FCMB Bank released a double dose of full year audited accounts for 2012 and first quarter unaudited accounts for the period ending March 2013. During the year ended December 2012, Net Interest Income rose 17% to N43.3billion. This resulted in a net interest margin of 50% down from 60% the year before. The bank ended the year with a return to profitability as they made a post tax profit of N16billion (2011: (N9.2billion).
2011 was a tumultuous year for FCMB just as it was for many other banks. Despite posting strong Net Interest margins of about 60% that year it was not enough to absorb loan losses of over N27billion during the period. 2012 was no different, even though the N12.6billion in loan loss suffered was 54% lower 2011. The bank claims its non-performing loans (NPL) ratio fell year on year by 10.9% to 2.5% inching higher to 3.3% at the end of first quarter 2013. Operating profit margin though below industry average, may be due to its merger and acquisition cost.
The period ended March 2013 gives an insight as to what to expect for 2013. The bank seems to have learnt lessons during the period as loan and advances dropped by 8%. Pre-tax profits rose moderately by 10% to N4.8billion as the bank continues to contend with rising operational cost. Bank’s this year will mostly declare profits however, it is those that are able to generate return on equity in excess of 20% that will have the competitive advantage. FCMB delivered ROE of 12% in 2012 and 3.2% at the first quarter of 2013, fairly flat in my opinion. The likes of Skye Bank, Diamond Bank and Sterling posted above 5% ROE for the first quarter.
FCMB share price has had a negative return of 17.7% in the last year according to Bloomberg. Their share price also shaved off 8% in value to close at N4.30 today (29/4/2013). Their price earnings ratio is based on the current price is about 5x whilst price to book ratio is about 0.61x. Banking stocks are mostly undervalued and this indices shows just why. But for the price to take a beating after crawling back to profitability the market is probably punishing the bank for not issuing dividends even after issuing a 1 for 25 bonus shares (4 shares for every 100 held). But you can’t blame the bank can you? The bank has distributable reserves of just N5billion. If it distributed all of that (a big IF) earnings, it will only amount to 26kobo per share, a yield of 6%…but even that will send a wrong signal. CBN will ask them to recapitalize..a worse proposition.
The better option for the bank was to therefore give out 4% of its 18.7billion outstanding shares as a bonus issue. Shareholders can then go to the market and sell to recoup investments. That will be about N3.2billion at todays price for shareholders. To the bank, the only cost is a share dilution and possibly a further devaluing of its already undervalued share price. Not sure they mind though!!
FCMB released its 2012 Audited Accounts on the website of the NSE