FCMB lifts full year profit to N32.6b on strong Q4

FCMB Group Plc has made quite a strong finishing of an outstanding financial year with a profit of N9.7 billion in the final quarter, toping up to a full year after-tax profit of N32.6 billion in 2022. This is despite pressure from rising cost of funds on net interest income in the final quarter.

The final quarter contributed 30 percent of the bank’s full year profit, accelerating further the galloping speed with which it built profit through the year to attain an all-time high net profit record at the end of the financial year.

The bank’s unaudited financial report at the end of December 2022 shows that after-tax profit improved from quarter to quarter all the way from N5.2 billion in the first quarter (Q1) to N8.5 billion in the second (Q2), climbing to N9.2 billion in the third quarter (Q3) and finishing yet higher at N9.7 billion in the final quarter (Q4).

The bank’s closing profit at the end of the year towers above the N21 billion figure it posted in 2021, representing a top record growth of 56 percent and the biggest profit record for FCMB in its post consolidated trading.

It is the strongest profit improvement for the bank since 2018 and the first time it has beaten its existing net profit peak of N22.1 billion established in 2014.

FCMB’s strong profit growth in the year reflects a sustained upswing in revenue and some slowdown in costs through the year.

Gross earnings scurried up from 6.9 percent growth at the end of 2021 to almost 33 percent increase to N281.7 billion at the end of the 2022 financial year. This is the highest revenue growth rate for the bank any time since 2013.

The bank achieved an all-round improvement in revenue lines with other income leading the growth at 37.8 percent to close at roughly N7 billion at full year. Net trading income followed with an increase of 37 percent to N12.8 billion.

The bank’s biggest revenue line — interest earnings, grew by 34.5 percent to N218 billion, the most rapid growth record for the bank since 2013. Also, fee and commission income improved by 23.7 percent in the year, amounting to N44 billion at the end of the year.

Some cost savings worked to reinforce revenue gains, which stretched out profit margin and propelled profit growth. The savings were extracted from personnel expenses, which grew by 14 percent to N35.7 billion, administrative cost that grew by 21 percent to N43 billion and other operating expenses that went up by 10.7 percent to N23.5 billion.

Two other major cost lines deviated from the moderated behaviour, which are interest and loan loss expenses that we underscored “critical factors for the bank in the final quarter” in our review of the bank’s operations at the end of Q3.

Interest expenses soared in the final quarter at 76 percent quarter-on-quarter to N36.6 billion. That jerked the full year growth in cost of funds from 21 percent at the end of Q3 to 37 percent to N97.6 billion at full year. This is ahead of the the 34.5 percent increase in interest earnings.

Despite the pressure from interest expenses, net interest income grew by 32.4 percent to N120.4 billion at the end of the financial year. This represents an increase of close to N30 billion in net interest income over the review period.

Strong increase in loan impairment expenses seen at the end of Q3 softened in the final quarter. Net impairment losses on financial assets dropped by 40.3 percent quarter-on-quarter in Q4.

The full year position shows net loan impairment charges of almost N25 billion, which is a huge increase of 63.7 percent, a sharp slowdown, however, from 292.5 percent upsurge at the end of Q3.

An outstanding growth in income supported by some slowdown in costs more than compensated for the cost increases, which enabled the outstanding earnings story of FCMB in 2022.

The bank registered the highest net profit margin since 2015 at 11.6 percent, rising from 9.8 percent at the end of the 2021 financial year.