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CardinalStone Company Update - FCMB Group Plc - Effective capital utilization to mitigate funding cost
(Source: CardinalStone Research, Date: 27-Jan-2025)
Company Update.png

FCMB: Effective capital utilization to mitigate funding cost

Exogenous factors such as the upward adjustment to the Cash Reserve Ratio (CRR) and higher interest rates have led to liquidity constraints for FCMB, with cost-of-funds (CoF) rising by 2.6ppts to 8.3% in 9M'24. Nevertheless, management is optimistic that the bank can assuage the funding cost pressures in FY'25 by utilizing inflows from its capital raise exercise to reduce its stock of expensive borrowings.



Consequently, we project a moderation in CoF to 7.5% in FY'25 (FY'24: 8.3%) on the back of expected temperance in interest charges on its expensive Interest-Bearing Liabilities (IBL) due to the aforementioned plan to use capital raise proceeds to reduce IBL and potential interest rate cut in H2'25. We expect a positive passthrough to Net Interest Income (NII) (+40.7% YoY) that would be further aided by an 18.0% increase in Interest-Earning Assets (IEA).

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CardinalStone Research 

Lagos Office: 5 Okotie Eboh Street 

                       South-West Ikoyi, Lagos

                       Nigeria

Abuja Office: 4 Misratah Street

                       Wuse II, Abuja, Nigeria

Tel:                 +234(1) 7100433, 7100434

Email:            research@cardinalstone.com 

Website:       www.cardinalstone.com   

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