October 03, (THEWILL) – First City Monument Bank Plc (FCMB)’s 2021 half-year result was a reversal of the meteoric performance it recorded in 2020, which many analysts had described as unsustainable. Given the performance trend in recent years, the ‘exceptional’ result in 2020, a year ravaged by COVID-19 and marked by a sluggish environment, was one that attracted curiosity.
Although many banks recorded a boom in 2020, investigation showed that they had a legacy of ‘climbing’ performance that achieved the topmost results that year, unlike FCMB’s which hit a sudden peak, now making a reversal, as most of the key fundamentals reveal.
“FCMB’s 2021 half-year result is like a climber who reached the peak of the mountain, announced his appearance and began to descend, but the bank is stable, notwithstanding the awful moral scandal that eventually consumed its former MD,” a leader of a major shareholders association said, on the condition of anonymity.
The tier-2 lender’s 2021 half year report showed a dip in profit after tax, from the peak of N9.7 billion to N7.56 billion, representing 22 percent. Profit before tax recorded a similar deep slope of 19.8 percent from N11.1 billion in the 2020 half year to N8.9 billion in the review period.
Gross earnings which climbed steadily from 2017 to hit its peak of N98.2 billion in H1 2020, slumped slightly to N94.2 billion representing 4 percent. The net interest income that recorded a significant rise of 17.3 percent to N45.4 billion in 2020, from N38.7billion in 2019, dropped to N43 billion in H1 2021 representing 5.2 percent.
While the total operating expenses climbed to N48 billion in the review period, from N44 billion in the preceding period, or 9 percent, the bank showed resilience in some areas where it recorded positive results, though moderate.
Its total assets rose to N2.24 trillion from N1.97 trillion, or 27 percent, while total loans and advances increased from N794.6 billion in H1 2020 to N916.7 in H1 2021 or 15.3 percent. Similarly, customer deposits rose from N1.1 trillion in H1 2020 to N1.3 trillion in H1 2021 or 18.1 percent. Earnings per share which climbed to 49 kobo in 2020, from 38 kobo in the preceding year (H1 2019), dropped to 38.1 kobo in 2021, representing 22.1 percent.
Equity analysts at CardinalStone Partners, have been consistent in their less than positive outlook about FCMB performance since the beginning of the year.
In its March 2021 report entitled “FCMB Downgraded as Liquidity Pressure Threatens 2021 Earnings”, the multi-asset investment firm noted that FCMB’s weak liquidity position will impact its core earnings after a solid outing in 2020. On that note, CardinalStone analysts cut the bank’s target price by 10.45 per cent due to a weak earnings outlook.
“On the projected earnings drop in 2021, the financial service boutique in the Tier-2 category started off the year on a weaker note as profit dropped. Specifically, FCMB profit after tax shrank 24 per cent in the first quarter (Q1) of 2021 when compared with its Q1-2020 result after a meteoric growth recorded in its audited scorecard for 2020,” the report stated.
Commenting on the bank’s H1 performance in a report of September 23, 2021 entitled, “FCMB: Key metrics worsen as debits, funding pressure prompt profit meltdown,” the analysts noted that the bank’s key performance indicators worsened in the first half of 2021.
“In a messy earnings meltdown, despite a strong economic recovery in Nigeria, FCMB group profits for the first half of the year tumbled more than 28 per cent, from N9.7 billion in the first half of 2020 to N7.5 billion. In its earnings forecast for the fourth quarter of 2021, FCMB is expecting to deliver N8.51 billion on a gross earnings projection of N48.22 billion.
“Its net operating income is expected to berth at N35.921 billion, from which operating expenses amounting to N20.402 billion would be subtracted as the group also plans to book more than N6.2 billion impairment charge on credit losses,” the report stated.
Shares of the First City Monument Bank (FCMB) posted a six per cent loss on the first day of trading on Monday, January 4.
The institution was in the eye of the storm following an allegation of adultery and paternity scandal involving its former Managing Director, Adam Nuru,
According to data on the Nigerian Stock Exchange’s website, the bank’s shares lost 0.20k from the N3.33k it closed at on Thursday, December 31. The data further states that the tier-2 bank which had a market capitalisation of N65.94 billion, had 19.8 billion shares listed on the Nigerian Stock Exchange but was ranked the top loser on the market on the first trading day.
It was further reported that the last time the bank’s share price suffered a decline of that magnitude was on November 13, 2020, when it suffered a 10 per cent decline from N3.80 per share on November 12, to N3.42 per share on November 13.
The loss may not be unconnected with the scandal involving Nuru, with many Nigerians calling for his sack while a petition sent to the Central Bank of Nigeria (CBN) and posted to change.com which garnered more than 3,000 signatures.
Reacting to the bank’s profits slump, reports revealed that a growing number of equity analysts and investment bankers have downgraded forecasts for the year while management deems it fit to lower guidance for 2021.
“FCMB group is dragged from both ends,” CardinalStone Securities said in a mid-year outlook for 2021. “Following its leadership fiasco, its new Chief Executive, Yemisi Edun, has a lot to do to sail the bank ashore.”
“Edun’s corporate strategy skills set will be put to an acid test in the latter part of the year as FCMB profit has been negatively impacted and analysts are projecting low earnings beat for the year,” the analysts stated in their report of September 23, 2021.”
Supporting lower earnings expectation projection, analysts at Vetiva Capital stated that despite reporting a 22 per cent decline in interest expense to ₦11.8 billion, FCMB’s net interest margin (NIM) shrank 43 basis points to 6.9 per cent from 7.3 per cent in the financial year 2020. It observed that the decline in interest income was solely due to weaker yields on investment securities – income from loans and advances actually increased 12 per cent.
“With short-dated securities likely to continue to return low yields in the medium term, we expect this to negatively impact the bank’s net interest margin for the rest of the year”, they said.
When contacted, a source at the Group’s Investor Relations department who pleaded for anonymity, said the analysts’ views represent a mere opinion, adding that they do not give the true picture of the results, “FCMB is a strong brand; it will deliver good returns to the stakeholders at the end of the year and at all times,” the source said.
Ahead of the 2021 Customer Service Week, FCMB has lined up a series of exciting activities to celebrate and reward its customers and employees during this year. They include a 10 per cent bonus for purchase of N500 airtime and above via the bank’s *329# USSD platform, transaction free day for business account holders on the Bank’s Business app and a game tagged, “Scavenger Hunt”.
The managing director of FCMB, Mrs. Yemisi Edun, has expressed gratitude to customers of the bank for their patronage and loyalty over the years. The bank, she stressed, fully recognises the power of customers and service, adding that, “giving us the opportunity to provide you with our services is of great importance to us. We don’t take your patronage for granted, so we will continue to focus on delivering the very best products and services to meet your current and future financial needs.”
On her part, the senior vice president, and head of Service Management, Ms. Felicia Obozuwa, said the best time of the year for the bank continues to be Customer Service Week.
While every day is Customer Service Day at FCMB, she stated that the bank is always excited at the extensive opportunity to honour service excellence during the week-long celebration.
There will also be a virtual customer engagement session with the bank’s managing director. This session will allow customers to get direct information from the bank on salient issues and the opportunities available for personal and business growth.
This year’s edition themed, “Power of Service” will highlight the importance of customer service and of the people who serve and support customers on a daily basis. Activities celebrating young customers are also part of the activity lined-up for the week. FCMB will deliver special gifts to children across the country who operate kiddies accounts and whose birthdays fall within the week of October 4 to 8.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
