First City Monument Bank Plc (FCMB) , a Nigerian lender, said First-Half (H1) profit rose 28.98 percent as foreign- currency gains in the wake of Naira devaluation compensated for surge in bad loan charges.
Net income climbed to N9.70 billion from N7.52 billion year ago, the Lagos-based Bank said on the website of the Nigerian Stock Exchange (NSE).
The lender made foreign-exchange revaluation gains of N3.65 billion in June 2020, compared with N1.46 billion a year ago, while non interest revenue-that consists of fees and commission income, and other income-was up by 14.23 percent to N17.25 billion as at June 2020.
Impairment losses on financial assets increased by 40.98 percent to N7.74 billion from N5.49 billion the previous year, and the bank said foreign currency revaluation gain represent gains realised from the revaluation of foreign currency-denominated assets and liabilities held in the non-trading books.
Impairments rose to N7.74 billion from N5.95 billion a year earlier, and bad loan losses are anticipated to surge on the back of guidelines prescribed by IFRS 9 and weak macroeconomic conditions.
The key import of IFRS 9 is the introduction of a forward-looking “expected loss “impairments standard that requires banks to provide more timely recognition of expected credit losses (ECL), based on future expectations, in place of the “incurred loss” model.
Loans and advances to customers increased by 10.15 percent to N794.61 billion as at June 2020, from N715.88 billion the previous year; and future loan growth could be muted as the coronavirus pandemic and the ensuing lock down that paralyzed business activities made loan disbursement difficult.
In a proactive move, FCMB Group said it plans to restructure half of its loans after plunging oil prices, the coronavirus lockdown and naira devaluation hindered the ability of the Nigerian bank’s clients to repay their debt.
The lender plans to increase impairments to offset losses in unhedged upstream assets in the oil and gas industry, it said. About 37 percent of the bank’s customers have foreign-currency loans and earn income in naira, so the lender will convert those into the local currency, FCMB said.
FCMB is using its subsidiary- FCMB Pensions Limited- to magnify its earning and stamp its footprint in the Nigerian Pension Industry.
FCMB Pensions Limited has consummated the acquisition of 96 percent in AIICO Pensions Limited.