FCMB market valuation slumps by 3.3% as shareholders unpack shares

In the last seven trading sessions on the equities market of the Nigerian Exchange Limited (NGX), FCMB Plc’s stock market valuation slumped by 3.3 per cent , following its twice in one quarter capital raise in the local debt capital market in the first quarter of the financial year 2023.

With a healthy addition to its capital, the company is expected to boost lending on expectation that rising interest rate will strengthen net margin as the Central bank alters money pricing with a hawkish pose.

In its most recent visit to the debt market, the group’s target was additional tier 1 capital subordinated bonds at a fixed interest rate of 16%. In a statement, management said the new raise qualifies as Tier I capital without diluting shareholders’ earnings prospect.

According to its latest earning release, FCMB Plc reported strong earnings performance, supported by its healthy business diversification. At analyst conferences in the past, management has always indicated plans to reduce its banking arm’s contribution to overperformance as a way to dilute the impact on overall profit growth.

This has been largely achieved and a need to support capital based became necessary. With persistent debit for failing to meet loan-to-deposit ratio requirements, the group was in the bond market for capital raised twice in three months.

Over N50 billion has been raised by FCMB Group this year amidst a plan to deepen its footprint in the retail segment and reduce opportunity costs of CBN CRR debits on earnings.

In a statement submitted to regulators, FCMB said AT 1 raise is specifically targeted to boost the banking subsidiary capital adequacy ratio. Confirming this, Yemi Edun, FCMB CEO the AT-1 bond will enable the Bank to finance incremental term lending in priority sectors.

The last push in Q1-2023 was FCMB group N20.686 billion perpetual 16% fixed rate resettable NC5.25 additional Tier I capital subordinated bonds (AT1).

The group pull the sum out from its N300 billion debt Issuance programme registered with regulators. In January 2023, MarketForces Africa reported FCMB group raised N30 billion from the local debt market.

In total, the group pulled N50.686 billion from the market in the first quarter of the year. It is expected that the impact of the capital raise will reflect on the group earnings results in the first quarter after it out the sum up for business.

Meanwhile, after the CBN naira design spooked the economic activities, FCMB indicated its earnings could slump. The Naira crunch affected all local banks’ activities and market analysts estimated that the experience is more likely to cause earnings draught in the banking sector – generally speaking.

Negative impacts of the failed naira policy implementation will have direct impacts on retail banks with high depositors’ funds, according to analysts.

Taking the bull by the horn, FCMB forecasted its gross earnings between April to June will print at N89.17 billion, 29 per cent below N126.22 billion the group generated in the comparable period in 2022.

The group expects its profit to settle lower at N9.83 billion, more than 31 per cent below N13.66 billion reported in the comparable period. Year to date, FCMB has gained 15.95 per cent in the stock market