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FCMB not likely to write large loans to counter-balance repayments by oil firms—Balogun

Considering the revelations form its recent FY results, the Group Chief Executive Officer of leading mid-tier lender, First City Monument Bank (FCMB), Ladi Balogun has given early signal suggesting that the bank would focus on retail banking with a higher margin this year to make up for a drop in government bond yields.

The group had last Wednesday, posted a 29.5 per cent drop in 2017 pretax profit to N11.46bn.

He also hinted that FCMB might not be able to write large loans quickly enough to counter-balance repayments by oil firms.

Otherwise, the bank expects loan growth to be flat this year; down from last year’s 5.4 per cent rise as oil companies pay down debt. The bank booked a 50 per cent impairment of N2.3bn on loans to debt-laden 9mobile, currently in talks with investors to take over the telecoms firm.

Balogun said “We expect to see large repayments in the oil and gas sector this year. We agree that the (economy) will be improving but largely because of chunky pay-down; we don’t think we would be able to replace quickly,” he told an analyst call, adding, “We are pushing more in the area of retail banking.”

However, one of the key targets of the bank this year is to seek conversion of its wholesale banking unit in Britain, FCMB UK, into a retail bank, as part of its push to grow its balance sheet and tap into non-institutional customers in Britain.

While stressing that the impact of the British strategy would not be immediate but would enable FCMB achieve incremental growth, Balogun averred that “the earnings contribution in naira terms from the British unit would be around N500m naira ($1.64m) for 2018”.

Business Hilights recalls that the FCMB UK grew pre-tax profit by 250 per cent to N300m last year even as the GMD revealed that “We’ve decided to slow down right now on asset growth and focus more on changing the mix of the asset and getting out some of the low margin upstream oil and gas business”.

Balogun disclosed that the bank does not see a need to raise funds this year due to high funding costs, especially for borrowing in dollars, and would maintain a conservative dividend policy to improve its capital position.