By Michael Eboh

Shareholders of First City Monument Bank, FCMB, Plc should brace up for tough times, as the bank has said that it is unlikely to pay dividend to shareholders for its 2011 financial year, going by its huge provisions for Non-performing loans

According to a profit warning for the quarter 2011 financial year issued by the bank, its loss before tax is expected to be in the region of N17 billion driven by one-off charges and provisions totaling N32 billion for the full year.

FBN Capital Limited in a report made available to Vanguard, said the bank’s profit after tax for the full year is expected to stand at N9 compared with previous guidance of N10.8 billion.

According to the report written by Olubunmi Asaolu, as of nine months 2011, FCMB had booked around N3.4 billion in provisions, adding that the additional N29.5 billion booked in the fourth quarter comprises, in order of magnitude, around N13 billion in provisions on legacy loans, that is, loans advanced prior to 2009.

N11.6 billion in charges related to the sale of loans to the Asset Management Corporation of Nigeria, AMCON, including Zenon for which FCMB’s exposure was N24 billion and N4.9 billion in relation to two transactions for which the most significant was an underwriting commitment by FCMB for FinBank preference shares.

He further averred that the N13 billion charge from legacy loans is even more disappointing because FCMB had oversight on these loans and maybe could have prepared the market better.

“A similar criticism applies to the impairment taken on the underwriting commitment on FinBank’s preference shares, given how extensive the negotiations with AMCON on the FinBank acquisition were.

“According to management, it felt that it was better to draw a line under this transaction because of distractions that were coming from aggrieved stakeholders, even if that meant having to take 90 per cent impairment,” he said.