FCMB Group Plc (FCMB) Earnings Call Transcript & Summary

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to the financial year 2022 Investors and Analyst Presentation. I will start by just introducing those that I have in the room with me today, in no particular order. We have the Group Chief Operating Officer; Mr. Gbolahan Joshua. We're also here with the Group Chief Financial Officer, Mr. Deji Fayose. We have present the Executive Director, Investment Banking and Coverage for the Group, Mr. Femi Badeji. We also have the Head of Investor Relations, Mr. Tunji Onamusi. From the bank, we have the Chief Executive Officer, of FCMB Nigeria, Mrs. Yemisi Edun and the Executive Director, Risk and Compliance, Mrs. Toyin Olaiya. We have present the executive -- the Chief Executive Officer of Credit Direct Limited, Mr. Chuks Nuanze, and we also have the CEO of FCMB, Asset Management, Mr. James Ilori. I believe that is everyone in the room, most of whom will be speaking or providing supporting information. I believe we also have the CFO of the bank, here, Mr. Kayode Adewuyi. So moving on to the agenda. I will be talking you through the highlights of our results. I will also be talking a little bit about our ecosystem strategy and then touching on the -- a summary of the impact our group has been having in its chosen areas. I will then be handing over to the group CFO, Deji, to give us an overview of the results. the Group Chief Operating Officer, will then talk us through the digital business review, then the CEO of the bank, talk us through banking, the CEO of Credit Direct through Consumer Finance, the Executive Director in charge of Investment Banking and Coverage will talk us through the investment banking review. And finally, the CEO of FCMB Asset Management will talk us through the investment management review that covers both our asset management business as well as our pensions and trustees businesses. Finally, I will close with the outlook for 2023. So starting with the results highlights. I will not dwell too much on this because many aspects of it will be covered in the meat of the presentation. I think what's important to note is that we did have a strong year across pretty much all our indices, we saw improvement. There was an uptick in nonperforming loan ratio, which went up to about 6.6%, which was, I would say, the only sort of negative in our sort of key financial performance indicators. CapEX ratio also remained flat at 16.2%, but we have since bolstered that since the year-end with the raising of an AT1 which has taken us comfortably above 17%, I believe. Now generally, you will see in the presentation, as we speak later, that pretty much all indices were improving typically sort of double digit and very high double digits with the headline earnings, PBT being at 61% growth. This is helping our cost-to-income ratio down to about 64% -- 64.9%. And we've also seen, thanks to the acquisition of AIICO Pensions last year, a year-on-year growth of about 49% in our AUM assets under management. I will move on to the next slide because I think this also highlights a number of the performance indices and results highlights were indicated in the first slide. We have been building an ecosystem, which really leverages on the capabilities that the group has created over its 40-something-odd years of existence. And combining with that, the opportunities available with technology to enable us better orchestrate and bring together this ecosystem and also to be able to leverage synergies, both cost synergies and marketing synergies. These are the things that really have been driving the improved performance. And we see this ecosystem as something that is designed to support all the stakeholders that participate in it, and we seek to connect people, capital and markets. Capital is particularly important because based on our fairly strong balance sheet, our asset management business as well as our investment banking business that can mobilize capital from third classes very effectively, we're able to deploy that towards our broader objectives of really supporting the communities that we serve. But if we look at the performance of the various aspects of this ecosystem, I'll start with our platforms, which is at the top left-hand corner of the slide, which is Slide 4. We have 4 operating platforms today, and we've seen all of them exhibit very strong profit growth a lot of this coming from the synergies that they enjoy across each other. So banking, we saw 72% profit growth. Consumer Finance, we saw 26% profit growth investment management -- sorry, investment banking, we saw 27% profit growth and Investment Management, 46% profit growth. Our technology platform is going to become increasingly important as we move ahead with our digital strategy. We have 2 platforms that are in a very nascent stage at this point. We've been building over the last 2 periods, a diaspora-focused digital banking platform, which is currently in private beta and that will go through a commercial launch in the second quarter of 2023. We have also built banking as a service capabilities, still fairly nascent, but this is enabling a number of our customers to have access to things like virtual accounts, payment APIs and the like, and we've seen -- we've recorded over 2 million transactions already on our banking service platform, and this is posting about N80 billion since we launched, which was in -- towards the end of last year. On the customer side, it's been mentioned in the earlier slide, we've seen significant growth with 1.7 million customers added in 2022. Our various products, the key products are highlighted here, payments, which is becoming increasingly important, saw 55% growth in terms of transaction count, which is the key driver of revenue. at least noninterest revenue. The lending products as well have shown fairly steady growth at 12%. And up to N1.2 trillion. The key areas where lending growth has occurred has been manufacturing, agriculture and individual sectors. In treasury, we have increasingly pivoted from a trading strategy to very much a sales strategy, where we're selling treasury products such as fixed income and where possible, foreign exchange to our customers. And this pivot towards a sales strategy has seen generate over N 10.4 billion of treasury sales income in 2022. And this is a 564% increase from the N1.6 billion that we generated in 2021. We've seen steady growth in our low-cost deposits of 13% to N1.2 trillion. Our Wealth Management business has recorded 49% growth, as mentioned earlier for the reasons stated. And on the financial advisory side and capital raising, we were able to grow our fees by 47% to N897 million in the year 2022. In terms of products that we offer in our ecosystem, from third parties. And I think these will continue to expand both in terms of volume as well as the breadth of offerings that we're bringing to our customers. Traditionally, insurance is in something we've offered through an agency arrangement, and there, we have recorded -- it's been flat this year. Last year, it was about N1 billion versus N1.1 billion revenue from insurance in 2021. I think some of this would have been due to the decline, particularly in things like trade finance, where we have seen a number of sort of captive insurance business coming through, but we're seeing steady growth in insurance that relates to areas like credit life insurance and so on that we do for our consumer lending. Airtime and data has been something we've traditionally sold through our apps. We generated about N1.4 billion of revenue from that, faxed largely to a bigger customer base as well as more and more people adopting the use of our mobile app and our COO will talk you through the growth in penetration of the mobile app in subsequent slides. Other services, although fairly small right now, is where we see very significant room for growth. We saw 55% growth in terms of revenue from other services such as gaming, utilities, i.e., bill payments, travel. And there, we recorded 55% growth for sort of in-app lending of services up to N239 million. In terms of capital that we are deploying into the economy as a whole, we were able to deploy incremental capital into the economy of about N1.1 trillion. Of this, about N857 billion was via capital raised from FCMB Capital Markets, about N132 billion came from incremental loan growth on our balance sheet and then N92 billion came from organic growth in terms of assets under management. These figures exclude the impact of the AIICO acquisition as well as we do not take into consideration total loans disbursed, and we just focus on the incremental growth. This volume of capital being deployed into the economy, where we seek as much as possible to now cross-sell multiple services, be they insurance, be they payments, be they treasury, to the beneficiaries of this capital has been one of the key growth drivers to the performance of our business. We're also pleased that our impact focused strategy, which I'll talk about a little on the next slide, have enabled us to attract increasingly large amounts of third-party funding to help support the capital that we deploy into the economy. And last year, we were able to attract about N245 billion from development finance institutions and burner agencies, which was channeled through the bank to critical sectors of the economy such as agriculture, affordable energy, women banking and financial inclusion. So the lack of the bank of industry the Central Bank of Nigeria, the Development Bank of Nigeria, those are some of the local DFIs that have supported us and supported our customers and then the life of African Development Bank, [Indiscernible] and the MasterCard Foundation were international entities that also contributed to the N345 billion that we were able to deploy during the course of last year. Talking about, on the next slide, a summary of the impact that we have been having, and this is just a few of the highlights. We're increasingly moving towards very much a purpose-driven or mission-driven strategy, and we are seeing this had a very positive impact on the performance of the business. And just a few highlights of that. In terms of financial inclusion, we provided of N13 billion of micro loans over 120,000 beneficiaries, 80% of these being women. And many of these customers, we're now offering a broader suite of banking services. We've been able to use our agency banking business to acquire about 210,000 customers, which therefore was critical to the customer acquisition targets that we have. We -- the customer acquisition numbers that we achieved last year. That agency banking network has now increased to over 100,000. Our strategy is slightly newer to the extent that we have our own direct agents as well as partners that through -- whose agency network we also plug into. In terms of food security, agriculture has been an increasingly important part of our lending business. And as you will see in later slides, we've been able to do this at remarkably low NPL ratios, and it's also been one of the things that have attracted a lot of the DFIs to us as a group. We increased our lending to that sector by about 44% last year to N147 billion, a few very important things we're able to do for our economy include helping to deliver the first Cassava-based sorbitol factory. Sorbitol being a key ingredient in consumer goods and pharmaceuticals and a major opportunity for the replacement for our import substitution in the country. Beyond import substitution, this initiative has helped empower over 10,000 rural farmers and across the aggregate space as well, we have supported over 280,000 small holder farmers through various partners and created over 600,000 jobs as a result nationwide. In terms of women empowerment, our zero interest loan program to women-owned businesses, so overall supporting 150 of such businesses last year and dispersing about N310 million of zero interest loans. Those customers, as they have demonstrated the ability to repay, many have gone on to enjoy commercial lending in larger volumes. So that's been an excellent sort of customer acquisition strategy for us. We've also been able to support that with capacity building, supporting over 200 women's on various business management training. To support all this, we have been able to secure a number of grants that has helped us to further expand our gender initiatives. In terms of climate action, we continued the transition of our branch network towards renewable energy, where we converted 12 branches last year, taking up to 154, which is now 75% of our branches. Our estimate was that last year, we probably saved over N500 million in energy costs as a result of that transition as our diesel consumption and related sort of costs also reduced. We also have supported over 5,600 households and SMEs across the country through the financing of mini grids and hybrid energy-efficient projects. In terms of just community CSR initiatives, a couple of highlights here, we supported over 25,000 women-only cooperative. We also achieved a milestone of 350,000 beneficiaries over 15 years in the provision of free eye care services in a number of instances, helping to cure avoidable or curable blindness. I will -- that brings me to the end of this section, and I will hand you over to our to talk us through the overview of the results in a bit more detail, financial. Deji?

Thank you, Ladi. Good afternoon all. I'll now please what you through the next section of presentation. Coverage Slide 6 to 10. From a group perspective, our earnings grew by 12% and 33% quarter-on-quarter and year-on-year, respectively, driven by year-on-year growth in both net interest income and noninterest income. Our net interest income declined by 12% quarter-on-quarter and later due to a rising cost of funds in quarter 4, which is a result of the 2 factors of increases in CRM NPL in the second half of the year. And the CRM moved from 20.5% to 30.5%. And whilst NPL increased by 500 basis points to 17.5% from 12.5%. However, our net interest income grew 34% year-on-year. Beyond negatives were a 5% increase in interest income. As our yields on adding assets grew from 11% to 12.7%, and we also recorded a loan book growth of 12%. Noninterest income, on the other hand, also grew by 14% year-on-year. and largely driven by growth in fees and commissions across our channels as well as asset management fees and trading income. This was despite a decline in our year-on-year foreign exchange revenues. At a group level, operating expenses declined by 6% quarter-on-quarter, albeit grew by 18% year-on-year, largely due to increased personnel costs, regulatory costs and general inflationary pressures. However, overall, our cost-to-income ratio improved by 9.5%, closing up 64.9% at the end of the year, from 1.8% in the previous year. Moving on to impairments. And our impairment charges declined by 22% quarter-on-quarter. However, it grew by 64% year-on-year on the back of increased provisions on risk assets. And this we see later the growth in our balance sheet recorded during the year. From an overall perspective, group profit before tax grew by 61% year-on-year, from N22.7 billion and full year N21 billion to N36.6 billion at the end of 2022. Slide 8, please. The next slide is just a snapshot of our key ratios. I would just highlight some of our key drivers of performance during the year. For the full year in 2022, the return on average equity grew to 12% from 8.9% in the prior year, a year-on-year growth of 35% as a direct result of our working profitability. Our net interest margin also on the balance sheet increased by 12.9% year-on-year, driven by growth in our earning assets and yields from 11% to 12.7%, as I like that in the previous slide. Our cost-to-income ratio also closed at 4.9%. Our FX decline closed on the quarter at like 3.5% and will cure a year-on-year increase on that. From some of our regulatory ratios, order capital adequacy and liquidity ratios are for minimal regulatory thresholds, closing up 16.2% and 35.4%, respectively, at the end of the financial year. So Slide 9, over here just to look at year-on-year growth and contribution to group earnings from operating companies -- and from a year-on-year perspective, all operating income has recorded double-digit year-on-year growth, with the banking group contributed 72%. Consumer Finance, 26%; investment Banking 27% and investment management 46%. In terms of contribution to the group, the branching group contributed some 74% of group profits, whilst our other nonbanking subsidiaries contributed 26% with 11% on the consumer finance business, 10% from investment Management and 4% from the investment banking. And in the last section will just try to show, what's our thought for our PBT group in absolute terms from full year 2021 to 2022. And as you can see, we have recorded year-on-year growth across all our business verticals except on micro finance and -- which is currently undergoing some business restructuring. I will now hand you back to Gbolahan Joshua, our Group Chief Operating Officer, who will take you through the next section, please. Thank you.

Thank you, Deji. My name is Gbolahan Joshua. I will take you through our digital business review on Slide 12 to 18, corporate payments, lending, wealth and agency banking. So at 12, just key highlights. We generated N7.1 billion EBIDTA revenue for the financial year 2022, was a 42% growth over the numbers for 2021. Digital revenues accounted for 13% of gross earnings, basically driven by lending and payments. For digital loans, we dispersed over N207 billion of loans to 984,000 customers portfolio increased by 6% to N64 billion, and digital lending accounts for 61% of our digital revenues. It's up from 49% in 2021. For digital customers, we now have 9.1 million digital customers. It's up 18% from 7.7 million customers in 2021. I'll move to Slide 13, which just shows our customer acquisition trend over the period. We acquired about 1.7 million customers in 2022, an average of about 360,000 customers every quarter and then to 250,000 customers from the ICO pensions acquisition. In terms of penetration across our various digital products, highest penetration is from our USSD product. And when you look at USSD and mobile for 2 of them, we have about 50% of our customers using those 2 products. Move to Slide 14, which speaks about our agency banking business. In H1, we highlighted that we're introducing some operational risk controls and the performance -- it's rebounded in Q4 revenues have moved from N150 million to N249 million, and cost of acquisition has moved from 42,000 to 59,000. Agency banking accounted for 15% of our customer acquisition and assay when you strip out the ICO acquisition. I'll now move to Slide 15, which just shows the breakdown of our digital revenues. It contributed 13% of gross earnings. But when you look at the split, 62% comes from lending at 36.6% from payments. The 2 contribute 98.7% of our digital revenues. Lending in absolute terms contributed N23 billion of 10 billion from the N12.8 billion in 2021. Our Retail retail loans have grown by 30%, while our SME digital loans declined by 1% which i'll speak to in a subsequent slide. Slide 16 just shows the trend of our TR revenues. We've seen a quarter-on-quarter growth averaging about N1 billion every quarter. However, there was a decline in quarter 4. Revenues declined by about N0.7 billion largely driven by SME lending, which accounted for about 70% of this decline is about $0.5 billion, and that was due to a 23% drop in the lending dollar. On Slide 17 shows a breakdown of our digital loan trend -- it's grown by 6% year-on-year, but declined at the end of quarter 4, largely coming from the SME book, where there was a slowdown in origination of new loans during the quarter, due to capital management and tightened underwriting and standards. But the holding company has issued an AT1 of N20 billion, which has now been downstreamed to the banking subsidiary. For our retail detail lending portfolio, it's split 52% and 48% between our micro-lending subsidiary, CDL and the bank and digital lending now accounts for 5.4% of the loan book. Slide 18 just shows highlights across our various digital products for SME digital loans, we disposed N165 billion in 2022, plus a 43% growth that was done in 2021 to over 21,000 customers, portfolio size is N7.8 billion. For retail loans, we disposed a total of N42 billion to about 962,000 customers, that's a 17% growth over number of loans is paused in 2021. Average ticket size 38,000, portfolio size of $16.4 billion. For digital world, we now have 65,000 customers, 23% growth even numbers we had in 2021. revenues have increased by 222% and AUM has grown by 131%. And the last slide just shows the breakdown of our payments revenue, 94% of payment revenues come from mobile, card and ATM Mobile is highest contribution at 61%. We expect that to increase slightly higher than that in the 2023 financial year. I'll now hand over to Edun Yemisi, who will take us through the banking group. Thank you.

Thank you, Gbolahan. Good day, ladies and gentlemen. I'm Yemisi Edun. I'll be speaking from Slide 20 to 28 on the review of the banking group. Slide 20 is a graph showing the key performance metrics. Gross early witnessed FX profit and year-on-year growth. This was driven by a 23% year-on-year increase in noninterest income and a 7% growth in our net interest margin due to growth in loan and advances. For cost-to-income ratio, the ratio trend downward from 74.1% to 65.5%, a 6.5% at the end of financial year 2022, mainly propelled by growth in revenue for the period. Return on average equity also increased by 310 bps year-on-year to close at [Indiscernible] . Capital adequacy ratio recorded a growth of 60 bps year-on-year, having moved from 15.4% to 16% on 2022. Total deposits grew year-on-year by 25% to N1.95 trillion. The growth in customer deposit costs across most of the deposit segments, especially personal banking and SME banking. The growth was a result of the clear execution of the retail strategy in the face of challenging operating environment had increased competition. Gross loans grew 12% year-on-year to N1.21 trillion. The cost of risk grew 60 bps to 1.4% year-on-year. The year-on-year growth was due to the charge for grouping NPL. Our NPL in line with IFRS standards close at 3.7%, an improvement of from 4.1% in the previous year. However, the NPL ratio deteriorated slightly based on GAAP from 4.12% in 2021 to 6.4% in 2022. The presentation subsequently will be based on the aggregate [Indiscernible] number. Number of customers grew 16% year-on-year from N6.95 million in 2021 to N6.07 in 2022. This is as a result of additional investments in technology to see acquisition drive. Moving on to Slide 21, which continues the analysis of the bank group's performance for the period. The track recorded a growth of 72% year-on-year on PBC, having moved from N16.7 billion to N26.9 billion and is a challenging macroeconomic development and environment. This is attributable to 7% increase in our year-on-year net interest income as our loans and advances grew by about 12%, especially in our focal sectors with different margins. Noninterest income also increased by [indiscernible] quarter-on-quarter and 23% year-on-year. While [Indiscernible] quarter was driven by growth in trading income year-on-year was driven by both increase in fees and commissions as well as trading income despite the lower FX income mix during the period. Operating expenses grew by 19% year-on-year due to technology enhancement cost and increased regulatory expenses, coupled with the double digestion in set by this cost growth for control and remain below the intuition rates during the period. This, however, declined in percent quarter-on-quarter due to the acetate amortization of the regulatory cost and conducting stability in line with IFRS and are continuing to drive to core contributable exchanges. CapEx grew 1% quarter-on-quarter and 12% year-on-year, as additional funding was provided to put up these sectors in the economy. Customer deposits also increased by 7% quarter-on-quarter and 26% year-on-year expected driven mainly by customer acquisition via [Indiscernible]. Moving on to Slide 22, which contains noninterest income analysis. Our net expenses commissions grew in terms year-on-year, driven by our economy and service fees and commissions. Trading income grew by 100% and 34% quarter-on-quarter and year-on-year, respectively, due to higher trading activities in government-backed securities. We look at a decline in FX income by 15% and except the same quarter and year-on-year expect due to minimal that we sampling this year. Other income grew by 902% and 104% higher effectively due to dividend income received. On Slide 23, we have our PBT distributed by segment. Our CORONA vaccine segment PBT grew margination quarter as a result of the increase in transaction activity or mostly channel due to the sale portion. However, declined year-on-year by N12.2 billion, largely due to increase plans or retain cost and the reduction in interest income as CRM and NPL increase in [Indiscernible]. Our path to consistent growth in personal banking includes, but not limited to deployment. To optimize continuable costs such as cash operating costs and loan returning charges. So aggressively grew a transacting fee using campaigns and reality pose to increase contribution of new feature loss on our mobile app and [Indiscernible] and to address and tap new customers to increase the transacting fee. For our SME Banking segment, we continue to see traction in SME as we remain on course with our strategy of using innovation and technology to drive the business. On year-on-year business, PBT grew by N7.3 billion was declined by N1.2 billion for that quarter. This decline was attributable to a deliberate slowdown in asset creation to manage capital and asset quality. However, with the new fall's rate as additional Tier 1 capital, coupled with the introduction of the new AI-driven system to manage risk CapEx, we expect the growth to resume in this segment. For treasury and financial market segments. PBT declined by N1.5 billion year-on-year due to capacity of FX for trading and minimal evaluation. However, it grew by N0.2 billion quarter-on-quarter due to higher trading activity in growth [Indiscernible]. Our corporate banking segment, though the business is still loss making. We have seen a significant reduction in losses with losses declining by N9.5 billion year-on-year. PBT declined N0.3 billion quarter-on-quarter, mainly due to an increase in incoming attributable growth of the portfolio to manage capital. As you [Indiscernible] on the SME segment, with the increased capital during -- the beginning of this year, we will speak to in this segment going forward. Commercial banking PBT improved year-on-year by N0.5 billion and N0.4 billion quarter-on-quarter. Our Institutional Banking segment, PBT declined by N1.3 billion year-on-year, [Indiscernible] [ N12.5 ] billion on quarter-on-quarter as a result of an increase in new cost deposits, which improve the measurement [Indiscernible]. Moving on to Slide 24, which analyzes the deposits trend analysis for the period. Total deposits grew 7% quarter-on-quarter and 25% year-on-year. Low cost deposits now account for 63% of our total depsoits, which grew by 4% quarter-on-quarter and 13% year-on-year. Retail deposits now constitutes about 65% of total deposits growing by 12% quarter-on-quarter and 23% year-on-year. On Slide 25, we provide the cost analysis and reduction plans for the year. Operating expenses decreased by 8% quarter-on-quarter due to the accelerated amortization of the regulatory costs in line with tariff and our continued drive to [Indiscernible] expenses. [Indiscernible] grew by 19% year-on-year due to an increase in regulatory investments in technology, coupled with the double-digit inflation earnings and value. Regulatory costs declined by 93% quarter-on-quarter due to the accredited amortization of the regulation cost in line with IFRS. However, it grew 23% year-on-year as a result of growth in balance sheet size and the deposit liability. Our technology costs grew 52% and 36% year-on-year, respectively, and accounted for 10% of OpEx in 2022. Our reduction plan as follows to internal sales realignment and automation for beta cost efficiency. Resources via location for optimization of performance and our focus remains on driving efficiency and reducing costs to drive. Slide 26 summerizes the group's sector [Indiscernible] and segment [Indiscernible]. Our loan portfolio remains well diversified across sector, segments and currency. We achieved a growth of 5% year-on-year, in line with our flat for the year in 2022. The quarter ended with a 0.8% growth Q-on-Q. Year-on-year growth was largely driven by our total portfolio, manufacturing 42%, as a cultural 32% and the digital have 11%. This [Indiscernible] contributed 71% to the year-on-year growth. The [ 33% ] year-on-year growth in the loan book was largely driven by the 8.7% exchange rate movement. The quarter-on-quarter growth came largely from the exchange rate movement. The 8.7% increase is translation rate year-on-year, was paid compensation in SD-WAN by [Indiscernible]. SME banking as the segment gained 1% of the portfolio in line with our business strategy. All sectors are within defined our regulatory limits. Moving on to Slide 27, which shows our loan book performance by sector, currency and segments. NPL ratio dropped by 40 bps year-on-year and 70 bps quarter-on-quarter to close at 3.7%. The year-on-year drop was due to loan book growth. The nonperforming loans, however, grew by 0.7% year-on-year and drop price [Indiscernible] quarter on quarter. The quarter-on-quarter drop in NPL ratio was largely due to loan growth and the reduction in commerce, individual and manufacturing sector NPL. NPL drop in individual and commercial sectors were slightly due to write-offs, which seem slightly impacted the drop [Indiscernible] in the total nonperforming loan. The [Indiscernible] appliance forming from the local currency portfolio, while adoption trend for very clear portfolio [Indiscernible]. The quality of our loan book remains the major focus for us. On Slide 28. This speaks to the strength in our NPL, cost of [Indiscernible], net impairment and coverage. Year-on-year growth in NPL ratio was slightly due to [Indiscernible]. Net income and volume grew by 35% quarter-on-quarter and 1.1% year-on-year. Due to worsening macroeconomic [Indiscernible], which affected [Indiscernible]. Growth in loan book within the year and still need to improve coverage. Cost of this grew by 70 bps year-on-year and 30 bps quarter-on-quarter. Year-on-year growth was viz-a-vis charge for growth in NPL and loan books. Accumulated impairment remains [Indiscernible] year-on-year, while it dropped marginally by 0.4% quarter-on-quarter. Our coverage improved significantly quarter-on-quarter from 89.9% to 105.9% in line with the [Indiscernible]. Thank you for listening. I'll now hand over to Chukwuma, the Managing Director of Credit [Indiscernible] Limited, who will present the consumer finance [Indiscernible].

Good afternoon, everyone, and thank you, Yemisi. I will be taking Slides 30 to 32. Interest income grew by 15% to N13.4 billion in 2022, a N1.7 billion growth in income when compared to the 2021 financial year. Despite inflationary pressures, our operating expense grew by 5% from N5.9 billion in 2021 to N6.2 billion in 2022. We achieved a profit performance of N4 billion in the 2022 financial year. This performance was up 26% when compared to the preceding year. Return on average equity grew 200 bps from 27% in 2021 to 29% in 2022. In 2022, we recorded an NPL ratio of 9.8%. This was up 7% in 2021. And this 300 bps growth was as a result of reduced collection from the segments in our consumer finance business. On the next page, on next slide, that's Slide 29 now -- sorry, Slide 31. Loan grew 22% year-on-year to N28.4 billion. As recorded year-on-year decrease in net impairments by 4% when compared to the 2021 financial year. Net interest income grew 11% and 8% quarter-on-quarter and year-on-year, respectively, while noninterest income grew by 28% year-on-year, during declined 15% between Q3 and Q4 2022. Our operational expenses grew by 5% year-on-year despite operating in double-digit inflation environment. Our digital channels now account for 27% of our global sales. On Slide 32, we maintained strong profitability ratios with our return on average equity growing from 27% to 29% between 2021 and 2022, supported by the 26% growth in profitability to N4 billion in the 2022 financial year. I will now be handing us over to Femi Badeji, Executive Director of FCMB Group plc to take us through the investment banking review segment of this meeting.

Thank you, Chukwuma. Good afternoon, everyone. My name is Femi Badeji, and I'll take you through the Investment Banking section of our presentation, which consists of Slides 34 through 35. For the Investment Banking business, gross earnings grew year-over-year by 28% to N3.5 billion. Whilst noninterest income grew year-over-year by 18% to N3 billion, PBT grew by 27% year-over-year to N1.4 billion. Though there was a 16% increase in operating expenses to N2 billion, CRR dropped by 600 basis points to 59%, and the return on equity for the business segments improved by 600 basis points to 27%. Moving to Slide 35. PBT for the investment banking business declined by 76% quarter-over-quarter, but, however, grew to 27% year-over-year. The year-over-year growth was driven by increased capital markets activity during the period as companies continue to explore capital market offerings, which led to an increase in capital raising and financial advisory fees as well as improvements in trade and income. Our Capital Markets business recorded 107% PBT growth year-over-year, improving its contribution to grow PBT to 2%. The value of stockbroking trades grew 68% year-over-year from N50.9 billion in fiscal year 2021 to N85.6 billion in fiscal year 2022, with the stockbroking business recording a 23% growth in market share year-over-year. Trading income declined by 80% quarter-over-quarter. However, it grew by 1,829% year-over-year, driven by an increase in proprietary trading activity. CIL for the business improved significantly in fiscal year 2022 to 59% from the 65% recorded for the same period in 2021 on the back of improved earnings. Overall contribution of the investment banking business to group PBT stood at 4% for fiscal year 2022. For 2023, we will continue to support our clients by offering appropriate capital market solutions and providing exceptional client service with the aim of retaining existing clients and acquiring new ones. I will now hand you over to James Ilori, CEO of FCMB Asset Management to take us through the Investment Management section of our presentation. Thank you.

Yes. Good afternoon, ladies and gentlemen. I'll be taking you through Slide 36 to 39 on the performance of the Investment Management Division. I'll start with Slide 37. Gross earnings rose by 47% on a year-on-year basis, and noninterest income grew by 43% also on a year-on-year basis. Operating expenses increased by 50%, and that increase was primarily due to increases -- I mean, costs related to the AIICO acquisition and general increases in personnel costs. Together, they accounted for over 70% of the increase in operating expenses. Return average equity rose from 34% in 2021 financial year to 35% at the end of 2022. Moving to the next slide. Assets under management grew by 4% on a quarter-on-quarter basis and by 49% year-on-year to close the year at N784 billion. AUM from the AIICO acquisition accounted for 64% of the N258 billion increase in the full year AUM, whilst investment income and net contribution from customers, mid of 22% and 14% of the AUM increase. Our pension business contributed 84% of assets under management last year compared with 80% in the previous year. Looking at digital products, AUM and management fee from digital products grew by 131% and 122% on a year-on-year basis. In terms of the retirement savings accounts, the number rose by over 3% to close at 734,385 with registrations by our digital platform accounting for 60% of the increase compared with 39% in 2021. Looking at the transfer window, we were net recipient of funds from the transfer window last year with a net inflow of N4.8 billion compared with a net increase of N3.9 billion in the previous year. In terms of net interest income, that increased by 120%, and this was primarily due to a lower dividend payout in 2021, which increased cash available for investments. In addition, interest rates on deposits rose significantly in 2022, and this positively impacted net interest income. Lastly, just looking at our PBT, that grew by 46% on a year-on-year basis with the AIICO pensions transaction adding 1.2 billion PBT. Therefore, our pensions business contributed 75% of PBT compared with 63% in the previous year. Moving to Slide 39, we just look at some of our primary goals for financial year 2023. There are 3 items listed. I'll start with the first one, which is the AIICO pension impact. Our year projections for financial year 2023 include incremental AUM of N34 billion. So total AUM contribution from the AIICO acquisition would be expected to hit N200 billion by the end of financial year 2023. In addition, we expect seeing PBT contribution of about N1.5 billion. Looking at digital distribution. We are finalizing arrangements to launch the web version of our grow digital products in the second quarter of 2023, and we expect this launch to increase access to these products. AUM and management fee from digital products are expected to rise by 58% and 83% to about N13.5 billion and N140 million, respectively. Lastly, in terms of our alternative assets initiatives, we have submitted a fund registration requested regulator. And that request is for series 1 of upcoming alternative assets fund, and we expect to receive a final approval to launch the fund in the second quarter of this year. I will now hand you back to Ladi Balogun who will talk about the general outlook for financial year 2023. Thank you.

Thank you, James. Skip to the last slide, please. So in spite of what we still see as a fairly challenging environment, we believe that our ecosystem strategy will enable us to sustain fairly robust profit growth this year. We're forecasting about 25% profit growth on the back of sustained earnings as well as other key performance indicators across our operating companies. We will see loan growth momentum continue, and this will be supported by high earnings retention as well as the issuance of the local currency AT1 that was closed earlier in the year. We also expect that we will acquire about 1.5 million customers plus, which is a growth on last year if we strip out the impact of the AIICO acquisition, and this is 1.5 million additional transacting customers across the group. And this will support transaction fees, current and savings accounts as well as -- sorry I believe, we lost connection briefly, so I will start the slide again. As mentioned earlier, we expect 25% earnings growth in terms of forecasting this year, 25% earnings growth. And this will be driven by some of the following factors. Loan growth momentum will be sustained as a result of higher earnings retention as well as the issuance of the local currency AT1 that we concluded in Q1. We also expect to acquire an additional 1.5 million transacting customers this year, across the group. This will be a growth on last year if we strip out those that we added as a result of the AIICO acquisition. And this will help support transaction fees, current and savings account balances and assets under management, all of which are key earnings drivers, and these are all projected to grow by about 35%, 15% and 20%, respectively, year-on-year. We do expect that revenue growth will be disproportionate with -- on the digital side, where we're expecting over 25% revenue growth coming from lending, payments and wealth management. Wholesale Banking, we saw in the last 2 quarters of last year, but it has now -- it was now profitable. We expect the profitability will accelerate in 2023 as we deepen wallet share with our top customers. On the investment banking side, we see sustained performance in the Capital Markets business, particularly in the primary capital markets as we continue to strengthen our market position in debt capital markets. We were involved in just looking in recent time, almost 70% of all bond issues that have been happening in the markets we've been involved. We expect that sort of level of market share will continue. And we're also seeing a growing pipeline of deal flow in the equity capital markets as well as M&A transactions. Finally, we expect that cost income ratio will improve marginally, driven by the marketing synergies that we're extracting from our ecosystem strategy as well as the efficient profit growth that we are seeing on the wholesale banking side and of course, the cost-efficient nature of our digital revenues. This brings me to the end of the presentation. Thank you very much for listening and happy to take your questions.

[Operator Instructions] The first question from [Indiscernible] for FBNB Quest.

Just few questions. Could you please tell us where you are seeing your capital adequacy ratio and take into consideration of the AT1 issuance? And also, can you give specific guidance for loan book growth, I mean, specific numbers for loan book growth and organic growth.

Yes, I mean, I can go ahead, right? I think maybe I will ask the CFO to let us know -- the group CFO, the capital adequacy ratio as a result of the AT1, and where we think it will be during the course of this year.

Thank you, Ladi. So in terms of the impact on our ability to capital adequacy ratio, we expect that we should move from about 17.2% or close to at least 17.5% by the end of the year. And by the time, also had the impact of capitalized profits, that we was 2.5% moderate.

So in summary, we expect to be hovering between 17.2% and 17.5% in terms of capital acceleration. You wanted guidance in terms of loan growth as well as deposit growth for the year. Do you have any idea on that or that...

[Indiscernible]

Okay. Do you have the group -- so I think from a group level, moderate, we're looking between 20%, 25%. Yes, for the opposite.

For loan growth?

For loan growth, I think, at a group level, 15%, on loan growth at a group level.

All right. Do you get 15% for loan growth?

15% on loan growth, yes, at a group level. 1-5, 1-5.

[Operator Instructions] There are no questions at this time.

Okay. So we have a couple of written questions here, which I will just read out. So first question is what is the profit margin on airtime and data sales. Do we see -- did we see an uptick in the mobile bank -- mobile platform and USSD usage during [Indiscernible]. And how much of that do we think is sticky? I mean, I can answer the last 2 because I have some idea on that. And I think in terms of profit margin on airtime and data sales, I think, [Indiscernible] also will take that. But on the last 2, certainly, yes, we did see an uptick. I think the uptick we saw was north of about 60%, if I'm not mistaken. And how much of that do we see as sticky. Certainly, not all of it will be sticky. But we -- I think we've seen probably about half of that, about half of that being...

20%

Okay. So actually, about 80% of that has been sticky. And we expect that, that will continue to grow. So whatever volumes we achieved during that period, even though we've seen maybe a 20% drop, we expect that the regular growth momentum will take us back to those sorts of volumes or level of usage by, I guess, maybe the end of H1 or early sort of Q3. So that addresses the stickiness issue. In terms of the profit margin on airtime and data, I don't know whether...

It's about 3%.

3% is the profit margin there, or the -- what they call it the take rate, I guess, what we're talking about, yes. Second question is that are we likely to see more branches transition to solar power during the year? What does this mean in terms of energy cost savings. Do you have any more branches planned for transition? About how many?

[Indiscernible]

So let's just say at least 12 branches will be transitioned during the course of this year. It will be hard to estimate or provide an estimate on the savings. But at least what it does is it's more of a hedge so that at least we know we will not be subject to the impact of volatile energy costs. Reason for the spike in NPL outlook for cost of risk, outlook for FX income, and what do we consider the major growth driver in 2023. So I do know part of that NPL spike was -- I gave a headline figure of 6.6%, which was the end GAAP figure. But when we look at the IFRS figure, that figure was what?

3.7.

3.7%. And 3.7%, was that...

It Was the reduction...

It was actually a reduction. So we did not see a spike. We're at 4.1% based on IFRS. So I'm not sure if we made that clarification during the presentation. But end GAAP is what the Central Bank would like us to report. So that's just to make that clarity. Outlook for cost of risk this year. I don't know who can provide that, Deji?

Yes. So for cost of risk, importantly, we have about 1.7% for cost of risk.

Yes, 1.7%. Outlook for FX income...

So we've not planned for that because it depends on how the reach -- market reach...

Sure. So we don't really have -- I mean, if we look at FX income, what we make from the sales side of FX income is relatively modest because there is a tight cap on the spread. And of course, there's quite a bit of a scarcity or liquidity in the official market. And therefore, the majority of our FX income comes from currency depreciation. So it's -- we've chosen not to make any sort of projection there, but we don't know what the incoming government will choose to do. Your guess is as good as ours. And so in terms of -- the major growth driver for 2023. I wouldn't say there is a single growth driver. And in the summary slide, we try to list some of them. And I will just recap that again. I think that clearly, loan growth will be important. As much of our loan growth, we can push into SME and retail, we'll make sure that it's higher margin loan growth. We do expect, as we saw last year, that individual was a significant chunk of the loan growth. Secondly, customer acquisition is a key driver for most of our noninterest income, and we expect that, that will also be fairly robust this year. Now in terms of sort of the more efficient sources of growth that are very significant, I would say, generally, we're seeing the wholesale banking, and if you look at the waterfall of profit growth last year, we saw that the wholesale banking was a major driver of that. That was really coming from deepening of wallet share as well as the related loan growth that happened in that space. We expect the same will continue this year. If you saw the breakdown of the numbers that Yemisi gave, in the first 2 quarters, I think both Corporate and Commercial Banking were loss-making, but their turn to profit in Q3 and Q4 for those respective quarters. And that's just a reflection of the fact that we were coming from a deeper loss position in 2021. And now that it is profitable, you'll be seeing a lot of the revenue growth flowing to the bottom line. So we think overall sort of loan growth, particularly in the corporate banking or the wholesale banking space, will be accretive to earnings. And thankfully, with the capital that we have to support that, that would also be positive. I think generally -- and we can't understate the impact of our ecosystem strategy because there is a lot of synergy that we're seeing, and there's a lot of what I would describe as almost spontaneous revenue growth is not requiring us to invest as much on the cost side because of these synergies. And so that will continue to power our earnings. And of course, digital remains very important. And the good thing about digital is that relatively speaking, this is profit growth or revenue growth that does not require as much spend. There are some things we are trying to do as a business to keep the cost side of technology moderated and a lot of that is around moving increasingly towards a bill versus advice strategy. That's what we've seen happen with our mobile channel, and that's helped us immensely, and we're increasingly doing that with other parts of our infrastructure, which would enable us to ensure that revenue grows much faster than the cost side. So that's a rather long-winded answer to your problem, I mean, to your question, reason being there is no single -- it's not the case of one driver, but a number of factors as mentioned earlier, we expect we will have a fairly strong year this year. I believe that is it in terms of questions. And if there are no more, we'll hand it back to the organizers

There are no questions from the phone.

Thank you very much, everyone, and we look forward to updating you on the performance in the first quarter of the year, and enjoy your evening. Thank you.