FCMB Group Plc (FCMB) Earnings Call Transcript & Summary

Welcome to the FCMB Group 9 Months 2023 Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Ladi Balogun, Chief Executive of FCMB Group.

Good afternoon. Welcome once again to the 9 months 2023 Investor Analyst conference call. I have in the room with me today, my colleagues that include our Chief Operating Officer, Gbolahan Joshua; the group CFO, Mr. Deji Fayose; the bank's CEO, Mr. Yemisi Edun; the Bank Chief Risk Officer, Mr. Oluwatoyin Olaiya. We also have the CEO of Credit Direct, Mr. [indiscernible]; the Director Investment Banking and Coverage in FCMB Group, the holding company, Mr. [indiscernible]; and the CEO of FCMB Asset Management, Mr. James Ilori; and finally, the Head of Investor Relations, Mr. [indiscernible]. I'll be taking you through the first slide of the agenda, which is the highlights of our results that have already been published and then handing over to the CFO to talk through those results in a bit more detail. So on that slide, we see that all our highlighted indices here have shown fairly strong growth in the 9 months to date. A number of things are responsible for this. Firstly, we did benefit from revaluation gain due to a fairly material dollar net asset position in our balance sheet, although we satisfied most of the gains there as provisions just to ensure that we don't get any surprises in terms of impairments going forward. So the net impact of the revaluation gain was somewhat muted. Beyond that, however, we did see very strong volume growth across all indices as is shown. And what is definitely coming to bear here is our ecosystem strategy that is resulting in an acceleration of our customer base, improved product per customer. And also, overall, we're seeing a number of different businesses contribute materially to the performance so that we're less dependent clearly on the local bank. Overall, we saw total assets increase by 32% to NGN 3.9 trillion. And similarly, on the asset management side, we saw AUM increase by 26% to NGN 953.7 billion. In terms of our balance sheet, we saw 39% growth in deposits to NGN 2.5 trillion and a NGN 1.6 billion growth -- sorry, NGN 1.6 trillion figure for our loan book, which represented a 34% growth comparing this time last year. Our customer base grew by $1.6 million, 15%. All these resulted in overall profit growth of 108% from NGN 26.5 billion in the 9 months to September 2022 to $55.1 billion in the 9 months to September 2022. I'll now hand you over to Deji Fayose, the CFO, to give you a more detailed overview of the financial performance.

All right. Thank you, Ladi. Good afternoon, ladies and gentlemen. I'll now please take you through Slides 4 to 8, which covers the overview of our group financial performance for the 9 months ended September 2023. Group panels grew by 6% year-on-year, closing at NGN 31.5 billion. However, [indiscernible] declined by 25% quarter-on-quarter. Our quarter-on-quarter decrease was due to the significant valuation income that are recorded in noninterest income in the previous quarter. Our net interest income also grew by 19% and 29% quarter-on-quarter and year-on-year, respectively, as a result of growth in year-on-year yield on our earning assets from 12.6% in the previous year to 3.9% at the end of September 2023. Noninterest income also grew by 167% year-on-year, driven largely by growth in our foreign exchange revenues, fees and commission income and our trading income from the treasury business. For operating expenses, we also recorded a growth of 14% and 29% quarter-on-quarter and year-on-year, respectively. The year-on-year growth was largely due to increased personnel cost, regulatory cost, some technology-related cost and general inflationary pressures across the market. Impairment charges were up a 106% from the prior year on the back of increased provisions and that were to practically on our risk assets. However, this declined by 99% quarter-on-quarter. At least additional provisions were booked late in the previous quarter when recorded our significant FX valuation gains. Overall, despite the recorded increases in our OpEx and impairments, our group EBIT grew by 108% year-on-year from NGN 26.5 billion, in the 9 months ended 2022 to NGN 5.1 billion at end of October 2023. Next slide, please, Slide 6. I'm looking at some of the key highlights, our financial ratios. Our 9-month 2023 return on average equity grew to 20.3% [indiscernible]% in the prior year, a year-on-year growth of 68% as a direct result of good stuff profitability. Our net interest margins also grew by 13% year-on-year from 7.1% last year to 8% in the current year as a result of a 29% growth in our net interest income. The group's cost-to-income ratio declined quarter-on-quarter to 60.4%. However, showed a year-on-year improvement by 24% on the back of improved earnings, closing our 49.9% at the end of September 2023 from 65.7% in October 2022. Both our capital adequacy and equity ratios remain above regulatory thresholds closing at 15.3% and for 42.3%, respectively. Slide 7. Slide 7 is our group earnings contribution from our respective operating companies at the end of the 9-month period. Our banking group contributed 80% of group profits, with down 4% from our Nigerian bank subsidiary and 6% from our U.K. franchise. Whilst all our other nonbanking subsidiaries contributed 20%. We had 8% contribution from our consumer finance business, 7% from [indiscernible], 3% from restaurant banking and group separate 2%. The next slide on this section is the waterfall that shows our year-on-year growth in our PBT from our 9-month position of NGN 26.5 billion to the current year position of NGN 5.1 billion at the end of September 2023. And it also depicts the year-on-year PBT contribution from our various operating companies. And as you can see on the waterfall, this has been a year-on-year increase across all our businesses. Thank you. I will now please stand you back to Gbolahan Joshua, our Group Chief Operating Officer, will take you through the next section.

Okay. Thank you, Deji. Good afternoon, everyone. I'll be taking you through our digital business, corporate lending, payment and well investment. So digital revenues came in at NGN 38.9 billion, a strong growth of 21% year-on-year. Return revenues now account for 11% of gross earnings. I mean it's largely driven by lending and payments. We've disposed over NGN 199 billion over the period in digital loans, a growth of 19% on a year-on-year basis to about 1.2 million customers, a growth of 74%. From a portfolio perspective, total portfolio is now NGN 117.8 billion, 53% year-on-year growth and detail [indiscernible] accounts for 69% TSR revenues, up from 63% last year. [indiscernible] 15% year-on-year growth. Next slide. This is just a breakdown of our customer attrition over the period. Total first month was NGN 12 million. We acquired about 1.2 million customers this year, a 10.9% growth over the 9 months, about 313,000 customers for the quarter. Next slide. This is an overview of our agency banking business. Revenues are captured on the payments business. We're seeing strong growth in revenues, and we've also seen strong growth from a customer acquisition perspective. We revamped the digital onboarding platform. And on a quarterly basis now, we acquired some 7,000 customers in quarter 3 ago. Next Slide. This shows the breakdown of our digital revenues at 68.8% coming from lending, 31% from payments, which includes agency and 0.3% from wealth. Lending is NGN 26.7 billion, up from NGN 17 billion over the last period, 57% year-on-year growth, both lending and payments account or 99.7% of the revenues. The next slide. This just shows the trend of our DT revenues on a quarterly basis. We've seen strong growth on a quarter-on-quarter basis. It moved from $10 billion quarterly in Q1 to NGN 12 billion by Q2 and now NGN 16 billion by Q3. On a quarter-on-quarter basis, Q2 growth was about 25%, Q3 about 30%. Based on our current run rate, data revenues are supposed to close the year at about NGN 55 billion for the full year. Next slide, please. This shows the breakdown of our digital lending portfolio. It's now NGN 117.8 billion, strong growth year-on-year and quarter-on-quarter across both SMEs and retail. On a quarterly basis, SMEs were up 28%, and retail digital lending was up 46%. We've seen significant improvement in our micro-lending subsidiary, CDL on the back of their digital transformation initiatives covering their core lending systems and distribution channels. Next slide. This just shows key highlights across our various areas of digital banking for SME loans, we disposed 17,014,984,000 customers, average ticket size is NGN 8.5 million, portfolio size in NGN 67.9 billion and 9% growth year-on-year. For retail digital loans, we have disposed NGN 72 billion, a 133% growth on a year-on-year basis to 1,201.2 million customers, down 9% year-on-year growth. Portfolio size is now NGN 50 billion to 40% growth year-on-year. For digital world, we now have 68,000 customers, 13% year-on-year growth in customer base. Revenues have grown by 100% year-on-year and [indiscernible] wealth up 45% to NGN 12.3 billion. The last slide is just a breakdown of our last registered breakdown on our payment revenue, largely driven by mobile, kind of agency banking, which the 3 of them together account for 86% of our payment revenues. I'll like hand you over to Yemisi Edun, the CEO of our Banking Group. Thank you.

Thank you, Gbolahan. Good day, ladies and gentlemen. I'll be speaking from Slide 19 to 27 on the review of the banking group. Slide 19 is a dashboard showing the key performance metrics. Gross earnings witnessed a 79% year-on-year growth. This was driven by a 28% year-on-year increase in our net interest margin and a 203% growth in noninterest income. The noninterest growth was driven by improved fees, commissions and gains from FX revaluation. The cost-to-income ratio trended downward from 67.6% to 50.6% at the end of Q3, mainly propelled by growth in earning for the period and the FX evaluation gain. Return on average equity also increased by 840 bps year-on-year to close at 19.3%. Capital adequacy ratio declined year-on-year from 16.7% to close at 15.4% in Q3. This was as a result of the devaluation that gives an expanded risk-weighted assets on the capital. However, the bank has showed off its capital in Q4 through an AT1 capital risk of about NGN 26 billion. The bank is now well above 61% of its capital adequacy ratio. Customer deposits grew year-on-year by 40% to NGN 2.54 trillion. The growth in customer deposits costs across most of the deposit segments, especially Personal Banking and SME banking, which was as a result of clear execution of retail strategy. FX rate devaluation impact on the foreign currency balance sheet also accounted for the partial group in customer deposits. Net loans grew 33% year-on-year to close at NGN 1.54 trillion. The cost of risk grew 390 bps to 5.9% year-on-year. The year-on-year growth in cost of risk and net loans was due to the charge for growth in NPL and growth in loan book arising from adjustments for the impact of devaluation. NPL ratio remained flat year-on-year at 4.4% and dropped by 50 bps quarter-on-quarter. Number of customers grew 13% year-on-year from 7.72 million in Q3 2022 to 8.7 million in Q3 2023. This was a result of additional investment in technology to either acquisition rate. Moving on to Slide 20, which contains the analysis of the bank group performance for the period. GDP grew 131% year-on-year, moving from NGN 17.6 billion to NGN 1.2 billion, amidst the challenging macroeconomic environment. This was attributable to a 28% increase in our year-on-year net interest income as we continue to scale up our balance sheet, especially in our focus sectors of the economy. Noninterest income also increased by 203% year-on-year. The growth was driven by net fees and commission, trading income, other income as well as revaluation gains. Operating expenses grew by 29% year-on-year as inflation continues to trend further in the country. The growth was also due to technology enhancement costs, increased staff costs and increased regulatory expenses. Net risk assets grew by 33% year-on-year. This was a result of the provision of funding through focused sectors of the economy and the impact of currency devaluation. Customer deposits also increased by 6% quarter-on-quarter and 40% year-on-year, respectively, driven mainly by customer acquisitions via retail channels and also currency devaluation. Slide 21 contains noninterest income analysis. Our net fees and commissions grew 22.4% year-on-year, driven by growth in electronic fees and commissions. However, it declined by 28.0% quarter-on-quarter due to increased FX-related cash recoverable expenses. Trading income declined by 71% quarter-on-quarter due to a decline in trading activities because of market uncertainties. However, it grew marginally by 2% year-on-year. FX income increased significantly year-on-year due to revaluation gain during the period. Other income grew by 355% and 62% quarter-on-quarter and year-on-year, respectively, due to dividend income received. On Slide 22, we have a PBT distributed by segments. Our customer banking segment PBC grew by NGN 847 million and NGN 2.99 billion quarter-on-quarter and year-on-year, respectively. This was as a result of the increase in transaction activities and alternate channels as well as improved customer acquisition and retention in line with our retail strategy. Our path to consistent growth in partner banking remains but not imitated to the following: aggressively growing our transaction business using campaigns and reality programs, increased contribution of new features lost on the mobile app and USSD, aggressive acquisition of our new customers to increase the transacting base as well as introduction of new products. For our SME banking, we continue to see traction as we remain on course with our strategy of using innovation and technology to drive the business. On year-on-year, this is the PBC grew by NGN 119 million. Treasury and Financial Market segments PBT declined by NGN 2.27 billion and NGN 716 million quarter-on-quarter and year-on-year, respectively. This was largely due to decline in trading activities in government-backed securities. Our corporate banking business recorded a profit of NGN 6.6 billion with quarter-on-quarter and year-on-year growth of NGN 3.94 billion and NGN 7.3 billion, respectively. We continue to see growth in this segment despite the challenging economic situation in the country. Commercial Banking PBT for the business declined by NGN 573 million quarter-on-quarter. It, however, grew by NGN 64 million year-on-year. For Institutional Banking segment, though the business is still loss making, we have seen a significant reduction in losses with losses declining by 1 point to NGN 8 billion year-on-year. Also what is to note that the group recorded FX devaluation gain of NGN 4.32 billion captured as an exceptional income due to the narrow devaluation in the NAFEX window, of which about 72% was set aside for anticipated damage charges and counter cyclical offers. Moving on to Slide 23, which analyzes the deposit trend for the period. Total deposits rose 6% quarter-on-quarter and 40% year-on-year. Low-cost deposits now account for 63% of our total deposits. It grew by 1% quarter-on-quarter and 26% year-on-year, respectively. However, our local deposit mix deteriorated because we have to refix deposits to fund very large PRR debits. We are however working on the mix, and we will -- this will be improved going forward. Retail deposits now constitute about 62% of total deposits growing by 9% quarter-on-quarter and 38% year-on-year, respectively. On Slide 24, we provide the cost analysis and reduction plans for the year. Operating expenses grew by 12% and 29% quarter-on-quarter and year-on-year, respectively. The year-on-year growth was slightly due to an increase in personnel and regulatory costs, coupled with the double-digit inflationary environment. Regulatory costs, that is the NDIC and [indiscernible] grew by 28% year-on-year due to growth in balance sheet side. Technology costs also grew by 9% and 44% quarter-on-quarter and year-on-year, respectively, to account for 10% of OpEx in 9 months 2023. Our reduction plans include, but not limited to internal process realignment and automation for greater cost efficiency, resources reallocation for optimization of Performa and we'll continue to focus on driving efficiency and reducing costs to prices. On Slide 25, which summarizes the group sector, currency and segment looming portfolio is well diversified across sectors and segments. We achieved a growth of 34% year-on-year, in line with our plan for the year and revaluation impact. The quarter ended with a 0.4% growth quarter-on-quarter. 89% of total year-on-year loan growth was induced by Naira devaluation, while the quarter-on-quarter growth was driven slightly by organic crude in SME and consumer business segments. Year-on-year organic growth was slightly driven by manufacturing, information and communication as well as individual sector. Concentration in foreign currency loan increased year-on-year due to significant evaluation of Naira. This led to movements from 40% to 54%. While quarter-on-quarter growth was marginal from 53% to 54%. Corporate and Institutional Banking segment grew by 41% times 44%, respectively, year-on-year, largely due to devaluation, while gaining 3% and 1% share for the post fully expected. Similarly, commercial gained 6% of the portfolio, while SME lost same ratio largely due to reclassification of some assets to commercial segment based on our policy on customer delineation. All sectors are within planned and regulatory limits, while concentration in oil and gas increased against plant work down due to devaluation. We have put strategies in case to wind down this sector in line with plan. Moving on to Slide 16, which is our loan book performance by sectors, currency and segments. NPL ratio remained flat year-on-year at 4.4% and dropped by 50 bps quarter-on-quarter. However, NPL grew by 33% year-on-year and dropped by 10% quarter-on-quarter. The year-on-year growth was caused by deterioration of an account in manufacturing whose restructuring and workout plan failed and missed economic challenges and positive funds that delayed the plant from commencing operations. Additionally, growth was caused by deterioration in real estate coming from an obligor in commercial real estate. Cash flow dropped due to drop in occupancy rates and impact of Naira devaluation. These loans are being worked out with high probability of partial recovery as they are well secured. Quarter-on-quarter growth in individual NPL was largely due to delays in salary payment, worthily macroeconomic variables impacting individual cash flows. Most of these will often reverse as backlogs of salaries at peak. 82% of our NPLs are currently coming from local currency portfolio, while 56% of NPL portfolio resides in corporate banking. We remain focused on the quality of our loan book and continue to monitor performance in line with our risk appetite. Slide 27 speaks to the trend in NPL, cost of risk, impairments and coverage. The year-on-year growth in net impairment charge was driven by growth in nonperforming ones, impacts of worsening macroeconomic delivers on our expected credit loss model and prudent adjustments for impact of devaluation on the loans. Cost of risk grew 390 bps year-on-year and 50 bps quarter-on-quarter to close at 5.2% for same living areas stated. Accumulated impairments grew by 52% year-on-year to proactively manage the impact of devaluation and dropped by 25% quarter-on-quarter due to a drop in NPL. Coverage dropped quarter-on-quarter from 123.6% to 102.2% as a result of reduction in impairments. Coverage with regulatory risk reserve and forbearance reserves close at 126%. Thank you for listening. I'll now hand you over to Chukwuma Nwanze Managing Director, Credit Bank Limited, who will present the consumer finance performance.

Thank you, Yemisi, and good afternoon, ladies and gentlemen. I will be taking us to Slide 28 to 30. For the first 9 months of [indiscernible] financial year, we achieved the gross revenues of NGN 14.3 billion, which represented 38% of fit on the corresponding period last year. Interest income grew 41% to NGN 13.7 billion from NGN 9.7 billion, 9 months in 2022. We recorded a 33% growth in profit before tax, which is now -- which is at NGN 4.2 billion for the first 9 months of 2023 financial year, and we've seen an improvement of 50 basis points in our cost-to-income ratio to 47.8%. Our nonperforming loan ratios also recorded an improvement by 60 basis points to 8.6% from 9.2% in the corresponding period last year, with a 1,000 basis point improvement recorded for our return on average equity from 30% to 40%. The growth in top line this year was supported by an increase in our loan disbursement by 84% and [indiscernible] to about NGN 20 billion in terms of growth, and we added 66,000 new customers in the start of the year. Interest expense grew by 156% year-on-year as a result of the growth in risk asset creation and an increase in borrowing to transform the good of our portfolio. During this quarter, we issued our daily commercial paper, raising NGN 2.8 billion from vessels, which has helped to further diversify our funding sources and ensure adequate liquidity to support the growth in disbursement. The strong business growth with weakness in 2023 has been supported by the successful rollout of our new core lending application, which is an integral part of our digital transformation journey, including the introduction of our whole digital channels, such as our USSD and embedded lending products that have contributed about NGN 67.3 billion in disbursement in the first 9 months of the 2023 financial year. Our operational expenses grew to NGN 5.6 billion in the first 9 months of this year, driven by higher levels of operating activities and the adverse impact of inflationary pressure on our business operations. We recorded a PBT performance of NGN 4.2 billion, representing a 67% quarter-on-quarter growth and a 33% year-on-year growth in profitability. Our loan book expanded by 25% quarter-on-quarter and 36% year-on-year to NGN 48.2 billion in the third quarter of 2023, and this is supported by the addition of well about 60,000 new customers during the period. We anticipate continued improvement in our profitability ratios, efficiency ratios and regulatory ratios supported by organic loan book growth, continued digitization of our business operations and cost optimization. The business continues to maintain strong liquidity and capital buffer to support growth in loan disbursements, customer acquisition and funding optimization, which we anticipate will help support us to finish the 2023 financial year strongly. I would now like to hand back to Mr. [indiscernible], Executive Director and the holding company to take us through the investment banking debt.

Thanks, Chucks, and good afternoon, everyone. My name is Olufemi Badeji, and I'll take you through the Investment Banking section of our presentation, which consists of Slides 32 and 33. Gross earnings for the 9-month period ended in September 2023 which grew year-over-year by 29% to NGN 3.6 billion with noninterest income from the same period, growing by 24% to NGN 3 billion and PBT growing by 28% to NGN 1.6 billion. Operating expenses were up by 31% year-over-year to NGN 1.9 billion for the measurement period, largely driven by increased wage costs and foreign currency denominated costs, e.g. payments to technology vendors. While CIR increased slightly by 100 basis points to 64%, the return on equity for the business segments improved by 200 basis points to 31%. 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 capital market offerings, which led to an increase in capital raising especially on the debt side and financial advisory fees. The Capital Markets business level participated in 24 transactions for the first 9 months of 2023 and helped to raise more than NGN 691 billion for our clients during that period. Fees and commissions from the stock booking business grew 77% quarter-over-quarter and 27% year-over-year, respectively, whilst trading income grew 229% quarter-over-quarter. It, however, declined year-over-year by 35% driven by lower volumes and proprietary trading activity for the period. The cost-to-income ratio remains relatively stable year-over-year at 54%, as has been highlighted before for the 9-month period ending September 2023, despite a 31% increase in operating expenses, which were largely personnel expenses. Overall contribution of the investment banking business to the group PBT was 3% as at of the end of the measurement period. For the rest of the year, the business remains focused on providing support its clients to close out on existing transactions and by continuing to offer appropriate capital market solutions and providing exceptional client service to its clients, the aim is to retain our existing clients and continuing to acquire new ones in 2024. 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.

Thank you, Femi. Good afternoon, ladies and gentlemen. I'll be taking you through Slide 34 to 37 on the performance of investment management division and I'll starts with Slide 35, which shows the 9-month performance of the division. Gross earnings rose by 39% year-on-year, with noninterest income contributing 89% of the increase. Looking at operating expenses, that increased by 40% year-on-year with personnel costs accounting for 60% of the increase, and that was due to the implementation of pay increases in the third quarter of this year. Result on average equity increased significantly. That rose by 1,200 basis points from 23% to 35%. Moving to the next slide. Assets under management grew by 5% quarter-on-quarter by 22% in the 9 months to September 2023 and by 26% year-on-year to close at NGN 954 billion. Investment income accounted for 45% of September 2023 year-to-date AUM increase, with the balance of 55% coming from net contribution from customers. Now that's broken into 2 parts. Direct net inflows accounted for 32% and exchange rate gain from the revaluation of our USD AUM accounted for 23%, so together that's 55%. Our Pensions business represents 79% of AUM in the third quarter compared with 84% in the same period last year. AUM and management fee from digital products increased by 41% and 107% year-on-year. Looking at the number of retirement savings accounts, that increased by almost 2% in the 9 months to September 2023 to close at 748,239 with registrations via our digital platform accounting for 63% of the increase compared with 60% at the end of last year. On the transfer window, we recorded a net inflow of NGN 792 million in the third quarter compared with a net outflow of NGN 2.5 billion in the previous quarter. The positive number was largely due to a reorganization of our sales distribution network and staffing in key regions of Lagos and Abuja. And looking at PBT, that rose by 39% year-on-year, with our pensions business contributing 64% of the NGN 3.4 billion PBT achieved. Moving to the next slide on our primary goals for this year. There are 3 primary goals there, and I'll take them one after the other. And I'll start with the ICO pension impact. The transactions impact on AUM and PBT were NGN 182 billion and NGN 1.1 billion in the 9 months to September 2023, representing 24% of AUM and 46% of PBC contributions from our pensions business. We remain on track to achieve our ICO-PBT contribution target of NGN 1.4 billion for this financial year. On digital distribution, the web version of our grow digital investment products went live in the third quarter and is expected to further diversify our client base by making it easier for non-FCMB investors to access our digital investment products. AUM and management fee from our digital products are expected to increase by 65% and 117% this year. Lastly on alternative assets, our phone registration request remains under consideration by the industry regulator or the SEC. We continue to engage with the SEC to ensure that the structure of the proposed fund meets all regulatory rules. And we're very hopeful that final approval will be secured by the end of this year. I will now hand you back to Mr. Ladi Balogun for an overview of our expectations for the financial year-end. Thank you.

Thank you. So we do expect [Audio Gap] full year we'll see a 25% year-on-year growth with associated growth in fees. And we're seeing increased market share, both in pensions and our overall asset management business, particularly around the digital side. On the investment banking side, we see Q4 still remaining strong with first equity customer markets and got capital markets here as well as M&A opportunities. Some of that being fueled by ongoing regulatory actions in sectors like the banking industry. And finally, on Consumer Finance, we think that we will continue to have a strong quarter. This has largely been driven by successful digital transformation, which that business has gone through the CDR and a number of new products that are now fully distally driven that are helping to create a new vista of growth opportunity for this business. That will be all from us, and we look forward to receiving your questions.

[Operator Instructions]. Dear speakers, there are no questions at this moment over the phone. And I would like now to hand the conference over to any written questions.

First question is asked by Ingosime Chukwuemeka, which is on the imminent banking recapitalization exercise. In management's view, an SMB capital of NGN 373 billion which represents 7.5x over the current capital of NGN 50 billion requirement for international bank license. What's the bank's assessment of I assume that should be it recapitalization side? I would say it's too early for us to second guess where the regulatory is going, but irrespective of where the regulator ends up, I think as a bank and as a group we continue to see the importance of shoring up our capital base and pursuing scale in a more deliberate manner. We think there are a number of options available to us now in that regard from straight equity to AT1. And as we see stronger earnings trajectory going into next year, being able to retain a significant amount of earnings to also accrete capital. So we think we're fairly well positioned, but of course, we have to wait to see where the regulator comes out. Second question, which was that with a car 33.3%, which sits close to the regulatory threshold, what's management intent on beating up its capital ratios. So we did complete a further AT1 in October or November. Well, it was anyway, Q4, I can't remember whether we've got regulatory approval, but let's just assume it was November. The transaction was concluded in October. And that has increased the bank's cost at 16.2%. We're also seeing a fairly strong Q4 from the back well, from the entire group. And so we expect the vast majority of our earnings in Q4 will be retained and dividends will be modest. So we do expect that we will show capital and be comfortably above the 16% by the end of the year. And the plan is to further shore it up in 2024 as well as expecting, all other things being equal, even stronger earnings in '24. So gradually, we see ourselves with a conservative dividend payout ratio, exploring various options of capital raising from Tier 2, AT1 and of course, finally ordinary sort of common equity, whether it be through retained earnings or through other sort of new issues, but we will certainly be beefing up our capital. And a lot will depend on what the regulators tell us. And that also speaks to whether we will be exploring capital rating in 2024. I think it would be premature to say right now. I think that certainly will be shoring up of capital, but the form that will take, we would have to wait and see. But we expect to certainly continue with our AT1 program. We've only raised, I think, about NGN 60-something billion. Sorry, NGN 46 billion, I'm sorry, out of NGN 300 billion program. So we our intention to largely exhaust that program within the 3 years for which the shelf listing is valid. And so that certainly we've put us in a fairly comfortable position. Now, next question, asks that excluding FX revaluation impact, what's the bank's organic loan growth year-to-date. I don't have that I don't know, [indiscernible] did you know what it would be?

We don't have that.

No, we don't have that, but I would say that because we're also mindful of capital that we intentionally slow down on asset creation when we're coming up against our capital buffers, and we tend to focus on growth on the high effectors that we have. We're still very focused on retail and SME loan growth because it offers very healthy yields and good NIM. And beyond that, we tend to be very much focused on the real sector of the economy. Next question is what's the bank outlook on asset quality ratio given the tougher macro climate? Maybe I'll have the risk of my risk colleagues if either [indiscernible] could speak to that so on the call.

[indiscernible] The plan is to remain within single digit. We try as much as possible as lesions. They have to clean buffers and have used most of our evaluation and gain [indiscernible] that this needs to be weenie have to write some assets to Memorandum. We will take them off the books and monitor them memorandum. So the asset [indiscernible] will still be in simple digits matrix.

Sure. The next question was what's the update on the bank for the bank in payment platform? It remains in private beta. We hope that it will be launched in Q1 next year to close to Q4 end of this year. The next question, #7 is based on the bank assessment, what sectors are more likely to be impacted by tougher business clients. Maybe Yemisi can speak to that, but we'll also take the next question, which is what's the bank outlook for NPLs in the oil and gas sector. So 2 questions, which sectors are more likely to be impacted by the tougher business clients? And what is the outlook for NPLs in the oil and gas sector.

Well, for areas that could be [indiscernible] said that will be so far may be real estate, oil and gas and all the manufacturing that are dependent on foreign exchange. So for those areas, we are treating the facilities the kid-by-kid basis to ensure that we have report cash use to support any facilities. On the oil and gas sector, as mentioned, because of the deviation, it has increased above the limit at debt. So we are mindful of that, and we're working that down and slowly we're mindful of increasing in that sector. What the bank will be doing in that is actually to see how what it's done within this.

[Operator Instructions].

The loan growth are due to devaluation 99%.

Okay. The next question is what is the bank guidance for cost of risk for FY '2023.

So it's going to be high will be around between 5% to 6%. We've made even a presentation that most of the revaluation is at the channel towards increasing DMAs.

All right. Any plans to raise capital in the pension app, I think the answer to that will depend on if any M&A opportunities materialize. Organically, in terms of growth, the business is not in need of capital, but we continue to receive -- we continue to see opportunities for inorganic growth, which we evaluate. And if any of them should make sense to us and parties are willing, then we will see what we can fund from the existing capital or we would resolve to raise capital, which will primarily provided by the group of the company.

Sorry, just a quick correction. Cost, obviously, we have a 4% in excess.

All right. That's it. I don't see any more questions here. Thank you.

Dear, speakers, I just want to let you know that there are no questions over the phone.

Great. We look forward to speaking with you at the end of the year or in the new year when we go through our full year accounts. Thank you.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.