FCMB Group Plc. was able to sustain gross earnings growth (+10.04% YoY to NGN199.44bn) in 2020FY supported by both interest income and non-interest income. Interest income was mainly driven by the 12.16% YoY improvement in interest on customer loans, as well as 12.27% YoY rise in income on investment securities, which jointly constitute over 90% of total interest income. The sharp growth in interest income came as a surprise but Management attributed it to translation gains arising from the impact of FX devaluation on interest from dollar instruments, as well as interest income from investment securities bought in 2019FY (while interest rates were relatively higher). The major drivers of non-interest income were fees-related income from increased customer usage of digital banking channels, and gains from revaluation of USD denominated assets due to Naira devaluation during the year. In 2021FY, the bank’s digitalization of SME lending should support loan growth which will ultimately bode well for interest income. And while Management has not provided guidance on the possibility of loan repricing, we do expect that interest income will at least benefit from the uptick in the yield environment. We do not anticipate that FX gains will be as significant in 2021, a view shared by Management. Furthermore, trading gains are expected to moderate on the back of rising yield investment securities.
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