FCMB: FY'24 earnings falter on cost pressures

In FY'24, FCMB Group Plc (NGX: FCMB"”TP: N12.62) reported a 55.9% YoY increase in gross earnings, primarily attributable to a 75.2% surge in interest income, which contributed c.80.0% to total revenue. Despite this strong topline growth, Profit After Tax (PAT) declined by 21.2% to N73.3 billion, reflecting the combined impact of a 122.3% rise in interest expenses, a 45.7% increase in operating expenses (OPEX), and a substantial 237.8% escalation in tax charges.

Despite the higher interest income of N621.8 billion, Net Interest Income grew by a modest 27.6% YoY to N225.3 billion, reflecting the impact of elevated funding costs (cost-of-funds FY'24: 10.5% vs FY'23: 6.0%). Expensive borrowings acquired during the year led to a 2.2x surge in interest expense and weighed on margin expansion (1.0ppts contraction in net interest margin (NIM) to 6.9% from 7.9% in FY'23).

Non-Interest Income (NIR) grew by a modest 8.7%, supported by a significant increase in foreign exchange trading income (+420.8%) and higher income from FGN bond trading (+221.5%), which helped offset the N47.5 billion decline in foreign exchange gains. Additionally, fee and commission income contributed to the overall NIR growth, driven by a 59.9% increase in account maintenance fees and a 21.4% rise in service fees and commissions.

A review of the bank's cost revealed a 45.7% YoY increment in operating expenses (OPEX) and a 30.7% YoY decline in net impairment charges. The expansion in OPEX was driven by personnel expenses (+60.0% YoY), IT & IS expenses (+58.3% YoY) and AMCON Levy (+40.0% YoY). Meanwhile, the moderation in impairment charges was driven by lower impairment charges on loans (-20.6% YoY). As a result, cost of risk printed lower at 2.0% (FY'23: 3.1%).

Elsewhere, FCMB recorded a 237.8% YoY surge in its tax expense to N38.6 billion, which resulted in a significantly higher effective tax rate of 34.5% (FY'23: 10.9%). The sharp increase was largely driven by a N17.7 billion windfall levy on realized foreign exchange gains"”comprising N7.6 billion from FY'23 and N10.1 billion from FY'24.

In Q4'24, the impact of funding pressures was more evident, with interest expense consuming 70.7% of interest income during the quarter. As a result, Net Interest Income (NII) declined by 8.2% YoY and 23.8% QoQ. Also, a N29.1 billion tax charge in Q4'24 resulted in a post-tax loss of N8.8 billion for the quarter.



Accordingly, the FY'24 result translated to a 1.2ppts and 12.5ppts decline in ROAA and ROAE to 1.3% and 12.7%, respectively. The group announced a dividend of N0.55 (FY'23:0.50), which translates to a divided yield of 6.04% as of May 3rd, 2025, closing price.

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