FCMB Group: Driving Strategic Growth with N110.94bn Public Offer

FCMB Group Plc is currently in the market for its public offer to raise N110.94 billion. Kayode Tokede reports the importance of the offer to stakeholders  as the group drives its expansion strategic growth plan

The FCMB  Group issuing  15,197,282,219 ordinary shares of 50 kobo each at N7.30 per ordinary share of N0.50kobo each. This is about N110.94 billion the group aimed to raise from new and existing shareholders.
The offer which opened on Monday, July 29 will end on Wednesday, September 4, 2024.
The offer price represents a discount of approximately 7.6per cent to the closing share price of N7.90  on June 06, 2024 and a 4.2per cent to the 30-day VWAP of N7.62 on June 06,2024.

The Group has consistently delivered impressive returns to investors, ranking second across the industry in share price growth (305per cent) over the last five years with dividends per share growing by 100per cent year-on-year.
According to analysts, FCMB’s stock offers significant upside for growth, given the stock is still trading below book value (0.31) and a low price earning ratio (1.31).
Its diversified group earnings (Nigerian Bank 68per cent vs other subsidiaries 32per cent) and strong profitability growth over the last two years (CAGR 114per cent) provide a strong justification for the rerating of FCMB share price to the benefit of  investors.

The Group capital raising exercise is on the backdrop of Central Bank of Nigeria (CBN) policy for banks operating in Nigeria to recapitalise.
In March 2024, the CBN released new guidelines on the minimum capital requirement for banks operating in Nigeria. This ranges from N50billion to N500billion depending on the type of licence held by the bank. In total, approximately N4.14trillion is expected to be raised between now and March 31, 2026.
This is why the ongoing FCMB Group’s N110.94 billion capital raising initiative at the capital market has continued to draw reactions from the investing public who admitted that the Group is already counting the gains of its proactive measures.

While some other banks are still deliberating on what to do to raise their capital, FCMB Group which had announced its desire to shore up its capital well ahead of the CBN’s announcement, is now on the verge of having its N110.94 billion capital target fully realised.
Analysts said the bank is banking on its stream of impressive performance to woo potential investors to its public offer. For instance, a recent review has shown that FCMB Group outperformed all major market indices for measuring returns in the Nigerian stock market.

Marketable Performance
FCMB Group’s strong financial performance and resilience in the face of adversity reaffirm its position as a leader in the financial sector, poised for sustained success and growth, and these constitute the strong points that cast it as a profitable investment.
FCMB Group recorded a profit before tax (PBT) of N64.2 billion in the first half (H1) of 2024, marking a 68 per cent year-on-year growth from the N38.2 billion posted in the corresponding period of 2023.
During the period, the group’s net profit hit N59.5 billion, which was a 68 per cent YoY improvement from the N35.4 billion posted in H1 2023.
It recorded a gross earning of N374.5 billion in H1’2024, representing a 57 per cent year-on-year (YoY) improvement from the N238.2 billion gross earning posted in H1’2023. Interest income of N269.2 billion represents an 81 per cent YoY increase from the N149 billion interest income in H1’2023.
Also in the H1 2024, customers’ deposits in FCMB Group increased by 26 per cent to N3.9 trillion, from N3.1 trillion as of 2023 FYYE.

FCMB Group’s net loans and advances to customers increased by 32 per cent in H1 2024 to N2.43 trillion, from N1.84 trillion as of 2023.
FCMB Group posted a net interest income of N106.2 billion during the period, marking a 47 per cent improvement from the N72.3 billion as of H1 2023. There was also a 33 per cent YoY decline in net impairment losses during the period to N31.3 billion, from N47.1 billion as of H1 2023.
The Group had declared growth in deposits, loans, assets under management, revenue and earnings and improved its environmental, social, and corporate governance scorecard in financial year ended December 31, 2023.
Meanwhile, the Group recorded a profit before tax of N104.4 billion, a 186 per cent YoY increase compared to N36.6 billion in 2022 and earnings growth across its business segments: Banking Group 212.6per cent, Consumer Finance 67.3per cent, Investment Management 40per cent, and Investment Banking 89.7per cent.

FCMB Group, paid shareholders a dividend of 50 kobo per share. The group contributed to food security and import substitution in Nigeria by increasing lending to the agricultural sector by 38.4per cent from N147.4 billion in 2022 to N204.3 billion in 2023.
In safeguarding the environment, it switched six additional branches of its retail and commercial banking subsidiary (First City Monument Bank Limited) from grid/diesel generators to solar power last year, taking the number of branches running on renewable energy to 160, which represents 78per cent of total branches.
In addition, the bank secured funding of up to N13 billion from local development finance institutions for on-lending to customers requiring solar energy solutions to further support its commitment to driving renewable energy.
FCMB’s customer base grew by 15.6per cent YoY from 10.9 million to 12.5 million for the period ended December 2023, whilst users of its mobile app that offers lending, wealth and payment solutions grew by 31per cent YoY to 3.4 million.

Strategic Growth Plan
The Group’s flagship subsidiary FCMB Limited will invest the fund to accelerate the execution of its expansion growth plans that would further enhance stakeholder value creation. The offer proceeds will be used for, business growth and expansion; Investment in IT and cybersecurity infrastructure; and Investment in human capital.
The group intends to use N84.57 billion of the proceeds on business growth & expansion; N16.22 billion on investment in IT & cybersecurity infrastructure and N7.32 billion on investment in human capital.
During the Facts Behind the Offer presentation at the Nigerian Exchange Limited (NGX), Group Chief Executive, FCMB Group, Ladi Balogun, who presented compelling evidence of the group’s resilience, operational strength and financial performance said that despite ongoing economic uncertainties and market fluctuations, FCMB Group has sustained robust growth and demonstrated exceptional resilience.
He said the Group’s earnings are expected to grow by a compound annual growth rate (CAGR) of more than 50 per cent over the next three years leading to significant earnings per share (EPS) accretion and dividend per share (DPS) growth (20 per cent of EPS) post-recapitalisation.

Key Reasons to Invest In FCMB Group
Balogun highlighted that the group has a robust recent growth trajectory, diversified with strong market position across business segments, excellent three year+ earnings growth outlook, digital led business model and impact through innovation.
On digital led business model, he said the group is well positioned to benefit from a mobile first digital ecosystem with digital banking already contributing 12 per cent of H1 2024 earnings (N45billiion) driven by a unique lending led digital strategy.
“Domestic & cross border payments, digital wealth, and SaaS offering new growth horizons,” he said.
He said the Group is a market leader in the Consumer Finance (#1) and Investment Banking (#2) segments with a leading position in pensions and banking.
“The Nigerian Bank contributed 68 per cent of group profits while other subsidiaries have contributed 32per cent as at H1 2024,” he explained.