FCMB: THE STRUGGLE RAGES.

The now legendary struggle between paper profit and paper loss  so obvious in Nigerian banking also raged in FCMB PLC within the nine months to September, this year.

According to unaudited figures for the period released this week, but for paper profit, FCMB would have landed in loss. However, anticipated loss provision applied the most pressure on the bottom line.

FCMB ended September with profit before tax up by 19.4% to N14.18bn but remove N29.5bn income from financial assets revaluation due to the Naira devaluation, and there will be no profit at all.

Yet, for fear of customers inability to service debts given the recession, it also increased impairment provision by 404.8% to N34.5bn.

Otherwise, the real tale for the period pointed to 1.26% decrease in interest income to N93.2bn accompanied by a higher 9.81% drop in interest expense.

Add to this FCMB's success in reducing personnel cost and other operating expenses by 6.81% and 4.99% respectively while keeping administration cost growth to only 1.06%; that left only 4.29% decrease in net trading income, and 18.6% increase in fee and commission expense as the real sources of pressure within the nine months.

So, with all the fair value gains and paper profits taken along FCMB recorded 21.1% increase in gross earnings to N140.74bn out of which revaluation( buried under Other income) chipped in 21% compared to only 3.66% at the same time in 2015.

What's more, paper profit and loss may be more as the years draws to a close because, since the new inter bank forex market was introduced in June, the third quarter was actually the first to manifest the raging struggle between paper profit and paper loss in full.

Thus when the fourth quarter paper provisions are added, real profit and loss from real operations may shrink some more unless some of third quarter provisions prove to be unnecessary before year end.

So, a key question for FCMB; as for many banks come year end, may be should dividend be declared from profit dominated by revalued financial assets?

FCMB PLC: Nbn, Third quarter
                            2016.         2015
Gross earnings 140.74.     116.26
Interest income  93.24.       94.42
Interest expense 40.04.       44.39
Fee & commission 13.37.    12.68
Fee & Comm. Exp.   2.69.      2.27
Net trading income  0.58.      0.61
Fair value gains      (0.013)   0.01
Other income.        33.55.      8.54
Impairment.           34.50.      6.83
Personnel cost.      18.70.    20.07
Administration       18.67.    18.47
Other operating exp. 8.64.    9.09
Profit b4 tax.            14.18.   11.88

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