Return on Equity Soars to 25% as FCMB Delivers Higher Returns

First City Monument Bank Group Plc has reached a significant milestone, posting a record profit as a solid return on average equity means that stewards of the Bank are turning equity investment into income

The lender has been recording growth in profit since 2019, a rare feat amid stringently draconic regulatory requirements and tough operating environment.

The small and mid-sized lender’s return on average equity (ROAE) rose to 25.93 percent in December 2023 from 12.04 percent as at December 2022, according to MoneyCentral calculations. It is interesting to note that a ROAE of 5.12 percent was recorded in 2017, when a sharp drop in crude oil price of mid-2014 made Banks susceptible to exposure to oil and gas.

Profit after tax (PAT) surged by 206.92 percent to N95.52 billion as at December 2023, thanks to N84.25 billion foreign exchange gains as lenders in Africa’s largest economy have benefitted from a sharp depreciation in Naira, a monetary policy that was inevitable given a dearth of foreign direct investment and the need to shore up the external reserves.

However, there is going to be a slow-down in industry profit as foreign exchange gains are expected to wane since there won’t be much devaluation this year.

A high interest rate environment is a boon for FCMB as net interest income (NII), a closely watched measure of how much money banks make from lending, spiked by 40.50 percent to N177.42 billion in December 2023, from N122 billion the previous year.

The lender’s loan book was up 53.78 percent to N1.83 trillion in the period under review from N1.19 trillion.

To shore up its capital, FCMB issued perpetual additional Tier-1 fixed rate bonds to raise N20.686 billion as banks suffered shrinking capital due to the Naira devaluation and subsequent upward revaluation of foreign currency (FCY) loans and overall risk-weighted assets.

The bus has not left the lender behind as its shares have rallied since the start of the year, recording a year to date (YTD) of 50 percent.

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