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Financial Crisis: FCMB, Diamond Bank Plan Fresh Capital Raising

First Bank Nigeria

Diamond Bank Plc and First City Monument Bank Limited (FCMB) have disclosed plans to raise fresh capital.

Diamond Bank said it is considering raising fresh capital and selling some assets in order to strengthen its capital base, its chief executive said on Wednesday.
Uzoma Dozie said the bank’s capital plan will ensure it meets all regulatory requirements both in the short term and in the future.

Diamond Bank’s capital adequacy ratio had fallen to 15.6 percent of assets by mid-year from 18.6 percent a year ago.
“We are doing a capital management plan and that will determine how much capital we want to raise, tenor and size,” Reuters quoted Dozie to have told an analysts’ conference call.

“We don’t have any need to grow our branch network any more. We are also looking at some assets that we can dispose of and we are a long way into that,” he said.

Diamond Bank’s non-performing loan ratio rose to 8.9 percent in the first half, above the central bank’s target level of 5 percent where it stood a year ago. It expects to bring down the ratio to 7.5 percent by year end, he said.

In a related development, FCMB plans to raise N10 to N15 billion ($47 million) of tier II capital to boost its balance sheet and will target its retail investors for the offering, its chief executive officer, Ladi Balogun, said on Wednesday.

Balogun said its capital adequacy ratio was close to the regulatory limit of 15 percent of assets at mid-year, and that it was undertaking the capital raising to provide an additional cushion.

He said the bank was also slowing down loan growth, adding that a rate of increase of 14.8 percent in the first half was largely due to the 40 percent drop in the value of the naira against the dollar since the dollar exchange rate peg was removed in June. Otherwise loans declined by 1.9 percent, said Balogun, whose term as CEO ends next year.
“For the Tier II we would be looking at anywhere in the range of 10 to 15 billion naira. It’s really going to be targeted at retail because we feel that the rates from institutions will be high,” Reuters quoted Balogun to have told an analysts’ conference call.

“We have interest from some depositors who want higher yields.”
Balogun said the bank would also retain profits in addition to the bond sale to boost capital and tap into buffers at its holding company, if necessary. FCMB, which closed 19 branches in the first half to cut costs, had $225 million in retained earnings, he said.

The central bank has told lenders to set aside extra provisions against their dollar loans in the wake of the sharp fall in the naira since it floated the exchange rate in June.

Balogun said its dollar loans were fully covered as of the end of June and that the bank expects to restructure 25 percent of loans to the oil and gas sector in the third quarter after it restructured 50 percent of those loans last year.

FCMB Group Plc has reported a profit before tax (PBT) of N16.3 billion for the six-months ended 30 June 2016, showing an increase of 70 per cent from N9.6 billion recorded in the corresponding period of 2015. FCMB Group Plc – which consists of FCMB Limited, FCMB Capital Markets Limited, CSL Stockbrokers Limited and CSL Trustees Limited, partly attributed the development to foreign exchange revaluation gains, following the recent implementation of the flexible exchange rate policy by the Central Bank of Nigeria (CBN).

FCMB Group Plc’s gross revenue for the six months increased by 14 per cent to N88.3 billion, compared to N77.4 billion for the same period in the previous year. Non-Interest Income surged by 110 per cent to N26.0 billion, up from N12.4 billion recorded in 2015.

Customer confidence in FCMB remained strong, as deposits were up five quarter-on quarter (QoQ) to N689.4 billion in June 2016, compared to N657.2 billion at the end of the first quarter of 2016. Total assets increased by 13 per cent QoQ to N1.3 trillion in June 2016 versus N1.1 trillion in March 2016. The Group’s loans and advances, also grew by 17 per cent QoQ to N657.0 billion in June 2016, compared to N561.6 billion at the end of Q1 2016.

Commenting on the results, the Managing Director of FCMB Group Plc, Mr. Peter Obaseki, said: “Our group’s half year 2016 profit before tax came in at N16.3 billion, up 70 per cent on same period in 2015 and driven largely by treasury upsides, cost optimisation and sustained momentum in the commercial and retail banking group.”

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