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Tuesday, August 16, 2022

FCMB’s Profit Rises to Highest in Six years on Treasury Trading Income

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First City Monument Bank (FCMB) Plc profit has risen to the highest in six years, thanks to a surge in treasury trading income.

The small and mid-sized lender saw net income increase by 80.92 percent to N13.66 billion as at June 2022, which is near the 2016 highs of N15.13 billion, based on data gathered by MoneyCentral.

Return on average equity (ROAE), a measure of profitability and efficiency, moved to 11 percent in June 2022 from 6.60 percent in 2021 and the highest in six years.

Aside from the uptick in interest income, the growth at the bottom line was largely driven by a 707.77 percent surge in treasury trading income to N4.66 billion.

It is interesting to note that banks who were reeling from deteriorating net interest margin have been benefitting from a gradual rise in bond yields as a benign yield environment paved the way for them to make money from fixed income securities.

Treasury Bills (T-Bills) are investment vehicles that allow investors to lend money to the government. In return the investors get a steady interest income. The maturity period for a treasury bill is less than one year.

The Nigeria 10-year government bond has a 11.778 percent yield and Nigeria 1-year government bond has a 5.467 percent yield, according to World Government Bonds.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised the benchmark interest rate to 14 per cent from 13 percent.

The new development makes it the second consecutive time the central bank would raise the benchmark rate in 2022.

Further analysis of the financial statement of FCMB shows interest income was up 34.96 percent to N98.08 billion in June 2022 while net interest income increased by 40 percent to N60.48 billion.

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