FCMB Group Plc (FCMB) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the FCMB Group Half Year 2023 Results Conference Call and webcast. [Operator Instructions] Please note that today's conference being recorded. I would now like to turn the conference over to your speaker, Ladi Balogun, the Group Chief Executive Officer. Please go ahead.

Thank you. Good afternoon, and welcome to the H1 2023 Investors and Analysts Presentation for FCMB Group plc. I will be leading the presentation today. And with me in the room, also the Group Chief Operating Officer; Mr. Gbolahan Joshua, the Group Chief Financial Officer; Mr. Deji Fayose and the Group Head of Investor Relations, Tunji Onamusi. And sorry, the Group Executive Director, Investment Banking and Coverage, Mr. Femi Badeji. From the back, we have Mrs. Yemisi Edun, who is the CEO of the bank. We also have in the room, the CEO of Credit Direct Limited, our Consumer Finance business. [ Mr. Shi Wonder ], and we have the CEO of FCMB Asset Management, who will be taking us through our investment management business. I will move straight into just a quick summary of the agenda, which is on your first slide, and nothing really changes after taking through the highlights and updates. I will hand over to our CFO, who will take us through the numbers in some more detail at a group level. So moving on to the results highlights. We can see that across board, with the exception of the increase in nonperforming loans everything is in green, which shows positive trends throughout the key financial indicators of our business. Balance sheet grew by about 40% year-on-year to NGN 3.7 trillion. And the earnings, as reported, grew 148 per to NGN 38.2 billion. We did have about net gain from revaluation of approximately NGN 12 billion for the period. And that led to a significant improvement in our cost-to-income ratio to 45% and our RoAE also to 22.9%. If we were to adjust for the gain, our CIR would have been at about 67.3%, which is still an improvement on prior year. At the group level, our capacity ratio remains at 16.4% or is an improvement of 130 basis points. We will see later that at the bank level, it is at 15%. However, we do plan to do an audit by September and capitalize our earnings that should restore our capital adequacy ratio to very healthy levels. I think it's important to note that a significant portion of our retained earnings is in hard currency, and that in itself helps us to be able to counter the impact on our capital adequacy ratio of currency devaluation. In terms of other financial indices, we saw that loans were significantly up 37% and deposits were up 45%. AUM was up 4%, and we acquired -- we grew our customer numbers up to 11.7 million, which is up 16% year-on-year. As mentioned, NPLs did tick up slightly to 5.2%. Moving to the next slide, just talking through what's been happening in terms of progress along the key elements of our ecosystem. Our existing platform that all exhibited strong earnings growth, Banking up 189%, Consumer Finance 10%; Investment Banking, 54%; and Investment Management, 53% year-on-year. Our technology platforms that are either in at the infancy stage for ------ [ CAD ] and [ Private Pizza ] as in the case of the borderless banking business. That in itself is also progressing well, and we'll begin full commercial operations towards the end of Q3, this quarter that we're currently in. Our Banking-as-a-Service business is now active. We recorded over 2.6 million transactions at the end of H1, compared to 2 million transactions for the full 12 months of last year. This is beginning to have modest impact on our fee income as well as helping to support our customer growth and current account and savings tax growth. We expect over the next few years that this will be a more significant contributor and helped drive improvements on both cost income ratio and RoAE. I've already discussed customer numbers, the social number of customers we acquired during this first half was 860,000. In terms of our products, across board, we are seeing fairly robust growth. On the payment side, growth was 6% on our mobile platform, so about 6.2 trillion. On the lending side, we saw 37% year-on-year growth to about NGN 1.5 trillion. The key factors driving that in manufacturing, agriculture on oil and gas. Oil and gas partly because of the revaluation of the currency or the devaluation of the currency. Treasury has moved clearly from being trading business much more to the sales business, where we have to generate NGN 5.9 billion in sales income in the first half of the year, which is 21% up on last year's NGN 4.9 billion. Our low-cost deposits grew by 23% to 1.6 trillion and assets under management are now about NGN 910 billion. On the investment banking side of the products there, we saw fees from capital raising and advisory mandates grew by 37% to NGN 609 million this month of the year. Turning to the third of third-party products. Insurance did see a dip of significant drop about [Audio Gap] [ NGN 700 billion ] in the first half of the year towards driving the growth of the economy. NGN 520 billion coming from capital that we raised [indiscernible], NGN 127 billion coming from growth in our AUM and NGN 61 billion that came from our incremental loan growth, which is the loan growth, excluding the impact of the naira devaluation. The next slide just talks through some of our key impact highlights whilst being focused on delivering strong financial returns. We also have a purpose of fostering inclusive and sustainable growth. And in that regard, we've set some key objectives which we track throughout the course of the year. The first thing democratizing access to comprehensive financial services, which is basically levering our group structure to ensure that beyond just traditional opening accounts and payments associated with financial inclusion, but we're making sure that retail customers get access to lending and wealth products and other products that may require. In this regard, we disbursed over 3 million loans via our digital lending product Fast Cash, which amounts to about NGN 105 billion there. We've expanded our agency network to 115,000 agents. And through this, we provided about NGN 5.2 billion in micro loans to about 33,000 beneficiaries. And we also have disbursed about NGN 171 billion to SMEs. Retail wealth products, digital retail wealth products that are giving access to those. We typically would not be able to gain access to sort of inflation, inflation beating fixed income investment products. We're able to offer some of these through our app. And in Africa, we saw about 78,000 customers able to access retail investment products through our app. Another key objective that we have is helping to improve the country's balance of payments and by driving exports and diaspora flows this is a fairly recent focus for us. And in that regard, we're facilitated about $160 million of [ non-oil ] export flows for about $81 million of direct remittance flows during the period. And we expect that this will continue to grow quite significantly. In terms of promoting sustainable economic growth, we're doing this slightly by focusing on sectors like the agricultural sector. And in that regard, we've contributed to food security in the country by growing our average loan book by about 18% to NGN 174 billion. We provided access to finance about 24,000 small rural farmers. We also rehabilitated about 80,000 finding households in Northeastern Nigeria through partnerships and we were able to source out NGN 71.6 billion funding from DFIs and donor agencies that was channeled through the bank to support critical sectors of the economy. In terms of women empowerment, of 120 women owned SMEs participated in Sheventures mentorship program. And about 50 women admitted to an export trade accelerator program to build export capacity. We also partnered with DFI to increase borrowing up to 1,000 women-owned SMEs, through training and investment readiness programs. And finally, we disclosed about NGN 18.5 billion of loans to women-owned SME. That concludes my section of the presentation. I'll now hand over to Deji Fayose to dive in a little deeper into the financial performance.

All right. Thank you, Ladi. Good afternoon ladies and gentlemen. I'll now take you through Slide 6 to 10, which covers the overview of our group financial performance at the end of H1. Slide 7, please. Book earnings grew by 89% from prior year and a 20% increase over the prior quarter driven by growth in both our net interest and noninterest income. Our net interest income grew by 28% over the prior quarter and 20% from the prior year as a result of growth in yield on our earning assets from 12% to 14.9%. Noninterest income also go year-on-year, with record increases in service fees and commissions across our channels. Traded income and growth in FX revenues as a result of the exchange rate unification by the CBN according to June. Operating expenses also grew by 20% over year. We got a growth in personnel costs, and general inflationary pressures. We also saw an increase in impairment charges from the prior year due to increased provisions that we took on our risk assets. Overall, our group PBT grew by 148% year-on-year from NGN 15.4 in the prior year, closing up NGN 38.2 billion at the end of H1 2023. On Slide 18. The next slide, which I'd like some of our key performance ratios. Our return on average equity grew to 22.9% by the end of June from 11.1% in the prior year. Year-on-year growth 106%, which as a direct results of our growth in profits. Our net interest margin also declined marginally due to a 22% growth in our average earning assets in our balance sheet. Cost-to-income ratio, however, improved by 34% year-on-year, which includes a 45.2% at the end of H1 from 68.6% in the prior year. Both our liquidity and capital adequacy ratios remain above regulatory thresholds, closing at 36.5% and 16.4%, respectively. Slide 9. And all our operating companies recorded year-on-year growth, where 186% growth from the banking group, 54% from investment banking, 53% from investment management and 10% on the consumer finance growth. In terms of our [indiscernible] contribution to group profits. The banking will contribute 82% of group profits, while our non-banking subsidiaries contributed at 16%. Slide 10 is our year-on-year waterfall chart, which depicts our growth in profit, as mentioned earlier. From NGN 15.4 billion in the prior year to NGN 38.2 billion in the coming and it also show the contribution across our various operating companies. I'll now please hand you over to Gbolahan Joshua, our Group Chief Operating Officer, who will take you through the next section.

Thank you, Deji. Good afternoon, everyone. My name is Gbolahan Joshua, I'm taking you through the digital business from Slide 12 to 18. Slide 12 just shows key highlights from our digital business generated NGN 22.6 billion of digital revenues across payments, lending and wealth, which is 31% year-on-year growth. Digital revenues are now 9% on gross earnings slightly down from 12% last year because of the exceptional revaluation income. We disbursed over NGN 123 billion to digital loans this year, that's a growth of [ 8% ] from another [ NGN 114 billion ] disbursed same period last year. And number of customers disbursed to over 771,000 customers, 69% growth from [ profit ], 5,000 customers in period last year. Total loan portfolio of our digital loans is NGN 87.2 billion. It's growing 18% year-on-year. And digital lending now accounts for 65% of our digital revenues. We now have 9.8 million digital customer that's up 18% from 8.3 million customers last year. Move on to Slide 13. Slide 13 just shows the chart of our customer acquisition and on quarter-on-quarter basis we acquired over 340,000 customers. For the year, we acquired about 870,000 customers, which is the [ 18% ] growth on a year-to-date pace. Slide 14 show the key highlights from our agency launching business. The growth in agency network 115,000 agents describing the revenue growth we've seen year-on-year revenues have moved from 315 million half year to almost 607 million customers this year. There was a slight dip in customer acquisition in the first quarter. That has rebounded after the operational risk measures [indiscernible] and customer acquisition from 69% year-on-year and [ 17% ] quarter-on-quarter. Now I go to Slide 15, we just show the breakdown of our digital revenues. Revenues are up 31% this year. Lending is up 38% from NGN 10.6 billion to NGN 14.6 billion, payments wealth and agency has grown 19% from NGN 6.7 billion to NGN 8 billion. Digital lending and payments remain the key drivers of digital revenues of digital revenues, accounting for 97%. Where se seen a strong uptick in agency business, where the contribution has been from 1.8% to 2.7%. Digital loans to retail have grown by 40%, while loans to SMEs is going by 2%, [indiscernible] in the coming slides, we've seen increase execution of our operational microlending business credit area. Next slide, Slide 16 show the breakdown quarter-on-quarter on digital revenues, revenues moved from an average of NGN 10 billion quarterly to NGN 12.5 billion quarterly, and that's a growth of 25% on a quarter-on-quarter and 31% year-on-year basis. Slide 11 to Slide 17. Slide 17 shows the breakdown of our digital loan book over the last 5 quarters. It excludes over NGN 50 billion of loans originated digitally which is traditional customer loan business in the bank, and we will be including this in subsequent presentations, but digital loans have grown from NGN 74 billion in H1 '22 to NGN 87 billion in H1 from '23. Digital loans now account for 5.7% of the total loan portfolio. The dip is due to the impact of the devaluation on the total loan book of the group excluding the impact of the devaluation, digital loans have been above 7% of the total loan portfolio of the group. We see an increased utilization in our credit direct business and the split of the digital retail lending portfolio is now 72% between the bank and our consumer lending business. Slide 18 just his key highlights. As SME loans disbursed about NGN 80 billion for H1, total volume of loans disbursed NGN 9.449, average ticket size of NGN 8.5 million, portfolio size of NGN 53 billion, we've seen an 8% growth year today. For digital loans, disbursed about NGN 44 billion, 100% with [indiscernible] disbursed in last year. Total loans disbursed about NGN 762,000 but also up about 17% from last year. Average ticket size NGN 32,000. That's now from about NGN 40,000 last year and portfolio side is NGN 34.1 billion. For wealth, we now have 78,000 customers that up from 60,000 customers which on last year. Revenues have grown by 116% year-on-year and AUM in our business grown by 22% to NGN 11 billion. And that slide just shows a breakdown of our payments revenue, largely driven by cards, mobile and ATMs with half of 94% of our digital payment revenues. I'll now hand over to Yemisi Edun, the CEO of the Bank, who will take us through the banking group. Thank you.

Thank you, Gbolahan. Good day, ladies and gentlemen. I'll take you from Slide 20 to 23 on the review of the banking group. Slide 20 is a result for showing the key performance metrics. Gross earnings is 93% year-on-year, this was driven by a 64% year-on-year increase in our net interest margin and [ 300% ] growth in noninterest income. The noninterest growth was driven by [ deposits ] and commissions from FX devaluation. Cost-to-income ratio 70.9% to 45.8% at the end of H1 2023, mainly propelled by earnings growth for the period and FX devaluation gains. Return on Average Equity also increased by 1,260 bps year-on-year to improve to 22.4%. Our capital adequacy, remained flat, dropped from 15.1% in H1 2022 to 15% in H1 2023. As I've been mentioned earlier, [indiscernible] more in September to average tariff reached this year, which will show great capital adequacy. [ Deposits ] profit grew year-on-year by 46% to NGN 2.39 trillion. The growth in cost market for fixed costs across most of the deposit segment especially personal banking and retail banking. It [indiscernible] is a result of the clear execution of the retail strategy and the FX rates unification impact on the foreign currency balance. Gross loans grew 40% year-on-year to NGN 1.61 trillion. The cost of risk grew 350 bps 4.8% year-on-year. The year-on-year growth in cost of cost of risk [indiscernible] and growth in loan book arising from [indiscernible] for the impact of the devaluation. NPL grew from 4.6% to 5.4% and [indiscernible] grew year-on-year. This led to an outcome in manufacturing. More details will be provided in subsequent slides. Number of customers grew 14% year-on-year from 7.46 million in H1 2022 to 8.49 million in H1 2023. This was a result of [indiscernible] investment in technology to lead the acquisitions right. Moving on to Slide 31, which comes to the analysis of the bank performance for the period. Profit before Tax 186% year-on-year moving from NGN 10.5 billion to NGN 31.2 billion and even and 89% growth quarter-over-quarter amid in challenge in macroeconomic environment. This was attributable to remain the sales increase in our year-on-year net interest income as we continue to scale our balance sheet, especially as we call the sector. Noninterest income also increased by 271% quarter-on-quarter and 319% year-on-year, the growth was driven by net fees and commission, trading income, other income and devaluation gains. Operating expenses grew by 24% year-on-year as [indiscernible] continues to trade off for in the country. The growth was also due to technology enhancement costs, increased staff costs and increased regulatory expenses. Net [ risk assets ] grew by 15% year-on-year. These were a result of the provision of [indiscernible] sector of the economy and the impact of currency devaluation. Customer deposits also increased by 19% quarter-on-quarter and 46% year-on-year respectively, driven mainly by customer acquisition by our retail channel and currency devaluation. Slide 22 contains our noninterest income and analysis. Net fees and commission grew 47% year-on-year, driven by growth in electronics, fees and commissions. However, declined by 6% quarter-on-quarter due to increase card recoverable expenses. Trading income 25% year-on-year due to higher o higher trading activities in government-backed securities. FX income [indiscernible] currently increased year-on-year due to the valuation gain [indiscernible]. Other income also grew significantly quarter-on-quarter as a [indiscernible] year-on-year due to dividend income received. On Slide 23, we have PBT [indiscernible] by statements. Out personal banking statement is decreased by [indiscernible] grew by NGN 1.6 billion advance and NGN 1.16 billion quarter-on-quarter and year-on-year respectively. This was that the result of the increase in transaction activities or on alternate channels due to the [indiscernible] policy of CBN, as well as improved customer acquisition and retention in line with our retail strategy. Our cost to [indiscernible] growth in personal banking remain, but not any case for the following. To optimize controllable costs such as kind of recent costs and net impairment charges. So aggressively [indiscernible] company and represents to increase contribution of new features launched on our mobile apps and to also aggressively grew position of new customers in other [indiscernible] will also introduce new products such as contactless banking. For SME banking, PBT grew by NGN 1.07 billion at NGN 2.01 billion quarter-on-quarter and year-on-year respectively. We continue to see traction as we remain, of course, with our strategy [indiscernible] is our new AI agreement system to [indiscernible]. Treasury and financial market segment PBT declined quarter-on-quarter by NGN 1.14 billion. However, grew by NGN 0.67 billion year-on-year, slightly due to higher trading activity in government backed securities. Corporate Banking business recorded profit of NGN 1.47 billion with quarter-on-quarter and year-on-year growth on NGN 0.91 million and NGN 3.23 billion. We continue to see growth in this segment based by the challenging economic situation in the country. The commercial banking segment PBT grew by NGN 1.3 billion quarter-on-quarter and NGN 0.1 billion year-on-year. For Institutional Banking segment, though the business is still loss making. We have seen a significant reduction in losses, which losses declining by NGN 0.3 billion and NGN 1.28 billion quarter and year-on-year respectively. And we recorded extraordinary income from devaluation during the period. The Group recorded FX revaluation gain of NGN 48.32 billion captured as the exceptional income, due to the Naira devaluation in the NAFEX window, of which about 72% was set aside for anticipated impairment charges and the balance of NGN 11 billion was recorded as an exceptional item. Moving on to Slide 24, which analyzes the deposit trend for the period. So [ customer deposits ] grew 19% quarter-on-quarter and 46% year-on-year. Low-cost deposits now account for 67% of total deposits. It grew by 14% quarter-on-quarter and 33% year-on-year respectively. Retail deposits [indiscernible] about 61% of total deposits grew by 9% quarter-on-quarter and 39% year-on-year, respectively. On Slide 25, we provide cost analysis and reduction plans for the year. Operating expenses grew by 4% and 24% quarter-on-quarter and year-on-year respectively. The year growth was slightly due to an increase in personnel and regulatory costs coupled the double-digit inflationary environment. Regulatory costs that is NDIC and AMCON grew by 17% year-on-year due to [ improving ] balance sheet size. Technology costs also grew by 30% and 29% quarter-on-quarter and year-on-year respectively, to account for 10% of operating expenses growth in H1 2022. Reduction plans are as following but not [indiscernible]. So internal process realignment and automation for greater cost efficiency. Resources reallocation for optimization of performance. Our focal continues to remain on driving efficiency and reducing cost to serve. Slide 26 summarizes the group sectors currently in our segment loan book. Our loan portfolio [indiscernible] segments, we achieved a growth of 40% percent year-on-year in line with our plan for the year 2023. The quarter [ is very weak ] with [ 32% ] growth. 83% of year-on-year growth was largely by [ 80% ] devaluation in naira, while 85% of quarter-on-quarter growth was achieved by the causes mentioned. Year-on-year organic growth was largely driven by manufacturing, agriculture, commerce, oil and gas-downstream and individual sectors while the quarter-on-quarter organic growth was largely driven by agriculture, manufacturing, commerce and the individual sectors. Contribution of foreign currency loans increased due to risk combining that led to significant devaluation of the naira. This led to movement in the foreign currency mix from 40% to 53% year-on-year and from 43% to 63% quarter-on-quarter. Corporate segment grew by 53% year-on-year, slightly due to devaluation, while gaining a 5% share of the portfolio. Similarly, commercial gained 7% of the portfolio. All sectors are within plans and regulatory limits, while the concentration in oil and gas was in the -- I gave plans that. Slide 27 shows the loan book performance by sector, currency and revenue. NPL which we were guiding to, 30 bps year-on-year and 10 bps quarter-on-quarter, to close at 5.4%. The year-on-year growth was caused by the consideration of an account in manufacturing, who's restructure and work out plant filled a new economic challenge and what they [ informed ] that delayed the plant from commencing operation. The year-on-year growth was also induced by the classification of deferred current [ acquired ] assets, who's [ work out ] plans have been challenged. This was further [indiscernible] by the naira devaluation. NPL growth was [ high ], year-on-year and quarter-on-quarter within the commerce sector with largely strong devaluation and deterioration in [indiscernible] performance. This product has been analyzed to improve [ directing ] and performance. Quarter-on-quarter drop in individual NPLs was due to recovery of [indiscernible] of some of the security filing quarter 1 because of the linked [ salary increase ]. This is the sense of our NPL which is currently coming from the local currency portfolio while 50% of our [indiscernible] portfolio [ resides ] in corporate banking. We remain focused on the quality of our loan book, are continuing to monitor performance in line with our risk appetite. Slide 28, speaks to the change in our NPL cost of risk entailing past coverage. The year-on-year growth in net impairment charge was driven by growth in NPL, impact of [indiscernible] macroeconomic variables on [ ECL ] and good debt adjustment for the impact of the valuation of the loan book. Cost of risk grew by 350 bps year-on-year and 310 bps quarter-on-quarter [indiscernible]. Accumulated impairments grew by 81% for the quarter and 71% year-on-year for similar reasons. Coverage grew quarter-on-quarter from 83.7% to 123.6% as a result of increased income. Coverage with regulatory risk reserve and forbearance reserve, [indiscernible] is 145%. Thank you for listening. I'll now hand you back to Chukwuma Managing Director, Credit Director Limited, who will present the Consumer Finance performance.

Thank you very much, Yemisi. Good afternoon, ladies and gentlemen. I'll be talking you through Slide 30 to 33, where we will be focusing on Credit Direct business performance for the first half of the year. Gross earnings and interest income grew by 24% during the period under review with profit before tax growing 10% from NGN 2.1 billion H1 '22 to NGN 2.3 billion, 1H 2023. Our operational expenses grew by 22% from NGN 2.7 billion to NGN 3.3 billion, with non-performing loans growing 83 bps to 9%. Return on average equity grew to 200 basis points to 33% from 31% when compared with the corresponding period last year. On Slide 31. The first half of the year, interest income and gross earnings both grew by about NGN 1.6 billion supported by 66% growth in disbursements year-on-year compared to the corresponding period in 2022. In Q2 alone, interest income jumped nearly NGN 600 million quarter-on-quarter, supported by 93% quarter-on-quarter growth in loan disbursement. Despite rate hikes, during the first half of the year, our interest expense dropped 2% quarter-on-quarter, while our cost of funds dropped 400 basis points supported by stronger loan collection performance and our ability to attract low cost funding from investors in our promissory notes. Our noninterest income grew 22% during the first half of the year contributed to more than NGN 0.5 billion in additional income to the company as we continue to grow our noninterest income streams. During the first half of the year, our wholly digital channels contributed an uplift of more than NGN 4.5 billion in loan development as customers continue to adopt a more efficient customer acquisition channel. Our USSD channel alone helped service more than 18,000 customers in the last 4 months, including 14,000 new customers. Operating expenses increased by about 22% year-on-year as a result of the increase in operating activity that supported the strong growth in risk asset creation. Cost-to-income ratio remained flat quarter-on-quarter despite inflation hovering around 22.4%. Our loan book expanded 32% year-on-year to NGN 38 billion in the first half of 2023. This was supported by the addition of 40,000 new customers. We continue to prioritize the creation of high-quality risk assets and nonperforming loans declined 60 bps from 9.6% to 9% between first quarter of the year and the second quarter of the year. This helps our loan loss provisions remained flat year-on-year despite the strong growth in our loan book over the past year. Return on average equity improved from 31% to 33% year-on-year, supported by 12% growth in our profit after tax during the first 6 months of the year. We anticipate the continued upward movement in our profitability ratios supported by strong growth in disbursement in the coming months. The business continues to maintain good maturity and capital buffers to support growth in loan disbursements, capital and customer acquisition and funding optimization, which we anticipate will help support us to finish the 2023 financial year strongly. I will now be handing you over to Femi Badeji, Executive Director, FCMB Group PLC to take us through the Investment Banking segment of this presentation. Thank you.

Thank you, Chukwuma, and good afternoon, everyone. My name is Femi Badeji, and I will take you through the Investment Banking section of our presentation which consists of Slides 34 and 35. Gross earnings for the Investment Banking segment for the first half of 2023 were up year-over-year by 31% (sic) [ 37% ] to NGN 2.1 billion, with noninterest income being up year-over-year by 28% to NGN 1.8 billion and PBT being up year-over-year by 54% to NGN 1 billion for the reporting period. Whilst operating expenses for the first half of 2023 were up 24% year-over-year to NGN 1.1 billion. The cost-to-income ratio for the business was 53%, which represented a 500 basis point year-on-year reduction. The return on average equity for the business was 28% for the reporting period, which represented a good 600 basis point year-over-year increase. Moving to the next slide, please. Gross earnings and PBT year-over-year growth were driven by increased capital markets activity during the period as companies continue to explore various capital market offerings, which led to an increase in capital raising and financial advisory fees as well as strong improvement in trading income. The Capital Markets business, led or participated in 17 transactions for the first half of 2023, helping to reach NGN 520 billion for our clients and is also working with a fairly robust pipeline for the rest of the year. Brokerage commissions from our stockbroking business grew by 6% year-over-year despite a 37% decline in the value of stockbroking trades year-over-year from NGN 50.8 billion in the first half of 2022 to NGN 32.3 billion in the first half of 2023. Trading income grew 21% year-over-year, driven by an increase in proprietary trading activity for the period. The year-over-year improvement in cost-to-income ratio to 53%, which we earlier talked about as at of the first half of this year was largely on the back of earnings growth outstripping the rise in operating expenses, which were largely personnel expenses. Overall contribution of the investment banking business to group PBT was 3% as of the end of the first half of this year. For the second half of the year, our primary focus remains providing support to our clients by continuing to offer 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, who will take us through the Investment Management Section of the presentation. Thank you.

Good afternoon, everyone. I'll be taking you through Slides 36 to 39, and I'll start with Slide 37, which is first half performance highlights for Investment Management [indiscernible]. Gross earnings rose by 45% year-on-year. This was on the back of a 41% increase in noninterest income compared with an increase of 38% in operating expenses but not cost accounted for over 50% of OpEx. Looking at our return on average equity, that increased by 900 basis points, 39% and this was on the back of a very strong profit numbers. Moving to the next slide. Assets under management rose by 10% quarter-on-quarter, by 16% in the first half of the year and by 24% on a year-on-year basis to close at NGN 910 billion. Investment income accounted 41% of the half year AUM increase, with the balance of 59% coming from net contribution from customers. The 59% is broken into 2 parts direct net inflows made of 28% and asset unit gains from the evaluation of AUM from our U.S. dollar products made of 31%, which together about 69%. Our pension business accounted for 79% of AUM in the second quarter compared with 84% in the same period of last year. AUM and management fee from digital products increased by 22%, and 32% on a year-on-year basis. In terms of the number of retirement savings accounts that grew by 1.11% in the first half of the year to close at over 742,000 with registrations via our digital platform contributing 63% of the increase compared with 60% at the end of last year. Looking at the transfer window. We recorded a net outflow of NGN 1.1 billion in the first half of this year as completions from new entrants increased. And the receipt of planned inflows of NGN 2.6 billion that could have [ counted as ] outflows was delayed until third quarter. PBT grew by 63% on a year-on-year basis with our pensions business contributing 64% of the figure. Moving to the next slide, on which I'll will provide an update on our primary objectives for this financial year. There are 3 of them and I'll start with the first one, which is on AIICO pension impact. The transaction's impact on assets under management and PBT were NGN 174.4 billion and NGN 770 million in the first half of this year, representing 24% of AUM and for 47% of PBT contribution from our pensions figures. We remain on track to achieve our AIICO PBT contribution target of NGN 1.41 billion for this financial year. Moving to the next item, which is on the digital execution. We are concluding work on the web version of our GRO digital investment products and now expect web version to go live in the third quarter of this year. We experienced the technical challenges in second quarter, which delayed the launch of the web version. AUM and management fee from our digital products are projected to increase by 58% and 83% this year. Lastly, on our alternative assets growth objectives. Our fund registration request to the SEC to raise at least NGN 10 billion under Series 1 of our planed alternative asset fund is still under review. However, we remain optimistic that final approval to launch the fund will be secured in the third quarter of this year. I will now hand you back to Ladi Balogun for an overview of our half year -- for second half of the year.

Thank you, James. So based on the performance in H1. I'm assuming that there's no further movement in the exchange rates, we are forecasting that earnings should be up this year by more than 65% year-on-year for the full year. And this will be driven by some of the following factors. First of all, we do expect that loan growth for the full year will top out at about 35%. We anticipate that we will sustain the momentum in terms of customer acquisition and acquire about 1.7 million by customers for the full year, which will support growth in fees, in current and savings accounts and in AUM that are all assets paced to grow 35%, 15% and 20% year-on-year. Digital revenues, we think, will continue to remain robust, with 25% growth forecasted across lending, payments and wealth for the full year. Wholesale banking, which has been a turnaround, we expect that we'll continue to see accelerated earnings growth as that business does not have high operating leverage or operating expenses. So as the revenues grow, most of that will flow straight to the bottom line. On the Investment Banking side, we do anticipate that there'll be sustained performance from Capital Markets as there's quite a lot happening in the DCM, debt capital markets area in the second half of the year as rates have generally, I would say, become a bit more favorable. And we have been investing and strengthening our capacity and therefore, growing our pipeline in the equity capital markets and M&A space, and we expect to see growing deal flow of revenue from that side. Cost of risk this year will top out at about 5% and we expect that because of the devaluation that OpEx will grow by about 30% for the year. But as mentioned earlier, we do expect that revenues will grow faster. And therefore, overall, we should see about 65% plus profit growth this year all of [indiscernible]. Thank you very much, and we look forward to [ answering ] your questions.

[Operator Instructions] We have no questions on the phone at the moment.

Well, [ Olosu Rambacha ], question is, what is your net loan USD position? It's about $150 million. Then we have a question from [ Ugawe Fozon ]. That what drove the sharp rise we saw in technology costs? Second question is what [indiscernible] is happening to the FCY loan exposure? Third question is when, in fact, do we foresee on the policy of FCY's loan exposure following the devaluation of the naira and then the next question, I'll just read them out and then I'll take them one by one. So the guide attributed the growth in NPLs to manufacturing, power and energy sector given all the reforms on subsidy and FX [ unification ], what's the outlook for these loans and possible asset quality concerns in the future? In turn, following the 350 basis point increase in cost of risk, is it reasonable to expect moderation or do we forecast higher provision? What is the USP for the Borderless Banking platform launching in H2, 2023? And while -- not finally, how will the service back up against [indiscernible] fintech services? And then finally, what drove the Q-on-Q decline in agency banking? Okay. So quite a lot of questions. The first one, the rise in technology costs. I don't know whether Yemisi or -- do you have details for that? What caused that?

So increased investment as well as the currency devaluation because most of the cost in technologies, foreign currency...

So those are most of our licensing costs linked to the dollar. The second question, which sectors have most of our FCY loan exposure, I believe that is oil and gas. Is that right?

Yes.

And what impact do we foresee this following the devaluation of the naira? I believe I can answer that. But in terms of the asset quality itself, that we will not see deterioration in those specific loans because of devaluation for the simple reason that their revenue is in dollars. So those specific loans themselves will not see deterioration. The next question, you asked is just -- does the bank attribute with growth in NPLs to the manufacturing -- does the bank attribute to the growth in NPLs to manufacturing power and energy sectors and given these reforms, what... [Technical Difficulty]

[Operator Instructions] Thank you for your patience.

Okay... [Technical Difficulty] Hello Emily, can you confirm if you can hear us?

I can hear you.

If you can hear us, we'll continue.

We can hear you, please continue.

So you can't hear us. Is that correct?

We can hear you sir. Can you hear us?

Yes, we can hear you. So question number 3 was the growth in NPLs was due to manufacturing, power and energy sectors. You were asking what the outlook for these loans and asset quality concerns will be in the future. So Yemisi is going to take that [indiscernible] in the back.

So we've anticipated that in the future with the business of declaration in these sectors. So because of that, we expect -- that's the reason why we pick up [ size ], part of the piece of the evaluation for any asset that in [indiscernible] segment on this sector.

So I believe what we're therefore saying is that what we've specified should be adequate to take care of deterioration that is anticipated in total. Okay. Now you also asked that there was a 350 basis point increase in the cost of risk. Do we forecast higher provisioning? I think we gave some guidance that will be at about 5% at the end of the year. So there will be some modest increase in provisioning, but not to the magnitude that was set aside for Q2. The USP of our Borderless Banking platform. Fundamentally, what that is doing basically is it is enabling us to offer a digital offering -- a full digital retail offering in FCMB U.K. So it's leveraging our U.K. retail license to provide multicurrency banking products. The way it differs from most other fintech is that we have a full retail license. So we are in control of our own balance sheet. We're able to offer savings products in the long run it will [ also ] for loan products and also we are able to customize the user journeys when it comes to AML and KYC based on our deeper understanding of Nigeria and African risk and most other fintechs have to basically rely on the KYC and AML rules of the -- all the clients that is providing them with, let's say, banking and service. So that flexibility will enable us to give us a much more comprehensive service to what we describe as African global citizens. So those could be Nigerians resident in Nigeria or they could be Nigerians in the U.K. or other parts of the world that would meet our AML and KYC standards. So it's really basically moving our U.K. business to full retail business that offers multicurrency accounts as well as remittance and savings products. So the final question was what drove the Q-on-Q decline in agency banking?

Okay. On what drove the decline was there was a spike in revenues in March due to the naira redesign policy. So that sort of more moderated when the policy was reversed. So that revenue spike in the month of March was what drove the Q-on-Q decline.

I don't believe there are any other questions. So we can -- let me just check to be sure, yes. So we can bring the meeting for a close. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.