping into Giphy’s GIFs.

Meta had initially stated that the CMA did not have jurisdiction because Giphy was not operational in the United Kingdom, adding later that Giphy’s paid services were not display advertising by the definition of the CMA.

In October, Meta was fined $70 million by the CMA for breaking some rules related to the deal by failing to report necessary information and changing its chief compliance officer on two different occasions without receiving permission.

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Brands

Burger King Expands to Nigeria

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Burger King

Burger King, an American multinational chain of hamburger fast food restaurants, has opened its very first restaurant in Nigeria to deepen its growing brand, support new job creation and enhance economic productivity in Africa’s largest economy.

The United States Mission in Nigeria has praised the improving commercial ties between Nigeria and the United States as American franchises and branches set up shops in Nigeria. This has in turn created more jobs as well as investment opportunities in the country.

This was said by the US Mission Commercial Counselor, Jennifer Woods during her speech at the opening of the Burger King outlet in Nigeria. Woods underlined the impact which new businesses have on a country’s economy, especially with a popular franchise like Burger King opening in a developing market like Nigeria.

She said that being Africa’s largest economy and a large youth population with a strong connection to the world, American brands must look at Nigeria as a highly critical market. She went ahead to state that while the companies will benefit from the expansion into the country, Nigeria itself will also benefit largely from their presence in the country.

Woods also described the addition of another American-owned franchise (one that emphasizes a culture of excellence) will help to provide job opportunities as the business expands to new parts across the country. She praised the high level of interest by consumers and the passion which they have for the iconic American rapid service restaurant since it began its operations in early November.

The Speaker of the Nigerian House of Representatives, Honourable Femi Gbajabiamila congratulated Burger King and all its local partners on the intriguing business deal, explaining it as another signal of the benefits of a close business relationship between the United States and Nigeria. He also stated that Burger King is expected to open hundreds of outlets across the country.

Burger King entered into an alliance with local firm, Allied Food & Confectionary Services Limited in order to bring the American brand into the Nigerian market. The Group Managing Director of Allied Food & Confectionary Services Limited, Antoine Zammarieh has prior experience bringing United States rapid service restaurants to Nigeria.

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Company News

Panasonic Confirms Data Breach after Hacker Attack

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Panasonic Nigeria

Japanese tech giant Panasonic has affirmed that the company has been a victim of a data breach after some hackers were able to access the company’s internal network.

In a press release dated November 26, the company stated that its private network was illicitly accessed by a “third party” on November 11, and also stated that some data which was on a company file server had been retrieved during the breach.

However, a spokesperson for Panasonic, Dannea DeLisser stated that the data breach started on June 22, and ended on November 3. She also said that the very first unauthorized access was detected on November 11.

The company which is based in Osaka, Japan provided additional details about the breach. In the press release, the company said that although it is conducting its own investigation into the breach, it is also working with a third-party organization to investigate the data leak. The third party organization is also looking into whether or not the breach included personal information of customers or sensitive information which concerns social infrastructure.

Immediately the unauthorized access was discovered by the company, the incident was reported to the appropriate authorities who went ahead to set up some security countermeasures, which also contained steps to avert external access to the network. The company closed the statement by apologizing for concerns and inconveniences caused by the data breach.

This type of incident is not completely new to Panasonic, as just under a year ago Panasonic India faced a ransomware attack in which hackers leaked about 4 gigabytes of data, including email addresses and financial details.

The data breach also comes at a period when Japanese technology companies are facing waves of cyberattacks. NEC and Mitsubishi Electric were victims of hackers in 2020, and Olympus was also made to suspend operations in Europe, Africa and the Middle East after being a victim of a ransomware attack.

The trend of cyberattacks in Japan is likely to reduce public faith in the company, especially since it has been hacked twice since last year.

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