FCMB: Modest expansion in PAT amidst funding cost pressures

FCMB Group Plc (NGX: FCMB"”TP: N12.62) reported a 15.9% YoY growth in Profit After Tax (PAT) to N107.8 billion in its unaudited FY'24 results. The performance was primarily driven by higher interest income, fuelled by a 44.1% expansion in Interest-Earning Assets (IEA) combined with the 3.1ppts uptick in asset yields. Consequently, Earnings Per Share (EPS) rose to N5.45, up from N4.70 in FY'23.

Despite the 75.1% increase in interest income to N621.5 billion, Net Interest Income grew by a modest 27.7% YoY to N225.4 billion, reflecting the impact of elevated funding cost pressures (cost-of-funds FY'24: 9.1% vs FY'23: 6.0%). Expensive borrowings acquired during the year led to a 2.2x surge in interest expense and weighed down on margin expansion (-1.0ppts contraction in interest margin (NIM) to 6.9% from 7.9% in FY'23).

The bank's Non-Interest Income (NIR) increased by 9.1%, driven by an 8.2x surge in foreign exchange trading income and a 3.2x rise in trading income from FGN bonds. This growth more than offset the impact of an N53.6 billion decline in foreign exchange gains as FCMB adjusted to comply with the NOP limit. Additionally, fee and commission income benefited from the 59.9% increase in account maintenance fees and the 22.2% rise in service fees and commissions, contributing to the overall growth in NIR.

A review of the bank's cost revealed a 45.3% increment in operating expenses (OPEX) and a 36.7% decline in net impairment charges. The expansion in OPEX was driven by personnel expenses (+60.1% YoY), IT & IS expenses (+55.5% YoY) and AMCON Levy (+40.0% YoY). Meanwhile, the moderation in impairment charges was driven by lower loan loss provisions (-21.3% YoY) as the group had initially set aside c.72.0% of its FY'23 FX revaluation gain of N78.3bn for anticipated impairment charges. As a result, the absence of substantial loan provisioning in FY'24 contributed to the decline in net impairment charges compared to the previous year.

In Q4'24, the impact of funding pressures from FY'24 was evident, with interest expense consuming approximately 70.6% of interest income for the quarter. As a result, Net Interest Income (NII) declined by 8.0% YoY and 23.6% QoQ. However, earnings for the quarter rose by 10.8%, driven by a N6.8 billion net impairment writeback and a 40.4% reduction in other operating expenses.



The FY'24 result translated to a 0.7ppts and 8.1ppts decline in ROAA and ROAE to 1.8% and 17.1%, respectively.

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