FCMB Group Plc’s overhaul of problem loans is beginning to restore room for credit growth and dividends, even as the Nigerian lender absorbs higher impairment charges and faces risks from restructured exposures.
The banking group’s gross loans returned to growth in the first half of 2026, expanding 4.4% year-to-date after a 3.8% contraction in the first quarter. The recovery reflects deployment of recapitalization proceeds into higher-yielding small and medium-sized enterprise lending, alongside plans to expand retail, consumer, upstream oil and foreign-currency credit.
CardinalStone Research forecasts 10% loan growth for FCMB in 2026, reversing the 0.4% decline recorded in 2025. The brokerage retained a Buy recommendation, with a ₦16.38 12-month price target versus a reference price of ₦12, implying 36.5% upside.
Loan-book cleanup
FCMB’s credit remediation program has materially improved its regulatory non-performing loan position. Under the Central Bank of Nigeria’s prudential framework, the bank’s NPL ratio declined to 5.2% in the first half from 17.0% at the end of 2025.
The improvement followed approximately ₦63.4 billion in write-offs, ₦74.9 billion in customer repayments and roughly ₦67 billion in loan restructurings that are now performing. Nominal NPLs fell 65% year-to-date to ₦108.7 billion.
The regulatory improvement is more substantial than the movement under IFRS 9, where Stage 3 loans declined only 18% year-to-date. That distinction matters because a large Power & Energy exposure was moved from Stage 2 to Stage 3 and now accounts for about half of total Stage 3 loans.
Earnings outlook
Higher asset yields, stronger interest-earning assets and a shift toward more efficient funding are expected to support FCMB’s earnings through the end of the year. Interest income rose 31% year-on-year in the first half, helped by a 1.7-percentage-point increase in asset yields to 23.7% and 26.5% growth in interest-earning assets.
The lender increased foreign-bank placements to ₦611.6 billion in H1 2026 from just ₦736.6 million at the end of 2025, taking advantage of higher offshore yields. Management plans to shift part of those placements into naira Treasury bills and Federal Government bonds, which could reinforce net interest margins.
FCMB’s CASA ratio improved by 9.5 percentage points year-to-date to 74.9%, as management retired expensive fixed deposits and expanded current and savings account balances. CardinalStone expects the group’s net interest margin to widen to 14.9% in 2026 from 12.2% in 2025.
Dividend reopening
The asset-quality cleanup could also reopen a crucial funding channel for the holding company. FCMB’s banking subsidiary is expected to resume upstreaming at least 30% of profit after tax, subject to regulatory approval, after its NPL ratio fell below the CBN threshold.
The constraint limited dividend flows in 2025, when the group relied largely on non-bank subsidiaries to fund a ₦0.35 per-share dividend. For 2026, management has guided for a ₦1.00 dividend per share. CardinalStone forecasts ₦0.96, equivalent to a 22.5% payout ratio, based on estimated EPS of ₦4.26.
Risks to the recovery
The investment case is not without risk. FCMB already booked ₦96.6 billion of loan impairments in the first half, equivalent to a 7.6% cost of risk. CardinalStone projects full-year impairment charges of ₦140.4 billion, up 71.8% from 2025, with a cost of risk of 5.2%, compared with 3.6% last year.
A deterioration in restructured credits would be the clearest downside risk. The group’s faster regulatory NPL reduction also does not fully eliminate IFRS 9 credit concerns, particularly given the concentration of Stage 3 loans in the Power & Energy sector.
Still, the recapitalization has left FCMB with a stronger buffer. CardinalStone forecasts capital adequacy of 20.3% in 2026, up from 18% in 2025, while liquidity is projected at 58.9%. The combination of loan growth, improved deposit mix and a potential restart of bank-to-holding-company dividends is central to the brokerage’s constructive view.
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