FCMB Group plc’s first quarter (Q1) 2015 profit has climbed as the Nigerian lender curbs increases in expenses.
For the first three months through March 2015, FCMB’s net income increased by 9 percent to N5.27 billion from N4.82 billion the same period of the corresponding year (Q1) 2014.
Earnings per share (EPS) moved by 9 percent to 107k in 2015 as against 97k in 2014.
The ability of the management of FCMB to install an effective control mechanisms, which paid off as operating expenses increased by a mere 6 percent to N16.50 billion despite regulatory induced costs.
Also, cost-to-income ratio, a measure of efficiency, reduced to 67.73 percent in 2015 compare with 69.32 percent in 2014. It means FCMB is cutting costs while increasing profit.
The growth in earnings and profits is coming amid restrictions in foreign-currency trading. While lenders in Africa largest economy Nigeria struggle with a slump in oil price, restrictions in foreign currency trading are the biggest risk to banks.
Nigeria central bank has devalued the naira twice since November, and prevented banks from buying dollars in the interbank market without matching orders, steadying the exchange rate while reducing liquidity.
Despite slow loan growth, FCMB was able to record 18 percent increase in interest income to N32.27 billion in 2015 from N27.37 billion in 2014, while net interest income rose by 10 percent to N18.05 billion.
However, the Nigerian lender gave in to the CBN’s tightening stance as interest expense spiked by 29 percent to N14.23 billion in 2015 as against N16.36 billion in 2014.
Recall that the central bank devalued the naira and raised interest rates by 100 basis points to 13 percent from 12 percent, as it sought to stem losses to its foreign reserves from defending the currency hit by weaker oil prices.
FCMB aggressiveness to lending has slowed as loan to deposit ratio fell to 76.64 percent in 2015 from 84.22 percent in 2014.
Loans to customers also reduced by 6 percent to N582.22 billion in the review period as against N617.98 billion in 20014, while deposits from customers moved by a single digit 4 percent to N759.64 billion compared with N733.80 billion in 2014.
Analysts say the slow growth in loans and deposit means the lender is not creating risk assets. Also, it is lending to the real sector, construction and aviation sector has also weakened.
FCMB’s total assets grew by a mere 1.7 percent to N1.19 trillion in 2015 compared with N1.7 trillion in 2014.
Its share price closed at N3.03 on the share price on the floor of the exchange, while market capitalisation was N64.55 billion.
BALA AUGIE
