October 12, 2021
  • October 12, 2021

Fitch Ratings Confirms FCMB IDR at “B-” with a Positive Outlook – Nairametrics

By on October 2, 2021 0

Fitch Ratings has confirmed First City Monument Bank’s (FCMB) Long-Term Issuer Default (IDR) rating at ‘B- with a stable outlook.

This is indicated in the report published Thursday by Fitch Ratings on its website.

According to the rating commentary, the national long-term rating has been upgraded from “BBB + (nga)” to “BBB (nga)” in accordance with bank policy. increased solvency compared to other issuers in the country. The report highlighted the main scoring drivers showing improved impaired loans in recent years.

The commentary also pointed out that FCMB’s national ratings were driven by the autonomous strength of the bank, with a capital adequacy ratio of 15.9%, which is above the minimum regulatory requirement of 15%.

Key factors

  • FCMB’s issuer default rating is determined by its intrinsic creditworthiness, defined by its “b-” VR. VR reflects FCMB’s exposure to Nigeria’s volatile operating environment and high credit concentrations.
  • This, according to the agency’s comment, is offset by the bank’s capitalization and adequate asset quality for rating, the latter partly reflecting significant non-loan assets comprising mainly Nigerian government securities ( B / Stable) and cash investments.

The commentary also highlighted notable indications from FCMB’s loan portfolios during the reporting period. Notably, FCMB’s bad loan ratio (stage 3 IFRS 9) has improved in recent years. It fell to 3% at the end of 1H21 (end of 2019: 3.6%), mainly due to improving economic conditions, growth in loans and write-offs.

According to the report, the bank finances itself mainly through granular deposits from individuals and SMEs (70% of total funding at the end of the first half of 2021, 73% in the form of current accounts and savings). The growth of deposits has been rapid in recent years, leading to a reduction in the customer loan / deposit ratio calculated by Fitch to 70% at the end of the first half of 2021 (a level still above that of its peers) from 77% at the end of 2019.

The recent upgrade and assertion are in line with its improved performance recorded in recent times.

A quick analysis of its performance for the year 2020 shows a 10% increase in its gross profit despite the effect of the pandemic during the year. The bank was able to navigate its operations during the pandemic, increasing its after-tax profit by 13.1% to 19.61 billion naira from 17.34 billion naira reported the previous year.

Its statement of financial position also showed an improvement in assets, with total assets increasing 23.4% to 2.06 trillion naira, from 1.67 trillion naira recorded the previous year. In addition, equity increased by 13.2% to reach N227.12 billion in 2020. Likewise, loans and advances to customers increased by 14.9% to reach N822.77 billion in the year. during the period under review.

At the same time, Fitch testified that operating conditions in the country were gradually stabilizing and forecasting GDP growth of 1.9% in 2021, after the contraction of 1.8% recorded the previous year.

Our baseline scenario is that business volumes and earnings should continue to rebound in 2021, while the recovery in oil prices is also a positive factor.

Nonetheless, downside risks persist, given inherently volatile market conditions, with banks still exposed to foreign exchange (CF) shortages, a potential further devaluation of the currency, rising inflation and regulatory intervention by the Central Bank of Nigeria (CBN)», We read in part in the report.

What you should know

The FCMB Group Board of Directors announced the appointment of Yemisi Edun as Managing Director and CEO of the banking subsidiary in July 2021, placing her among the notable female bank CEOs in the country.

At the time of writing, the FCMB is trading at 2.89 N on the Nigerian Exchange Group.