Culled—Proshare
February 3, 2020
By ARM Research
FCMB Group Plc reported EPS growth of 8.5% YoY to N0.89/share, coming above our estimate of N0.60/share. The deviation stemmed from lower loan-loss provision booked and higher than expected loan growth. To buttress, as at 9M 2019, loan growth was at 0.8%. Going into the last quarter, the bank expanded its loan book by 12.5% taking total loan growth for the year to 13.3% YoY. This resulted into sizable growth in interest income QoQ and YoY.
Overall, key drivers of the result were the strong growth in interest income and lower provisioning, both of which masked a decline in Non-interest revenue and increase in interest expense. As mentioned earlier, interest income rose by N9.6 billion YoY neutering pressure from higher interest expense (+N4.9 billion YoY). On balance, Net Interest Income expanded 6.5% YoY to N77.3 billion with related margin contracting 44 bps YoY due to a faster growth in interest earning assets. Elsewhere, the bank reported lower loan-loss provision of N9.3 billion (-34% YoY) with Cost of risk moderating by 93 bps YoY to 1.3%. Lastly, Non-interest revenue moderated 7.3% YoY to N36.3 billion largely due to lower FX gains.
Streamlining to the quarterly breakdown, PBT and PAT expanded by 80.6% QoQ and 112.4% QoQ to N7.2 billion and N6.9 billion respectively on the back of an increase in NII and lower loan-provision. Despite increased funding cost, NII was higher by 19.8% QoQ largely on the back of higher interest income on loans. Growth in funding cost was largely on the back of higher interest expense on deposits from banks. That said, NIM contracted marginally by 10 bps QoQ following a faster growth in interest earning assets. Elsewhere, loan- loss provision moderated 37.9% QoQ to N1.5 billion.
We think the performance over FY 19 was decent. Despite our expectation for pressured earnings over 2019, particularly due to absence of FX gains, the bank was able to stay above the pressure. We will be on the watch for possible updates to the audited result following CBN’s approval.
Our last communicated FVE of N2.07 translates to a NEUTRAL recommendation on our rating scale. FCMB trades at a current P/B of 0.20x, a discount to 1-year average of 0.32x. 
