FCMB may have set the pace for its 2017 financial year with 40% Y/Y or 384 %Q/Q boost in provisioning and decline in funding income, recorded in the first quarter ended 31 March 2017.
The result which was released recently for the investing public showed that Profit before tax (PBT) declined by 10 per cent y/y to N2.0billion, while PAT grew by 405 per cent y/y to N2.1billion courtesy of other comprehensive income (OCI)
Components of other comprehensive income which boosted FCMB’s PAT in Q1, may be unrealized holding gains on investments that are classified as available for sale, foreign currency translation gains, Pension plan gains or losses, or Pension prior service credits. All these forms of earnings are usually one off gains.
However, key driver behind the marked growth in PAT was a positive result of N537m on the other comprehensive income (OCI) line compared with a loss of –N1.2bn in Q1 2016.
The FCMB Q1 2017 result which has remained subject of discussion in the equities market, may have started generating negative reaction from the market, which ostensibly has triggered downward revisions to consensus 2017E PBT by some investment analysts.
Pre-provision profits grew modestly by 4 per cent y/y. However, a 40 per cent y/y rise in loan loss provisions proved significant and completely offset the modest growth in pre-provision profits.
Apart from the rise in provisions, the decline in PBT was also underpinned by a 9 per cent reduction in funding income. In contrast, non-interest income grew by 49 per cent y/y.
Sequentially, PBT declined by 4 per cent q/q. Again, funding income which declined by 5 per cent q/q and provision for loan losses which was up by 384 per cent q/q were the key drivers behind the reduction in PBT on a q/q basis.
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