FCMB to Sustain Conservative Dividend Policy to Boost Capital Position

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By Modupe Gbadeyanka

Group chief executive of FCMB, Mr Ladi Balogun, has disclosed that the group will continue to maintain a conservative dividend policy so as to improve its capital position.

Mr Balogun made this disclosure during a conference call to stakeholders of the banking group on Friday.

According to him, the financial institution does not have plans to raise funds this year due to high funding costs, especially for borrowing in Dollars.

In its 2017 financial statements released this week, the board of FCMB proposed the payment of 10k per share dividend to shareholders.

As at Friday, April 6, 2018, the shares of FCMB were sold on the floor of the Nigerian Stock Exchange (NSE) for N2.35k per share.

Speaking on how the firm plans to make a possible impact this year, Mr Balogun said the tier-two lender expects its non-performing loans to rise in the course of the year but would be within a regulatory target of five percent.

In 2017, the financial institution recorded non-performing loans (NPL) to total loans ratio of 4.9 percent.

Also last year, FCMB booked a 50 percent impairment of N2.3 billion on loans to debt-laden 9mobile, which is in talks with investors to take over the telecoms firm.

This year, the bank expects loan growth to be flat, down from last year’s 5.4 percent rise, as oil companies pay down debt.

“We expect to see large repayments in the oil and gas sector this year. We agree that the (economy) will be improving but largely because of chunky paydowns, we don’t think we would be able to replace those quickly,” Mr Balogun stated.

The bank chief disclosed that FCMB would focus on retail banking with a higher margin this year to make up for a drop in government bond yields as the lender may not be able to write large loans quickly enough to counter-balance repayments by oil firms.

He said the economy was improving after Nigeria experienced its worst recession in a quarter of a century in 2016, which should boost consumers.

“We are pushing more in the area of retail banking,” he said.

According to him, the lender was seeking to convert its wholesale banking unit in Britain, FCMB UK, into a retail bank, as part of its push to grow its balance sheet and tap into non-institutional customers in Britain.

He said the impact of the British strategy would not be immediate but would enable the lender to achieve incremental growth.

Mr Balogun disclosed that the earnings contribution in Naira terms from the British unit will be around N500 million for 2018. FCMB UK grew pre-tax profit by 250 percent to N300 million last year.

“We’ve decided to slow down right now on asset growth and focus more on changing the mix of the asset and getting out some of the low margin upstream oil and gas business,” he said.

In its 2017 earnigns, FCMB achieved a gross revenue of N169.9 billion, a 4 percent decrease from N176.3 billion in 2016.

The decrease was primarily driven by the exceptional FX revaluation income in 2016.

The lender also posted a non-interest income of N32.0 billion for the full-year ended December 2017, a decrease of 33 percent Year-on-Year (YoY) from N47.7 billion for the same period prior year.

In addition, the net impairment on loans reduced by 33 percent YoY to N21.3 billion for the twelve-months ended December 2017, from N31.8 billion for the same period prior year, while the operating expenses increased by 5 percent to N68.7 billion for the full-year ended December

2017, due to contingent expenses.

During the year under review, the bank posted a profit before tax (PBT) of N11.5 billion, declined by 30 percent from N16.2 billion for the twelve-months 2016.

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