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In the News
FCMB is Maintaining Underperform Rating on Weak Outlook
Posted 05/02/2016/ 12:33:49 pm | Share on Facebook
Following FCMB Group’s (FCMB) results which surprised negatively, we have cut our 2016E earnings forecast by 20% and our price target by 22% to N0.5. The cut to our EPS forecast is mainly driven by a -7% reduction to our funding income estimate (we have raised our non-interest income forecast by 7.1% on the back of a better-than-expected Q3 result).

Although management guided to a 2016E loan growth target of 10% or slightly less, we have maintained a more conservative loan growth outlook of 5%. We expect the prevailing macro-headwinds to continue to weigh, particularly on asset quality.

We have kept our 2016E loan loss provisions forecast relatively unchanged at around N14.6bn based on a cost of risk estimate of 2.4%, despite the fact that management is hopeful of seeing some recoveries. As a result of these changes, we have reduced our 2016E PBT forecast by 20% to N4.2bn. Ytd, FCMB shares have shed -47.3% vs. ASI -17.9%. At current levels, our reduced price target implies a downside potential of -41%. We maintain our Underperform rating.


Weak Q3; Spike in Impairments underpin Pretax Loss of -N7.0bn

FCMB‘s Q3 2015 results showed pre-tax and after-tax losses of –N7.0bn and -N6.2bn respectively. Although almost all the key headlines items contributed to the loss, a 739% y/y spike in loan loss provisions to N11.5bn was the key driver behind the weak results.


Further up the P&L, profit before provisions declined by -10% y/y, largely due to a 15% y/y reduction in funding income. Although interest expense fell by 23% y/y, this was completely offset by an -18% y/y reduction in interest income. In contrast, non-interest income was flat y/y.

Sequentially, pre-provision profits were down by -5% q/q. Again, the weakness was driven by funding income (-13% q/q). Although non-interest income grew by 14% q/q, the growth on this line was not enough to provide an offset. Compared with our forecasts, profit before provisions missed by 10%, largely because of a negative surprise (-21%) on the funding income line.

Although non-interest income surprised positively, beating our estimate by 21%, the weakness on the funding income line proved significant. Further down the P&L, impairment charges came in 162% higher than our forecast and were the major driver behind the negative surprises in PBT and PAT relative to our N1.8bn and N1.5bn forecasts for both lines respectively.
 
 
Stock Market Insight as at 20th Jun 18
 
Top 5 Gainers View Gainers   
 SECURITY LAST CLOSE CURRENT CHANGE % CHANGE 

 FO

35.15

35.80

0.65

1.82 % 

 ETERNA

6.61

7.20

0.59

8.19 % 

 ZENITHBANK

25.50

26.00

0.50

1.92 % 

 STANBIC

48.75

49.00

0.25

0.51 % 

 ETI

20.00

20.20

0.20

0.99 % 

 
Top 5 LosersView Losers   
 SECURITY LAST CLOSE CURRENT CHANGE % CHANGE 

 SEPLAT

754.90

717.20

-37.70

5.26 % 

 NB

110.10

109.00

-1.10

1.01 % 

 CCNN

26.00

25.20

-0.80

3.17 % 

 GUARANTY

 41.00

40.65

-0.35

0.86 % 

 CUSTODIAN

5.27

5.01

-0.26

5.19 % 

 
Top 5 Trades   [By Volume of Trade]
  SECURITY VOLUME VALUE (N)  

  ZENITHBANK

44,844,747

1,146,236,337.80  

  FBNH

38,692,205

411,822,341.55  

  ACCESS

25,824,464

266,668,353.00  

  UBA

14,207,810

1,146,236,337.80  

  TRANSCORP

13,629,233

19,576,354.67  

 
Financial Indicator
     
  TRADE VOLUME:

267763971

  NO. OF DEALS [TRADES]:

4786

  TRADE VALUE:

3826616937.03

  ALL-SHARE INDEX:

38605.07

  MKT. CAPITALIZATION:

13984710032284.83

 
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