FCMB overshoots full-year profit target on N84bn foreign exchange gains

FCMB Group Plc overshot its 2023 full-year profit target with a better-than-expected final quarter that swelled foreign exchange (FX) gains from N54.8 billion at the close of the third quarter (Q3) to N84.2 billion at full-year.

The bank’s full-year after-tax profit target of N73 billion for the group was equally overshot by a clear N22.5 billion to N95.5 billion — more than three times the closing profit of N31.1 billion it posted at the end of 2022.

The bank’s unaudited financial report for the full year ended December 2023 shows that the final quarter delivered an after-tax profit of N46.3 billion — close to twice the forecast figure of N24 billion for the quarter and 48.5 percent of the full-year profit figure.

The FX gains, which were the main upside force for the bank in the year, multiplied about 20 times from the N4.3 billion the bank realised in the preceding financial year.

FCMB began and finished the 2023 financial year with great speed on the path of earnings. It began the year with an outstanding profit growth of 85 percent to N9.3 billion in the first quarter (Q1) and sped up to 159 percent to N35.4 billion at half-year.

The bank grew profit by 114.4 percent to N49.2 billion at the end of Q3 and broke all the records with 207 percent advance to N95.5 billion at full-year.

The bank’s expectation of strong revenue growth and an all-round slowdown in costs in the final quarter — to be led by net loan impairment charges — was realised.

The gross earnings forecast of less than N112 billion for the final quarter was well exceeded at N165.7 billion, contributing about 32 percent of the full-year gross income of N516.8 billion for the bank in 2023.

Gross earnings grew by 82.6 percent at the end of the year from the closing figure of less than N283 billion at the end of 2022.

Interest earnings equally beat the target for the quarter at N116.6 billion compared to N91.7 billion, accounting for 32.8 percent of the closing interest income of N355.7 billion for the bank. The figure is an increase of 62 percent for the year, an accelerated growth from 55 percent to N239 billion at the end of Q3.

Net fee and commission income is on target at N44.4 billion at the end of the year, which is an increase of 30.6 percent for the year.

Other revenue, which was powered by FX gains, multiplied more than 17 times to N90.9 billion at the end of the year.

The two cost elements that pressured earnings in the preceding quarters: interest and loan impairment expenses, slowed down in the final quarter.

Cost of funds grew by 82.7 percent at the end of the year to N178.3 billion, down from an increase of 94.3 percent at the end of Q3, though it stood above the 62 percent increase in interest earnings.

Net interest income accelerated from 29.5 percent growth at the end of Q3 to 45.4 percent to stand at N177.4 billion at full-year.

As per the management’s expectation, net credit loss expenses, which tripled to roughly N57 billion at the end of the third quarter, slowed down to an increase of 165.4 percent to N66.3 billion at full-year.

Quarterly loan losses dropped for the second time from N42 billion in the second quarter to N10 billion in the third and further to N9 billion in the final quarter.

The increase in interest earnings with the slowdown in interest and loan loss expenses resulted in an increase of 14.5 percent in net interest income after the bad loan charges to N111 billion.

This is a strong upturn from a drop of 14.6 percent in net-interest income after loan impairment charges to N63.5 billion at the end of Q3.

At N154.4 billion, total operating expenses are moderated at 29.9 percent of gross earnings at the full year, significantly down from the 40.2 percent mark at the end of the 2022 financial year.

The summary of the bank’s earnings story at the end of the 2023 full year is that strong revenue gains enabled management to absorb pressures from cost of funds and credit losses, stretch out margins and register the strongest profit advance in many years.