FCMB Group Reports Q1 2018 Results – Pre-provision Profits Declined by 24% Q0Q

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Event
: FCMB Group reports Q1 2018 results
Implications: Limited revisions to consensus 2018 PBT forecast.
Positives: PBT grew by 64% y/y, driven by strong double-digit growth in funding income
Negatives: Pre-provision profits declined by 24% q/q driven by q/q reduction in both revenue lines.

This afternoon FCMB Group (FCMB) published its Q1 2018 results which showed that PBT grew by 64% y/y to N3.3bn. Although the double-digit earnings growth was primarily underpinned by a 12% y/y growth in pre-provision profits, a 2% y/y reduction in loan loss provisions also helped. In term of revenue drivers, although both revenue lines grew  y/y, funding income which advanced by 14% y/y was the stronger of the two.

The growth in non-interest income came in at around 6% y/y. Further down the P&L, PAT growth narrowed to 31% y/y mainly because of a 60% y/y reduction in other comprehensive income. Sequentially, PBT and PAT fell by 30% q/q and 50% q/q respectively because of negative surprises on both revenue lines.

Compared with our forecasts, PBT beat by 74% because of the positive surprise in funding income which came in around 15% higher than our estimate. FCMB’s Q1 PBT points towards a 2018E ROAE of 5.9%, slightly ahead of management’s guidance of c.5%.

When annualised, FCMB’s Q1 2018 PBT tracks broadly in line with consensus 2018 PBT forecast of N12.5bn. As such , we expect to see limited revisions to consensus 2018E PBT forecasts and a subdued or neutral reaction from the market.

FCMB shares have outperformed the index year-to-date. The shares have gained 66.9% ytd  vs. the 7.9% ytd gain delivered by the index.

We rate the shares Underperform.

Our estimates are under review.

FCMB Group Q1 2018 results: actual vs. FBNQuest Capital Research estimates (N millions)

Source: NSE; FBNQuest Capital Estimates

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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