Rating: Buy
Current Market Price: N1.45
Loan-Deposit Ratio: 69.29%
Non-Performing Loan Ratio: 3.67%
Year High: N2.20
Year Low: N1.45
Fair Value: N3.24
Equity Analyst: Segun Tunde Jeariogbe

Key Investment Ratios
• This report observed the financial performance indices of FCMB Holdings for the year ended 31st December 2019; compared the same with that of the corresponding period of 2018 to establish growth.
• Loan to Deposit ratio was estimated at 69.29%, as against 73.53% in the previous year.
• The total non-performing loan and advances, at the end of the year, was valued at N27.68 billion, an improvement over the N40.19 billion reported in the 2018 financial performance document.
• In other words, the Non-Performing Loan Ratio at the end of the just-concluded year stood at 3.67%, down from 5.90% at the end of 2018.

Company figures
• Gross Earnings at the of the year is estimated at N181.24 billion, the same as a 2.26% marginal growth over the N177.24 billion achieved at the end of the 2018 financial year.
• Interest Income stood at N137.44 billion, versus N131.66 billion at the end of 2018.
• Interest Expenses equally improved marginally to N61.47 billion, as against N59.08 billion in 2018.
• Thus, Net Interest Income is valued at N75.97 billion, compared to N72.57 billion in the prior year.
• Operating Expenses adjusted down by a marginal 4.75% to N70.18 billion, as against N73.68 billion in 2018.
• Profit before Tax improved by 9.15% to N20.13 billion from N18.44 billion in the comparable year.
• After accounting for Tax Expenses the management of FCMBH achieved N17.33 billion as profit for the year 2019, this is 15.80% over the N14.97 billion made at the end of 2018.
• Similarly, Total Comprehensive Income stood at N20.07 billion, same as 19.10% above N16.85 billion in 2018.

• Total Assets for the year was valued at N1.66 trillion, 16.57% above the N1.43 trillion reported in the preceding year.
• Total Liabilities, on the other hand, stood at N1.46 trillion as against N1.24 trillion in 2018.
• Net Assets is currently valued for N200.66 billion versus N183.42 billion in 2018.
• Retained Earnings stood at N34.18 billion, same as 18.04% above the N28.96 billion stated in the bank’s financial document in 2018.
• Total Deposits received by FCMH-Holdings stood at N1.03 trillion, which is 20.01% higher than the N860.88 billion deposit reported in 2018.
• Meanwhile, Total Loans and Advances improved by 13.09% to stand at N714.88 billion versus N633.03 billion in the corresponding year.

Dividend Yield
• At the end of the 2019 business session, the management of FCMB-Holdings had proposed a 14k cash dividend for investors whose names appear in the registrar records by 15th April 2020.
• In other words, the qualification date for the said dividend is 14th April, while the payment date is slated for 28th April 2020.
• The Pay-Out Ratio is estimated at 15.99%, lower than the 18.52% of 2018
• Meanwhile, the dividend yield, estimated with the share price of FCMB on the floor of the exchange on the day the result was released stood at 9.33%, far better than 0.01% in 2018. Note the difference in the price reported within the two years compared.

Financial Strength/Solvency Ratios
• Debt Ratio which compares Total Assets to Total Liabilities stood at 0.88x or 88%, implying that the Total Liabilities is 88% of Total Assets. Note that Total Liabilities is inclusive of Total Deposits for the period.
• Total Debt to Equity for the quarter stood at 7.31x, the same as 7.52% above the 6.80x estimated in 2018. This implies that the company used 7.31 times its equity through the year (Note: debt used to estimate the ratio is Total Liabilities and is inclusive of Total Deposits for the period).
• Equity Ratio which compares Equity to Total Assets stood at 0.12x, as against the previous 0.13x, implying that the reported Equity value at the end of the period is 12% of FCMBH’s Total Assets. However, this is a 6.15% reduction from the previous estimate.
• Estimated Beta value for FCMBH as at the time this report was compiled stood at 1.42, which is above-market beta but below the industry average.

Profitability Ratios
• Pre-Tax Margin improved by 6.74% to 11.11%, as against the 10.40% estimated at the end of the 2018 financial year.
• Interest Expenses to Gross Earnings inched up by 1.73% to 33.91% from the previously estimated 33.34%.
• Return on Average Equity, at the end of the year, was estimated at 8.64%, s against the previous 8.61%.
• See the table below for detailed profitability ratios and comparison.

Efficiency Ratios
• Operating Expenses to Gross Earnings Ratio stood slightly below that of the corresponding year by a marginal 6.85%, after rising from 41.57% to 38.72%. This is an improvement in management efficiency.
• Gross Earning is the same as 10.86% of the Total Assets value at the end of the quarter, representing 12.28% below the 12.38% estimated in 2018.
• It was equally established that 69.29% of the total deposits for the period were granted as loans and advances to customers, which is 5.77% below the 73.53% of deposit in 2018.

Investment/Valuation Ratios
• At the end of the year, N0.88 was earned on each unit of FCMBH shares listed on the exchange, higher than the N0.76 reported in prior year.
• Following the same trend, Total Comprehensive Income per share is estimated at N1.01 which is 19.10% below the N0.85 earned in 2018.
• The price of FCMBH at the time this report was released can replicate the earnings per share 1.71 times (P/E-Ratio=1.71x), lower than the 2.46x estimated in 2018, which is a positive adjustment, due to price adjustment on the floor of the exchange within the two years compared in this report.
• The said earnings per share is a 58.37% yield of the price of FCMBH shares on the exchange when the result was released to the market, a higher yield when compared to 40.64% yield estimate of the previous year.
• Estimated Book Value per share of FCMBH is currently N10.13, the same as 9.40% above the N9.26 of 2018.
• Thus, Price to Book Value stood at 0.15x as against 0.20x, which simply implies that the stock is currently selling below its book value on the floor of the exchange.

Valuation
• While trying to place a fair value on each unit of FCMB Holdings shares, we considered the average of two valuation models. FCFE Stable Growth Model valued the stock at N4.48 while H-Model placed the price at N2.00. We, therefore, arrived at an average value of N3.24 for each unit of its shares. Thus, considering the gap between the current market price of FCMBH shares and our fair value, we have rated the Holding Company a Buy.