FCMB Profit After Tax declines by 87% in Q3 2015

Sequel to recent profit warning by First City Monument Bank Plc (FCMB) Group that its third quarter result for 2015 might be adversely affected by impairment charges, the group at the weekend released the result showing 87percent drop in profit after tax (PAT) and 85 percent decline in profit before tax (PBT).

Ladi Balogun, GMD, FCMB

The result showed a pre-tax and after-tax loss of N7.0 billion and N6.2 billion respectively in the 2015 third quarter 2015 results compared with N23.9 billion in PBT in 2014 and N22.1 billion in PAT during the corresponding period of 2014.

Apart from the weak performance of interest income and non-interest income, the significant surge in impairment charges contributed to the outlook, which has consequently depressed both Return on Equity (RoE) and Return on Asset (RoA) with a plunge by 313.9 percent and 315.2 percent on Quarter on Quarter (QoQ) respectively.

Commenting on the result, Group Managing Director, Mr. Peter Obaseki explained that the macro-economic challenges coupled with corresponding strict industry regulations had remained daunting and the new policy by Federal Government on full implementation of Treasury Single Account compounded the liquidity challenges within industry. However, the reduction in harmonized Cash Reserve Ratio (CRR) on private and public sector deposit to 25 percent from 31 percent is expected to ease the liquidity challenges.

In the face of the above overwhelming challenges, FCMB Plc succumbed to micro economic pressures to post a disappointing financial performance.

According to him, we have observed falling risk assets management as non -performing Loan (NPL) ratio closed above benchmark at 5.8 percent against 2.7 percent, driven mainly by impairment charges. Also, operating efficiency maintained unimpressive outlook as the Cost to Income Ratio (CIR) remains bloated at 73.90 percent against 70.3 percent recorded in previous year comparable period.

The bank commended its achievement of an improved and robust balance sheet outlook with 12 percent growth on year-on-year basis, despite pressure of the new Treasury Single Account (TSA) transfer.

However, key issues from the nine months earnings as presented by the management of the bank include the fact that the bank significantly missed all its targets on ROE and ROA plunged significantly by 313.9 percent and 315.2 percent QoQ respectively, driven significantly by impairment charges; bloated CIR at 73.90 per cent against 70.3 per cent recorded in 2014 reflects sustained falling operating efficiency.

It is worthy to note that customer deposit also declined by 10.5 percent and 2.7 percent on QoQ and YoY basis respectively. However, growing non-performing loans and huge impairment charges depressed bottom-line, with significant impairment in legacy risk assets portfolio eroded the bank profitability.