FCMB loan loss provisioning drags down profit

FIRST City Monument Bank(FCMB)Plc loan loss provisioning has signifianctly impacted to the decline in its profit
The Bank declared a Profit Before Tax (PBT) of N4.8 billion for the financial year ended April 30, 2009.

This represents a 77 per cent drop when compared with N20.52 billion achieved in the corresponding period of 2008.The audited result for the financial year ended April 30, 2009 recorded a 36 per cent growth in gross earnings at N71.66 billion.

A statement issued by the bank said the major contributing factor to the decline in the results  was the significant loan loss provision of N21.9 billion. “This amount was a result of the N7.9 billion provisions as determined by the bank and additional provisions of N14 billion representing 58% of the amount advised by the CBN stress test on the bank’s loan portfolio as at June 30th 2009”, the bank explained.

Total provisions from the CBN exercise was N24 billion. The balance of N10 billion was recognised in Q1 (ended July 2009) of the current financial year.

For the full financial year, total assets grew by 10 per cent  from N467.34 billion to N515.60 billion. Deposits grew by 28% in the year from N251.22 billion to N321.22 billion. Loans grew by 45% from N189 billion to N273 billion. Nonperforming loans rose to 10% of total loans as a result of the stress test.

Meanwhile, in its six months results  ended October 2009, the bank recorded  a loss of N479 million.
The bank also simultaneously released Q1 (31st July 2009) and Q2 (30th October 2009) results.

The latter showed that whilst the balances of the provisions of N10 billion were made in July 2009, recoveries of provisions totalling N5.2 billion have been made between September 1st and October 30th. Year to Date loss was N479 million, which suggests barring any unforeseen circumstances the eight months period ending December 31st 2009 should close on a positive note. Management also expects that further recoveries will be recorded in the remaining months of the year.

For the six months period, gross earnings were down by 13 per cent, while operating income was down 28 per cent from same period of year. This is largely attributable to the slowdown and suspension of interest income on non performing loans. Nonetheless, capital adequacy remains extremely buoyant at 31 per cent. With the special audit and provisions now behind the bank, the bank will continue its recovery drive on provisioned accounts which is expected to yield further positive results and resume profitable volume growth in 2010.

The bank also explained that appropriation of profit for the financial year ended April 2009, whether to cash dividend, bonus or transfer to reserves will be communicated as soon as the CBN approval is received on this item. This is as Management has scheduled conducting an investor conference come next week to discuss the results.