The performance of First City Monument Bank (FCMB) Plc for the 2012 fi nancial year and its recent transformation into a Holding Company shows that the fi nancial institution is on a stronger footing and set to enhance value to customers and shareholders.
The audited accounts of FCMB Plc for the 2012 fi nancial year showed that it recorded a net profi t of N15.3 billion, an increase of 256 per cent over the loss of about N9.24 billion in 2011. Total deposits from customers rose from N411 billion in 2011 to N646 billion in 2012, an increase of 57 per cent. This is an indication of an increasing market share for the bank. In the same vein, the bank's loans and advances grew by 11 per cent to N357 billion in 2012, compared to N323 billion in 2011.
The stellar performance recorded was driven by strong growth in interest income and non-interest income of 39 per cent and 138 per cent, respectively. The bank maintained the momentum of its last year's performance into this year as the result for the fi rst quarter ended March 31, 2013 showed a profi t after tax of N4.2 billion. This represents a rise of three per cent when compared to N4.10 billion recorded in the corresponding period of 2012.
Strategies
The bank leveraged on its merger with FinBank as its spread and customer base have increased signifi cantly making it one of the most visible and viable banks. This development has also made it fi t for signifi cant retail growth and a more competitive commercial bank with reduce cost of funds, greater convenience and capacity to distribute its products and serve customers.
As a result of the integration of operations, the bank was able to realize cost synergies arising from duplicated branches, head offi ce and technology costs. The customer base has risen to over two million, while branches and cash centres have increased to over 275. Also, sentiment about merger and morale has remained positive among staff of both banks, which of cause increased productivity.
Profitability
Income associated with the deployment of capital improved year-on-year, as profi t before tax stood at N16.2 billion in 2012, putting behind the loss position of the 2011 fi nancial year of N4.8 billon. Return of equity stood at 11.2 per cent, as at December 2012, from the negative of nine per cent in the corresponding period of 2011, while group net revenues were up by 37 per cent year-on-year at N72.6 billion in 2012 and 18 per cent year-on-year at N19.3 billon in the fi rst quarter of 2013.
The operational expenses growth of 17 per cent recorded in the fi rst quarter of this year was as a result of the mid-period consolidation of FinBank's numbers in the fi rst quarter of 2012, while the 37 per cent growth in operating income, as at 31 December 2012 over 2011, was substantially driven by the FinBank merger, which saw its non-interest income consolidated for the fi rst time in 2012.
Liquidity
The balance sheet and earnings potential of FCMB has improved signifi cantly, as the bank's capital adequacy and liquidity ratios remain strong at 21.9 per cent in 2012 and 27.2 per cent in the fi rst quarter of 2013 and 59 per cent in 2012 and 49 per cent in the fi rst quarter, respectively. Total assets were up by 51 per cent to N909 billion in the 2012 fi nancial year, but contracted slightly to N895 billion in the fi rst quarter of 2013 as the bank continued its drive to improve effi ciency ratios and asset quality.
Net interest margin was 8.2 per cent in the fi rst quarter, an improvement of 44 per cent from the fourth quarter of 2012 and 30.6 per cent from fi rst quarter of 2012, respectively, enabled by a better deposit mix and continued growth in retail loans. Cost-to-income ratio was 60.3 per cent for the 2012, showing a fl at year-on-year improvement of 1.2 per cent. There was also a 6.5 per cent year-on-year improvement in the fi rst quarter of 2013. Risk assets grew by 10.9 per cent in the 2012 fi nancial year to N357.8 billon, but fell by 3.5 per cent to N329 billion in the fi rst quarter, while the non-performing loans ratio, fell by 10.9 per cent to 2.5 per cent as at December 2012 and by 41.4 per cent to 3.3 per cent in the fi rst quarter.
What is new
On June 24, 2013, the bank announced its transformation into a Holding company structure having completed all the regulatory and legal processes required to set up a holding company to manage the governance of First City Monument Bank Plc and its subsidiaries.
The journey started with the directive of the Central Bank of Nigeria (CBN), under Regulation 3 of 2010, that all deposit banks in Nigeria should divest their non-core banking subsidiaries and consolidate into one Holding Company. On December 2012, the shareholders of the bank approved the restructuring at an Extra-Ordinary General Meeting. The implementation roadmap was elongated due to the signifi cant merger transaction in 2012 and the need to dispose of seven non-permissible/ non-strategic subsidiaries.
Under the Holding Company structure, shareholding in First City Monument Bank (FCMB) Plc have been exchanged onefor- one for FCMB Group Plc shares, effectively making them owners of FCMB Group Plc, in the same ratio as previous holding in the bank. Through ownership of FCMB Group Plc, shareholders will continue to own all the subsidiaries 100 per cent, including First City Monument Bank Plc and its subsidiaries (FCMB Capital Markets Limited, CSL Stockbrokers Limited, Credit Direct Limited, FCMB (UK) Ltd, Arab Gambian Islamic Bank Ltd, First City Asset Management Ltd anddd CSL Trustees Ltd).
FCMB Group Plc will have three wholly-owned direct subsidiaries – First City Monument Bank Plc, FCMB Capital Markets Limited and CSL Stockbrokers Limited while the other entities in the Holding Company will report into the three direct subsidiaries. Four out of the non-permissible/non-strategic subsidiaries: City Securities (Registrars) Ltd, FinBank Capital Ltd, FinBank Homes Ltd and FinBank Securities & Asset Management Ltd have been sold, subject to regulatory approval. The sale of Fin- Bank Insurance Brokers Ltd, FinBank Insurance Company Ltd and Arab Gambian Islamic Bank Ltd is ongoing while Fin Registrars Limited has been liquidated.
The Board of Directors of the FCMB Group Plc and those of the subsidiaries have been duly constituted. Mr. Ladi Balogun is the Group Managing Director/ Chief Executive of FCMB Plc, while Peter Obaseki has been appointed Managing Director of the holding company, FCMB Group Plc and will report to the Board of Directors of FCMB Group Plc, which will be chaired by Dr. Jonathan Long.
Analysts are of the opinion that the emergence of FCMB as a Holding Company represents another major milestone in the history of the fi nancial institution, which was founded in 1977 by Dr. Olasubomi Balogun. The analysts observed that the continuous re-strategisation and renewal of the fi nancial institution (right from its early origin in investment banking as City Securities Limited in 1977 to its present status) is a demonstration of a commitment to be the best in the market place going by its target to be among the top fi ve banks in Nigeria by 2015. They further expressed optimism that the Holding Company structure will make the bank become more competitive in the industry and enhance its profi tability, which would ultimately create value for shareholders.
Outlook
The holding company structure will make the bank become more competitive in the industry and enhance its profi tability, which would ultimately create value for shareholders. According to the GMD/CEO of FCMB Plc, Ladi Balogun, the improved performance recorded during the year under review has shown that the bank has recovered strongly, adding that the board is committed to ensuring that the performance improves further in 2013.
He stated that by 2015, retail banking should account for 40 per cent of our revenues and 50 per cent of the bank's profi ts. "This implies robust margins and a high effi ciency model for the retail bank, driven by alternate channels such as mobile, internet, mobile, sales agents and bank agents. Our goal is to ensure that our cost to income ratio is below 50 per cent by 2015 so that we can achieve a group return on equity of about 30 per cent.
"We are on course for the attainment of a 75 per cent low cost deposit mix by 2015, and with the growth in retail loans, we foresee our net interest margins remaining consistently above eight per cent over the next two years. We look ahead to 2013 with great optimism and resolve that our performance can only get better and we will move from strength to strength," Balogun added
National Mirror