Takeaways from the FCMB conference call
FCMB Group which recently released its FY 2017 result has foreclosed any form of capital raise this year. Group Chief Executive Officer (GCEO), Ladi Balogun, disclosed this during a conference call held last week.
Here are key takeaways from the call.
GCEO Balogun stated that the bank does not see a need to raise capital within the year. The bank intends to manage its capital by keeping its dividend payout conservative. FCMB paid a dividend of N0.10 for the 2017 financial year, same as the previous year.
Flat loan book
The bank intends to maintain a relatively flat loan book this year. It intends to push more into the retail end. It expects repayment of upstream oil and gas loans but has no plans to replace them with large loans.
The Net Interest Margin (NIM) on oil and gas loans is quite low because the cost of funding the dollar balance sheet required has become increasingly high. FCMB will also focus on agribusiness and manufacturing.
The bank took a 50% provision on its loan to 9Mobile amounting to N2.3 billion.
The bank expects the Non-Performing Loan (NPL) ratio to remain in the 5% range, as it expects some write-offs to be made in the course of the year.
The large margins from FX sales to retail customers have since evaporated since the spreads have thinned. The bank, however, anticipates an increase in trading income from SME and corporate customers.
In addition, the bank will be more active in the local currency fixed income trading space as naira liquidity grows.
FCMB expects a double-digit growth in fees and commissions, with significant growth in wealth management. Asset and wealth management divisions will continue to make significant contributions going forward. The two divisions have a Return on Equity (ROE) target for next year.
Update on pensions arm
FCMB intends to accelerate the growth of its market share by leveraging on the bank’s network. It has also taken cost control measures, some of which took effect in the first quarter of 2018. It has set a 30-40% growth in Return on Equity (ROE) for this arm.
The bank is currently seeking a UK retail license. While FCMB UK may not contribute much to the bottom line now,it does give the parent access to a diversified funding base.
FCMB UK will have a single digit Return on Equity (ROE) for the next few years, but this will grow going forward.