FCMB Seeks UK Retail Licence, Sees Flat Loan Growth -CEO

Ladi Balogun, chief executive of FCMB Holdings, says the group is looking at converting FCMB UK, its wholesale banking unit in Britain, into a retail bank, as part of plans to grow its balance sheet and tap into non-institutional customers in that country.
Addressing analysts during a conference call on Friday, according to Reuters, Balogun said the impact of the strategy may not be immediate but would enhance incremental growth, with the earnings contribution around N500m ($1.64m) for 2018.
FCMB becomes the second after United Bank for Africa Plc to say it is converting its wholesale to retail banking licence in the UK as part of targeting the huge the Nigerian and African communities in Europe’s financial hub.
FCMB UK grew pre-tax profit by 250% to N300m last year.
“We’ve decided to slow down right now on asset growth and focus more on changing the mix of the asset and getting out some of the low margin upstream oil and gas business,” he said.
The group, Balogun continued, expects loan growth to be flat this year – down from last year’s 5.4 percent rise – as oil companies pay down debt, stressing a renewed focus on retail banking with a higher margin this year to make up for expected drop in government bond yields. It is not unexpected that the bank may not be able to write large loans quickly enough to counter-balance repayments by oil firms, even as he noted the gradual improvement in the economy after a recession that ended last year, which should boost consumers.
“We expect to see large repayments in the oil and gas sector this year. We agree that the (economy) will be improving but largely because of chunky paydowns, we don’t think we would be able to replace those quickly.
“We are pushing more in the area of retail banking.”
FCMB group recorded 29.5% drop in 2017 pretax profit to N11.46bn, just as the bank booked a 50% impairment of N2.3bn on loans to debt-laden 9mobile, which is in talks with investors to take over the telecoms firm.
He said the bank expects non-performing loans to rise in the course of the year but would be within a regulatory target of five%, adding that it does not see a need to raise funds this year due to high funding costs, especially for borrowing in dollars, and would maintain a conservative dividend policy to improve its capital position.
Banking sources told Reuters last month that FCMB was among several lenders considering selling a Eurobond this year.