Four key factors will shape the bank’s full year earnings performance depending on how they turn out in the final quarter.The first and the most critical is the cost of funds, which posed a major headache to the bank’s management in the just concluded financial year. Up to the end of the third quarter, interest expenses grew well ahead of interest income — which shrank margins.
The direction of interest expenses in the final quarter will therefore be a key determinant of whether the bank’s recovery journey would progress or falter with the 2021 outing. On year-on-year reading, FCMB raised gross earnings from a 4 percent decline at half year to an increase of 2 percent to close at N149.5 billion at the end of nine months of operations. This is a sustained improvement from a 12 percent revenue drop in the first quarter.
The third key factor to watch is cost savings from rapidly dropping net impairment loss on financial assets. The bank recorded a drop of 64 percent in net loan impairment expenses year-on-year to about N4.8 billion at the end of September. Whether the margin of drop in credit loss expenses will increase or shrink in the final quarter is a key development that will either improve of squeeze the bank’s profit capacity for the year.
Whether the gains will be sustained or lost is a crucial development that will define the bank’s full year performance.
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