FCMB Group Plc (FCMB) Earnings Call Transcript & Summary

Thank you. Good afternoon, ladies and gentlemen, and welcome to our full year 2025 and Q1 2026 Investors and Analyst Presentation. In the room today, I have with me our Group Chief Operating Officer, Mr. Gbolahan Joshua. I also have our Group Chief Financial Officer, Mr. Deji Fayose; Chief Risk Officer in the bank, Mrs. Toyin Olaiya; the CFO of the bank, Mr. Kayode Adewuyi; the Executive Director Coverage and Investment Banking for the holding company, Mr. Olufemi Badeji; the CEO of our Asset Management business, FCMB Asset Management, Mr. James Ilori; and the CEO of Credit Direct Finance Company Limited, Mr. Chuk Nwanze. Also in the room, we have the Head of Investor Relations, Mr. Tunji Onamusi. I will be taking you through the first couple of slides, if we move to the agenda, first of all, and I'll be talking you through the highlights as well as strategic updates, which will be the first 2 slides. I will then be handing you over to the group's financial -- Chief Financial Officer, who will talk us through in some more detail the financial performance of the group and its constituent part. So I would first of all like to briefly address the delay in the release of the audited accounts. [indiscernible] the Central Bank of Nigeria needed to conduct capital verification on the public offer that we did at the end of last year. That verification exercise took a lot longer than had taken the first time around when we did the offer in 2024. And that capital verification exercise, even though we submitted all materials by -- before the end of the year, we did not get the final capital verification approved until March 2026. Unfortunately, it was the same team that was doing the risk-based examination that also had done our capital verification and our risk-based examination needed to be completed before our 2025 FY -- financial year 2025 accounts could be approved. And even though all -- we were able to get Board approval as at February 2026 -- end of February 2026, and we were able to submit all accounts to Central Bank in March. It did take 9 weeks to get the final approval of the accounts from the Central Bank. So it was really largely as a result of the greater scrutiny that went into capital verification for the second capital raise that happened towards the end of the year. So I will move into the actual performance and starting with Slide 3, looking at how we performed on some of our key indices. It was a relatively strong year -- and we have seen the performance continue to be robust at the operating level in 2026 Q1. The performance for last year and also this year has been driven to a large extent by significantly improved margins and greater efficiency where we have sought to improve the mix of our deposits. We've also sought to bring down our cost of funds. And we've seen our nonbanking subsidiaries that are typically operating at very high return on equity also performed very strongly in the year. But if we look at the key sort of balance sheet footings first of all, on Slide 3, we did see modest growth in balance sheet total assets at 8.2% year-on-year. In Q1, we saw 4.7% quarter-on-quarter, which suggests that actual balance sheet growth in 2026 is likely to outpace 2025. Customer deposits -- and the low-cost deposit mix reveals a lot more in terms of what was happening in terms of our balance sheet in 2025 and as we go into 2026. The total cost of deposits did not grow by any meaningful amount in 2025, recording just 2.8% overall deposit growth. However, what we did see was that the mix shifted significantly. And we moved, first of all, to 65% low-cost deposit mix and then 71% low-cost deposit mix in 2026. In 2025, although it's not reported here, our low-cost deposits actually grew by 17%. In terms of loans and advances, the loan book was relatively flat year-on-year at 2.37% and also declined quarter-on-quarter to -- sorry, NGN 2.37 trillion was where we were at end of 2025, and we have declined slightly to NGN 2.23 trillion, which is a 4.6% decline for Q1. However, it's important to note that there were significant paydowns during the course of the year. There was also naira appreciation, which meant that the naira value of our dollar loan book saw a decline. But in sectors like retail and SME that is predominantly naira denominated, we did record fairly robust growth, which we'll be showing later in the presentation. If we look at other indicators of volume on the nonbanking side, our assets under management also grew robustly at 24% year-on-year to NGN 1.7 trillion. And we also continued the strong growth in Q1, where Q-on-Q, we saw 10% growth, which suggests that this year, we should be seeing north of 30% annualized growth in terms of AUM. Profit before tax, as indicated in our announcement, and also shared when we released our unaudited numbers, there were minimal audit adjustments and PBT grew 80.6% year-on-year to NGN 202 billion. That was also sustained -- that momentum was sustained and in fact, accelerated in Q1 2026, where we recorded NGN 87 billion and a 148% year-on-year growth. The key drivers for this will be explained in later slides. However, I think it's important to note that the core earnings engine of the business as a whole has strengthened significantly as a result of the capital raise and a number of other steps we've taken to make the balance sheet far more efficient. Return on equity increased significantly to 23.2% year-on-year at the end of the year and also further to 31% at the end of Q1. Net interest margin also improved substantially from 6.3% in 2024 to 9.5% in 2025. And we've seen continued improvement of the net interest margin to 10.7% in 2026. Cost-to-income ratio also continues to improve. We've seen cost-to-income ratio improved to 53.8%, a 610 basis point improvement between '24 and '25 and has dropped further to 46.7% in 2026 Q1. And we expect that throughout the course of this year, we will be able to maintain a cost-to-income ratio significantly below 50% and in this range. Customers, we did see a growth in our customer base of 14% year-on-year to 16.3 million. We saw a 2% growth in the first quarter at 16.6 million customers. Moving on to Slide 5, just sharing some of the key highlights of what has driven the performance of the business. The group strategy is working effectively. We saw strong diversified earnings streams. We exceeded our 2025 guidance of NGN 185 billion due to strong earnings growth from both the banks that grew 110% and the nonbank businesses that grew 81%. Net interest income grew very strongly, driven by higher yields on earning assets and lower funding costs. The lower funding costs were achieved partly as a result of the 2024 capital raise that we fully deployed in 2025. But similarly, we've seen continued improvement in net interest margin as the -- our cost of funds has continued to come down. As mentioned earlier, we did not get our capital verification until March. So the impact of the capital raise in 2025 wasn't -- and approved in March 2026, wasn't fully felt in the Q1 numbers. We, therefore, believe that there's good reason to expect that as we get the full impact of the capital that was approved at the end of March 2026 that we will be able to defend our net interest margins this year comfortably above 10%. There was significant improvement in efficiency. The cost-to-income moved to 46%, 46.7% to be precise, as of the end of Q1. And there will be more details given in the course of the CFO presentation on the drivers of this. I would also want to speak on the dividend. We, as a Board, are proposing a dividend of NGN 0.35 for the year-end 2025, representing a total payout of NGN 23.1 billion. The breakdown of this is the nonbank subsidiaries and income from Holdco are providing NGN 20 billion of the dividend. And the full year 2024 final dividend from the bank was NGN 3 billion -- or NGN 3 billion of that full year dividend is also going towards the NGN 23 billion that we are paying. One -- and we'll be providing more details on this during the course of our presentation, that the bank was unable to pay a full year dividend in 2025 as a result of an increase in NPL as a fallout of 2 syndicated loans that were moved to nonperforming at the end of the year following the audit. And as a result, the bank's NPL ratio is above 10% and therefore, there was no full year dividend from the bank. We will be explaining what the actions we are taking to normalize that. And the plan is to resume dividend payment from the bank in the course of 2026 and the dividend payment from the bank in 2026 will, therefore, contribute towards the full year dividend that we expect will be significantly higher for the 2026 financial year-end. It does mean, because the NPL ratio was above [ 10%, ] that we will not be able to commence our interim dividend that we have planned for H1 2026 as we do not have a full year dividend from the bank that would have been the main contributor to the interim dividend. So in terms of the capital position, the public offer for 2025 has lifted our capital adequacy ratio to a very comfortable 27%. The fresh capital, as mentioned, will help bring down our cost of funds further as we pay off fixed deposits that currently represent about 29% of our total deposits. It would also strengthen our lending capacity with a focus on driving our higher-yielding retail and SME loans. The fresh capital will also allow us to execute our international banking strategy, which will further diversify our earnings and the group intends to begin expansion in the West African region in the year 2026. Thank you. I will now pass you on to the group CFO, Deji Fayose, to take you through a more detailed financial overview of the results.

All right. Thank you, Ladi, and good afternoon, everyone. I'm now pleased to take you through our FY 2025 and Q1 group results, starting with Slide 6 to 13, which covers the group results overview. Slide 7, please. Slide 7 is a snapshot of our group income statement, where we see our gross earnings have grown year-on-year by 42% to NGN 1.1 trillion, largely driven by 125% increase in our net interest income. This momentum was also sustained into Q1 2026 with gross earnings growing by 27% at the end of the first quarter to NGN 320 billion. Further details of the main drivers of our financial performance will be discussed in the subsequent slides. Slide 8 is the group earnings contribution from our respective subsidiaries. The contribution from the Nigerian bank stood at 85% at the end of the year and declined to 65% as at Q1 2026, largely as a result of a NGN 9.3 billion gain on the disposal of a minority stake in our pension business in Q1, which was recorded at the holding company. Also worth noting is that our U.K. business was impacted by a one-off ECL charge in 2025, alongside yield compression in the core trade finance business as the Nigerian macro improved during that period. In response, the franchise is pivoting towards a transaction banking-led strategy and expect to return to profitability by the end of this year, 2026. Slide 9, we provide further details on group earnings. Growth in gross earnings by 27%, 42%, quarter-on-quarter and year-on-year was driven by growth in net interest income at the end of FY '25 and Q1 '26. Our interest expense group-wide also declined by 7%, reflecting improvement in our funding mix and lower cost of deposits, which we'll touch on further down the slide. And this led to a 124% year-on-year growth in net interest income, closing at NGN 505 billion at the end of 2025 and a further growth of 92% at the end of Q1 2026 to close at NGN 168.3 billion. On the other hand, however, noninterest income declined by 33% year-on-year and by 46.1% in quarter 1, 2026. These were largely driven by a contraction in our FX and trading income in both periods. The next slide, Slide 10. which touches on our group margin analysis. Net interest margins improved from 6.3% in 2024 to 9.5% end of 2025 and has improved further to 10.7% in Q1 2026. Cost of funds declined year-on-year for both 2025 and Q1 2026, driven by an improved funding mix and an improvement in our low-cost deposit mobilization. The low-cost deposit mix has also improved from 57.5% in December 2024 to 65.4% in December 2025 and a further improvement to 71.1% as at Q1 2026. Yields on earning assets have also improved year-on-year and quarter-on-quarter, closing at 22.7% as at Q1 2026. Slide 11 looks at our group operating expense, where we're clearly seeing a moderation in cost growth. Operating expenses grew by 43.4% to NGN 328 billion at the end of 2025. However, slowed sharply to 15% year-on-year in Q1 2026, reflecting sustained cost discipline and the benefit of slower inflation and a sharper focus on cost-to-income ratio in the current year. As a result, the group CIR improved from 59.9% in 2024 to 53.8% in FY 2025 and a further declined to 46.7% in Q1 2026 from 62.8% in the prior year. Overall, on Slide 12, I think all the above have resulted in growth in group profit by 80.6% year-on-year in FY 2025 to NGN 202.1 billion and has grown further by 148% to NGN 87 billion at the end of Q1 2026. Our return on equity also improved by [indiscernible] from 12.7% to 23.2% at the end of 2025, and this was largely supported by 142% year-on-year growth in our profit after tax. ROAEs also improved further to 31% at the end of Q1 2026, reflecting sustained profitability momentum into 2026. Slide 13. Slide 13 provides a detailed update on the normalization of our asset quality and how we're currently accelerating the resolution of Stage 2 loan exposures. So a few points to note. The banking subsidiary's prudential nonperforming loan ratio increased to 16.97% in FY 2025 and reflecting the classification of 2 syndicated exposures within the oil and gas and power and energy sectors and some trade-related loans in other sectors. These exposures are all currently under remediation and classified as Stage 2 under IFRS 9, and they accounted for a significant portion of the increase that we saw in regulatory risk reserves by NGN 80 billion in FY 2025. A breakout of those exposures in oil and gas downstream, NGN 77 billion; oil and gas upstream, NGN 58 billion; power and energy sector, NGN 52 billion; commerce, NGN 13 billion; and other sector, NGN 6 billion, comes to total exposure of NGN 206 billion and about 8.7% of the FY 2025 loan portfolio. Management has also commenced a comprehensive asset quality normalization program where we are focused on accelerating loan write-off and restoring the bank subsidiary's prudential NPL ratio to within regulatory thresholds by the end of September 2026. Based on all these actions, we expect to see elevated credit cost in FY 2026 as remediation actions are completed, and we also expect loan write-offs of approximately NGN 250 billion, which will impact our net credit growth for the year. Excluding these write-offs and the FX revalue impact of about NGN 120 billion, online loan growth for 2026 projection is NGN 320 billion. We also expect that the banking subsidiary will begin its dividend upstream and a stronger platform for sustainable growth for the year. I'm now pleased to take you through Slides 14 to 18, which is our banking division review for FY 2025 and Q1 2026. Slide 15. The bank subsidiary recorded an 8% year-on-year and 4% year-to-date growth in total assets for FY 2025 and Q1, where we saw customer deposits also grew by 4% year-on-year and 5% year-to-date, whilst loans declined by 2% and 6% for the same period under review. Return on equity and cost-to-income ratio improved to 21.6% and 54.6% for FY 2025 and 22.2% to 52.4% for Q1 2026, respectively. And this is all a result of improved profitability by year-on-year PBT in the bank growing by 110% to NGN 163 billion for the full year and by 97% to NGN 56.1 billion at the end of quarter 1, 2026. Slide 16 highlights the business segment contribution in our banking subsidiary, where retail banking [indiscernible] the funding, accounting for 53% of deposits, wholesale banking drove lending accounting for 65% of our loans and the treasury and financial markets business led business profitability, contributing 53% of profit before tax in FY 2025. Slide 17 reports on the loan portfolio classification by sector and the loan book remains diversified with only one sector above 15%. Slide 18 also shows the breakdown of our FY 2025 Stage 3 loans by sector and Stage 3 loans currently account for 6.1% of the loan book as of FY 2025. I'm now pleased to take you through Slide 19 to 23, which is the performance of our nonbanking division. Slide 20, please. Gross earnings and PBT grew year-on-year by 74% and 107%, respectively, in our consumer finance business for FY 2025 and by 55% and 99% in Q1 2026. The investment banking also grew gross earnings and PBT by 31% and 90% and by 85% and 322% in Q1 2026. Our investment management business recorded a 28% and 29% growth in gross earnings and PBT, respectively, for FY 2025 and [ 42% and 54% ] in Q1 2026. Group assets under management, led by pension franchise was up by 24% to NGN 1.7 trillion at the end of FY 2025 and further by 10% to NGN 1.9 trillion at the end of Q1 2026. The following slide just shows further details of our nonbanking divisions, and I'll just touch on each of them. On Slide 21, for consumer finance, the business acquired approximately 96,000 new customers at December 2025 and a 34% year-on-year growth in disbursements. Revenue from digital related loans grew by 70% from NGN 38.4 billion in 2024 to NGN 65.3 billion in 2025. The loan book also grew by 58% year-on-year to NGN 139.5 billion, driven by a 34% year-on-year increase in disbursements. Strong liquidity buffers were also maintained throughout the period, ensuring uninterrupted loan disbursements to support the current pace of growth in the business. On Slide 22, investment banking, gross earnings and PBT for the division also grew by 31% and 90%, respectively, at FY 2025. Performance in our stock-broking business was driven by 59% year-on-year growth in trading volumes, whilst performance in our capital markets business was sustained by increased capital market activities with gross earnings and PBT growing year-on-year by 18% and 22%, respectively. Going into 2026, we expect to see continued momentum across our investment banking businesses. And on the next slide, touching on investment management, AUMs have grown by 24% to NGN 1.7 trillion at the end of 2025 and a further growth of 11% to NGN 1.85 trillion at the end of March 2026. The AUM from our digital products also increased by 41%, while management fee increased by 8% year-on-year in FY 2025. Overall, the investment management PBT increased by 32% year-on-year to close at NGN 8.4 billion as at FY 2025 with the pensions business accounting for 55% of PBT and the other business lines contributing 45%. I'll now please hand you over to our Group CEO, Mr. Gbolahan Joshua, to take you through our digital business review. Thank you.

Thank you, Deji. Good afternoon, everyone. My name is Gbolahan Joshua. I'll be taking you through our digital business, covering lending, payments and wealth from Slide 25 to 30. On Slide 25. Digital revenues for the year were NGN 155.3 billion. It's a 52% growth from NGN 101.9 billion recorded in 2024. Digital revenues now account for 13.7% of gross earnings, largely driven by lending and payments. For digital loans, we disbursed over NGN 476.9 billion. It's up 34% year-on-year. The split of the loan disbursement is 57% retail loans and 43% SME loans. Total portfolio is NGN 260.7 billion. It's grown 49% year-on-year, and the portfolio is split 46% between retail and SME (sic) [ 54% retail, 46% SME. ] For mobile and Internet banking users, they grew 17% year-on-year to 7.3 million customers largely driven by our revamped onboarding process and increased cross-selling of our digital products, lending, payments and wealth. Slide 26 just shows the trend of customer acquisition. We acquired about 2.1 million customers for the year. That's about a 14.8% growth. And mobile and Internet banking adoption has continued to improve. It's improved from 44% to 45.7%. That's a 17% growth year-on-year. The next slide, Slide 27 just shows the breakdown of digital revenues. 46% comes from the nonbank subsidiary and 54% from the bank. Digital lending, which is the largest driver, accounts for 75.4% of the revenues, growing 53% year-on-year to NGN 76 billion. And then for lending revenues, we've got that split 62%, 38% between retail and SME. Payments accounts for 22% of our digital revenues, year-on-year growth of 35%. It's moved from NGN 25.3 billion to NGN 34.1 billion. And digital wealth, which accounts for 2.6% of our revenues, growing year-on-year by 48% to NGN 4 billion from NGN 2.7 billion in 2024. The next slide, which is Slide 28, just shows the trend of our digital revenues on a quarterly basis, it's grown 42% on a quarterly trend from NGN 31.5 billion Q4 2024, it's now at NGN 44.7 billion as of Q1 2026. In terms of contribution, what we see digital contributed 12% to interest income and to noninterest income, it contributed 32% to noninterest income. Slide 29 shows the breakdown of the digital loan book between retail and SME. The loan book has grown 49% from NGN 174 billion in 2024 to NGN 260.7 billion in 2025. It accounts for 11% of the total loan portfolio. It's split 53% and 47% between the bank and our nonbank subsidiary, which is CDF. The last slide, which is Slide 30, just shows key highlights of our businesses across lending, SME and retail, wealth and payments. For SME digital loans, we disbursed NGN 270.6 billion in the year. And in terms of number of loans disbursed over 19,000, average ticket size of NGN 14 million, portfolio size is NGN 120.3 billion. For retail digital loans, we disbursed about NGN 206.2 billion to about 1.9 million customers, average ticket size of NGN 45,000, portfolio size is NGN 140.4 billion. For digital wealth, we have over 120,000 customers. Revenues have grown by over 48% (sic) [ by 54% ] and AUM growth of 42% for the period to 31.8 billion. For digital payments, you just see a breakdown of the various products driving and the channels driving it. Between mobile merchant solutions and cards, they account for 80% of our digital payment revenues. I'll now hand you over to Ladi, who will give the outlook and guidance for 2026.

We'll have a very strong year, all things considered. We expect PBT to grow by about 60% year-on-year from where we ended 2025. And this will be supported by the deployment of the proceeds that was raised from the 2025 public offer. This will see continued expansion in net interest margin, which will also be supported by the growth in consumer and SME lending. We do expect that our nonbank subsidiaries will also continue to experience very strong year-on-year growth in profitability. 2026, as has been mentioned earlier, is going to see more aggressive write-offs of our previous forbearance loans. And we will be looking to do this to ensure that we will bring the bank's NPL ratio to within the regulatory thresholds. And the aim is to get ultimately below 5% by the end of the year for the bank. This is expected to result in elevated credit losses as has been mentioned -- or credit costs as has been mentioned earlier. And in spite of that, we do still expect that because of the strong underlying earnings growth that we would still see a very strong year in terms of PBT growth. The enlarged capital base would typically have meant a reduction in ROE. However, we expect that due to the improving cost-to-income ratio and revenue growth that ROE should be improved on last year, and we're targeting about 23.5% for this year. And again, this is in spite of the increased ECL. So we do expect that we will bring the NPL ratio well within the thresholds that would enable us to be able to pay interim dividends from the bank to the holding company and then be able to, therefore, pay a larger dividend for 2026 from the group to our shareholders. If I move to Slide 33, we could just see how we fared against our guidance for 2025 and also what we're guiding for 2026. We were able to surpass our PBT guidance, achieving NGN 202 billion versus the NGN 185 billion. Consequently, we surpassed our ROE (sic) [ ROAE ] guidance where we ended at 23.2%. Loan growth, partly because of naira appreciation, and also significant paydowns that we experienced, fell significantly short and was slightly negative last year. Deposit growth also fell short. However, our growth in low-cost deposits was really the focus in 2025, and that did grow quite strongly. I think it was about 17% year-on-year growth. In terms of net interest margin, we surpassed what we had guided at 9.5%. Digital revenues also grew faster than planned at 52%. Cost-to-income ratio was better than planned at 53.8%, and we expect it will be marginally below 60%, in the late 50s. Our cost of risk was, however, higher than planned at 3.7%. In terms of guidance for 2026, we do expect that we will be able to deliver a profit of NGN 325 billion or above, which would take our return on equity in spite of an enlarged capital base for the year to 23.5%. Loan growth will be marginally reduced again, largely because of the write-offs that we would be doing during the course of the year. The deposit growth, we expect will be in the 10% to 15% range. For the reasons explained earlier, we do expect net interest margin will improve in 2026. Digital revenue will continue to be strong. Cost-to-income ratio, we also expect to remain in the mid-40s. And our cost of risk will be elevated because we will be writing off a significant portion of our NPLs. And so we expect cost of risk will be at 6% -- slightly above 6%. Thank you. That brings me to the end of the presentation, and we will be happy to take questions.

[Operator Instructions]

I will -- should I go ahead with the questions on the webcast first?

Ladi, you're welcome to do so.

Okay. Thank you. So I'll start with the webcast questions. I'm not in the room with the rest of my colleagues, so I'll be requesting over the call for somebody to take these. The ones that I can take myself, I will do so. So first question came in from [indiscernible]. Why was the release of the 2025 account significantly delayed? I believe we've provided the explanation at the beginning of the call. But just to recap, the Central Bank had chosen to deal with capital verification first and in a far more detailed manner than was done in the prior public offer. Unfortunately, even though we were able to submit all files by -- before the end of the year, capital verification process did not end until March. And it was only after that, that processes relating to our risk-based supervision, our credit portfolio reviews and eventual accounts approval could be done, and that entire process took about 9 weeks. The second question came in from [indiscernible], is the bank going to commence payment of interim dividend in H1 2026 as promised? Again, as explained earlier, we unfortunately will not be able to commence the payment of interim dividend this year. It is our hope that we will be in a position to do that next year. The reasons given for that is the elevation of the bank's NPL ratio above 10%. The 2 syndicated loans that we had to move to nonperforming, we had treated in line with all other syndicate members for those syndicated loans as performing, but events following the end of the year led to the Central Bank's belief that those accounts should be classified as nonperforming, and we did accordingly. Moving on to the third question from [ Muyiwa Oni ], wants us to elaborate on the drivers for the 6% expectation in cost of risk? And what do we expect to be the normalized cost of risk once the forbearance-related loans are resolved. If the Chief Risk Officer is in the room, I would ask her to take this one, please.

Okay. So in terms of the normalized cost of risk, by the time we deal with some of the assets that we are intending to dissolve, that should come below 3%. And on the plan on what we want to do, as has been explained, the plan is to write off the legacy -- the major chunk of what we're looking at are the legacy assets in oil and gas upstream and power and energy. We have CBN regulation allowing write-offs of forbearance assets. So we want to take advantage of that. And once we do that, and then we also have some trade-related facilities, these are facilities that experienced some shortfalls as a result of FX scarcity and devaluation that affected the naira positions that they had given the bank in lieu of the LC transactions that we had put for them. So we're looking at writing them off the memorandum while we still work on the workout and the remedial positions. So that's generally the plan.

Okay. If I could just add to that. So [ Muyiwa ], if you look at Slide 13, I think there's a detailed breakdown showing each of the sectors, oil and gas downstream, oil and gas upstream, power and energy, commerce and then others. So the major sectors are impacted are shown there. Thank you.

The next question comes again from [ Muyiwa ], asking if management can share the implications of the recent draft of guidelines from the CBN. What areas is the sector pushing back on? And what changes do you expect to our structure going forward? I think it would be premature for us to respond. Literally, we received the guidelines the same day that they were made public. They are still drafts. We as a management team and the Board will be going through them. The industry will also be going through it and making its recommendations as a body. And I'm sure other stakeholders and members of the public will also be making their own recommendations to this. It's hard to say at this stage how far from the draft, the final position would be. So I think for us, it would just be too premature to comment on the implications. And in terms of the things that the sector as a whole will be putting back on, I think, again, it would be too early. But I expect before the July 9, I believe it is, deadline that we would have made all our submissions and see where we land. Fundamentally, I don't think this changes our strategy. I don't think it also in any way, shape or form impacts anything that we're guiding certainly for 2025. The next point that was raised is elaborating on the Q1 trading loss and fair value loss and share the outlook for both lines full year 2026. I don't know whether either of the bank CFO or Gbolahan, either of you would have...

Yes. I'll take it. So what was responsible for the trading loss? For full year, it was largely coming from the bond trading line. There was a growth in treasury bills trading. If you look at Note 12 of the accounts, it was largely coming from the bond trading line. 2025 was quite deliberate. We slowed down on trading from a bond trading perspective, and you'll see that we did more from a held-to-maturity perspective, which impacted the net interest margin. However, in terms of FX losses, that was largely due to the reduction -- the revaluation of the currency, that also filtered into Q1. We also saw a further revaluation of the currency. However, for Q1, in terms of the trading losses, there was a trading loss of about NGN 6 billion on the bonds portfolio. And I'll basically bring that into the next question, which is what's our outlook for the interest rate. So with some of the positions we have from a trading perspective that the prices move against the bonds, what do we think is going to be our outlook for the rest of the year? Initially, we expected interest rates to come down slightly higher. That view has slightly changed now just in view of where we're seeing inflation and the impact of the U.S.-Iran war. We think interest rates are still going to come down, but not as aggressive as we had thought before. Thank you.

Expanding on our international expansion plans and sharing time lines. So for 2026, we are working on currently on transactions focused on -- in the West Africa region. It is our anticipation that we would arrive at a substantive signed agreement with at least one entity in the region during the course of this year. And we would then proceed to regulatory approvals, and that would really then be in the hands of the regulators. We are currently evaluating other opportunities for 2027. The focus for us for now will be in the West Africa region. And we are also looking to be as capital efficient as possible to make sure that we stay within the guidelines of the Central Bank. Next question is, given the recent funding pressures in the market, how is the group positioning commercial paper program to optimize pricing and support cost of funds management? I don't know whether either of the CFO or -- or the group COO want to take that?

Okay. We have -- for the CP, we've got one currently under approval. Subject to regulatory approvals, we might end up coming out with a paper before the end of Q3, but that's subject to regulatory approvals.

The next question is, given the FY 2025 Stage 3 loan distribution, what is informing the elevated exposures in commerce and oil and gas services? And what is management's outlook on the recovery time lines and provisioning adequacy. Again, I don't know whether, [indiscernible], you can take these.

Okay. I'll take this. So if you look at the Stage 3 loan book, which I think we've given a breakdown of the Stage 3 loan book on, I think it's Slide 18, yes. The difference between what you have on the Stage 3 loan book and what you have on the Stage 2 loan book are largely the exposures we've spoken about. So what is informing the elevated exposure is just in terms of classification from an IFRS perspective, those loans are classified in Stage 3. From a prudential guidelines perspective, some are classified as substandard and some are classified as doubtful. So what we intend to do is if you look at the gap between both, [indiscernible] and debt yield will say that's about 8.7%. Our outlook on recovery and provisioning adequacy, we will recover what we're going to recover. For those that we are not able to recover, those are the ones we've projected we're going to have the loan write-offs on and will also spike the cost of risk this year to 6%. So it's the resolution of these loans that will lead to that spike in cost of risk to 6% this year. Thank you.

Okay. The next question is what is driving the sharp decline in earnings for FCMB U.K., which moved from a profit of NGN 5.4 billion to NGN 8.9 billion in 2025, negative? And how should we think about sustainability and strategic role of the U.K. subsidiary within the group going forward? So the sharp decline in earnings was driven by impairments on 2 loans, one of which accounted for about 90% of the losses. And those loans were in the SME space. Certainly, the larger of the 2 was a U.K.-based SME. And that -- sorry, the second factor that impacted the earnings, as I believe was mentioned in the presentation, was the significant decline in yields and interest rates for trade finance in the U.K. Our U.K. business had traditionally been a major provider of liquidity to banks in the region and trade typically in the form of trade finance. When Nigeria went through periods of significant FX illiquidity, the U.K. bank was very strategic in supporting the sector. It continues to do that, but yields have come down very, very substantially, largely because Nigerian banks are meeting their obligations, their trade obligations fairly rapidly and most international lenders have resumed lending to Nigerian banks. In terms of sustainability, we are evolving the strategy moving more towards transaction banking. That's been contingent on building a technology platform that will support transaction banking in the U.K. We've launched in the retail segment, and we are currently in the process of launching in the corporate segment by Q1 next year. We expect that the results of this will be a significant reduction in the cost of funds of the U.K. bank and as a result, a restoration of its net interest margins. We do believe that the strategic importance of the U.K. franchise remains for a number of reasons. The first being that it will continue to be a critical provider of liquidity for Nigerian FIs and other African FIs in trade finance, albeit at tighter margins. And secondly, we also believe the need for cross-border payments and offshore banking for our corporate SME and HNI clients remains critical and often is not well met by the traditional U.K. banks and also not particularly well met by the fintechs either. So we do believe that there is a clear need, and we're building the technology to enable us to be able to fill that gap and consequently deliver sustainable growth in profitability. So what are the plans for our international footprint? And should we expect this is driven more through acquisitions, organic expansion or strategic partnerships? We will be exploring a combination of the first 2, I would say, more than the third, which is acquisitions and organic expansion. We are not only focused on banking licenses, but would also be looking at other group entities, either in the form of payments or otherwise. And I think in the nonbanking areas, we would -- are more likely to look at greenfield. And in the banking areas, we would most likely be looking at acquisitions. But we are at the fairly early stages of this with a focus on closing one transaction in 2026 and then hopefully, a second in 2027. What opportunities and challenges do we see arising from the proposed Holdco framework, particularly with respect to acquisitions, international expansion and the scaling of the group's nonbank businesses. We do not anticipate that there will be a fundamental shift to strategy. We will certainly have to be very capital efficient in what we do, but we think ultimately, this will be to the benefit of our shareholders and will support our focus on continuous growth in terms of return on equity. Moving on to the next question from [ Hubert Everest Vierra, ] can you clarify the NPL ratio for the banking group? Slide 13 mentioned 16.9%, while Slide 16 mentioned 6.1%. So maybe Toyin, you can take that, please.

Okay. Yes. So the 16.9% represents an NPL ratio at NGAAP level based on CBN prudential guidelines, like we had mentioned. The 6.1% represents NPL ratio at IFRS. So like we have said before, at the NGAAP level, CBN classified some of those forbearance assets we had mentioned in the oil and gas and power sector. So that's the reason for the variance. And some of those provisions [ they ] are taking at [ overall ] level by Central Bank. All of that has been explained in Slide 13. So that's just the difference. The IFRS NPL and at the NGAAP level based on CBN prudential guidance. Thank you.

Okay. From [ Tobi Oshadumi, ] what are your thoughts about the recent proposed CBN financial holdco guidelines? And how do you think that will affect your organization structure going forward? Again, I think it's just too soon to comment, but I'm certain that by the H1 results presentation, we would be able to give more insights on our views on it. Next question from [ Bolade Mayowa ]. A deep dive into the interest income component shows a bulk of the interest came from cash and cash equivalents rather than loans. Do you -- can you please provide clarity on that and guidance going forward? I don't know whether something that the COO wants to take.

Okay. Yes. So if you look at the financial statements, specifically the breakdown of the cash and cash equivalents. On the balances with banks outside Nigeria, you see over NGN 1 trillion, close to NGN 1.2 trillion. That's really the key driver of that revenue line in terms of the interest income on cash and cash equivalents. As part of the strategies adopted by our treasury team, do we -- what's the outlook for that going forward? It will be slightly -- you will see the numbers come down this year. They will be playing more in the local currency market and Nigerian market to Nigerian bank. So the revenue line will decline this year and the volumes there will also decline. But you see a corresponding growth in things around investment securities and all that. Thank you.

Thank you. Have we had -- okay, this is a second question from [ Bolade ]. Can you clarify loss in bonds and other trading income and mark-to-market losses? I believe we've already dealt with this, correct?

No, I think this was a follow-on question. So yes, he wanted clarity on what [indiscernible] mark-to-market losses are realized. So I'll say about 40% of the losses are realized, about 60% are mark-to-market. Thank you.

Okay. And then from [indiscernible], could you provide clarity on the structural changes to be made in view of the new draft holdco guidelines. As I mentioned, it's too soon for us to provide anything there that would be more than a personal opinion. So we don't have an institutional position yet. In addition, what led to the halt in payroll deductions in some states that drove up the NPL in Credit Direct. I don't know whether Chuk could speak to that, please.

Yes. So typically, every now and then state governments have payroll verification exercises that were mentioned. They carried out the payroll verification exercises. The assessments take anything from 6 months to a year, but we are at the end of it. We expect deductions to resume in Q3. We've been told something around July, August. So we are confident that we'll be back in those markets and the outstanding funds will be remitted to us in due course.

Okay. So a number of questions. I think 8 in total from [indiscernible]. So the first is, should investors view the level of earnings in FY '25 and Q1 '26 as sustainable going forward? And what are the key factors that could support or challenge the current profit run rate? And maybe I will take this. I think absolutely, they are sustainable. I think we will actually see on a core earnings perspective, we'll actually see acceleration in subsequent quarters. And this is why if we take the full year guidance that we have given, that would result in a run rate for the remaining quarters of just around NGN 80 billion in spite of the -- that's PBT. In spite of the elevated loan loss expense that we expect to take as we seek to write off all those loans that are in -- classified as nonperforming under NGAAP, at least the forbearance loans. The key drivers, the things that will support this, number one, is the NGN 240 billion of capital will be fully deployed in Q2, and that would be partially used -- substantially used to pay down our fixed deposits. We, therefore, expect to see further improvement in net interest margins. The second driver of this performance is going to be continued growth across the board in terms of retail and SME lending that gives us fairly strong net interest margins and continued growth and momentum in our nonbank subsidiaries as well as continued growth and momentum in low-cost deposits. So we expect strong and healthy net interest margins. We also expect that OpEx will grow far slower this year. It should grow in line with inflation. And what we're expecting during the course of the year is as we move an increasing amount of our retail business to digital, all our customer onboarding is moving increasingly towards digital. Most of our lending activities are moving towards digital. And by far, the majority of our payment activities and even on the wealth side with both FCMB Asset Management and eventually on CSL Stockbrokers, much of that would be driven by digital, which would mean that we enjoy much better cost-income ratio as a business. So cost-to-income ratio generally as a business will continue to trend down. And we think the combination of improving NIMs improving cost-to-income ratio and improved volume growth will ultimately result in earnings that will more than offset the impact of the higher impairments that we would be taking. What could challenge the current profit run rate? I think the -- a crash in interest rates potentially could affect our net interest margin. I think, of course, a situation in which our loan losses or there's a further deterioration in the asset quality could also impact it. But I think in both instances, we are taking a fairly conservative view in terms of the guidance that we have given and not factoring in the impact of recoveries. And with our -- with a decline in interest income, we also expect that, that would be substantially offset by the relatively high yield that we will be enjoying in businesses like Credit Direct as well as in the bank's retail lending and SME lending business, which would also support wider NIMs in those segments. It would not fully offset the impact in our treasury, but we think that the impact will be far less than with institutions that do not have the benefit of these high-yield lending businesses in their portfolio. Second question, Stage 2 loans and asset quality. While NPL ratio improved 4.8%, Stage 2 remained relatively elevated at 11.4%. Can we provide more color on the composition of these exposures, the sectors involved, the likes of migration in Stage 3 and the different macro -- I don't know if I could ask either Toyin or anyone else to take that.

Okay. So in terms of the Stage 2 loan book, I think right now, it's about NGN 270 billion, NGN 280 billion. In terms of what we've shown on Slide 13, in terms of the asset remediation measures, we've shown about NGN 206 billion out of that book. So everything we're speaking on in Slide 13 actually relates more to how we deal with the loans in the Stage 2 loan book. How do we see it panning out? We think there will be some write-offs. There will be additional NPLs to be taken. Like Toyin said, because of the CBN forbearance measures, you don't have to wait -- you don't have to wait for the mandatory 1 year before you can write off an asset. Once you've taken impairment on it, you can write it off that same year. So we intend to capitalize on that. Thank you. So we likely don't see a lot of those loans migrating into Stage 3 because once we've taken the impairments on them, we intend to write them off. Thank you.

Okay. The next question, loan growth strategy given the strong capital position and relatively flat loan book growth over the past year. What are the key constraints to loan expansion today? And which sectors or segments does management see as the primary growth drivers for 2026 and beyond? I'll have a stab at that. Key constraint has been the relatively high naira interest rates because of cash reserve requirements, in particular, it means that it's not profitable to lend your deposits out at anything below 30% plus. So as a result, most of our lending in naira is constrained to either retail, SME or lending with on-lending facilities from domestic DFIs. We are relatively one of the larger lenders leveraging domestic DFIs, largely because of our strong SME focus and our strong agri focus, both of which -- those 2 segments represent the vast majority of our local currency lending in the bank's balance sheet. So that -- the relatively high interest rates will remain a constraint for lending outside of retail and SME, which means that the lending that we would do typically would be in dollars on the wholesale side. And that lending would either come from the Nigerian subsidiary or the U.K. subsidiary that lends mostly to FIs. In Nigerian subsidiary, it's mostly in the oil and gas as well as non-oil export spaces. And again, the key here is going to be issues around sector concentration and also making sure that we are lending to the highest quality borrowers, taking on board the lessons from prior oil and gas exposure. Now in terms of the segments that we think will drive the growth in 2026, we do see some modest growth with a higher quality upstream [indiscernible] areas. We also think in the retail and SME space, we will continue to see growth. And in the non-oil exports area, particularly agriculture, we also think we will see growth. Beyond that, I think it will be fairly broad-based across different segments. But broadly speaking, most of the growth on the naira side of the balance sheet will be coming from the retail and SME space. Noninterest income recovery, this has been under pressure due to weaker trading and FX loss. Beyond fees and commissions, what initiatives are being pursued to diversify revenue streams and reduce earnings dependence on net interest income. So the first is that we continue to expand on our payment strategy, and that supports not just the bank revenues, but also the nonbank businesses, and you'll be seeing payments increasingly feature in terms of contributions of -- from our digital revenue space. The second is acceleration of our asset management revenues. The pensions business continues to grow robustly. We are also growing not just digital wealth, but the alternative asset space. We're closing out on Series II of our private credit fund. And we're also seeing significant growth in terms of assets under management from our HNIs and private banking. And this is particularly the case as we pay down on fixed deposits and many of these clients will now move to the asset management business. We do expect that treasury [indiscernible] is going to be an increasingly important part of our revenue. We're investing not just in personnel, but in new products. And so treasury sales, commissions and spreads will grow materially in the course of 2026, which underpins why treasury and financial markets will remain a core part of the bank's meeting of its targets this year. I think also important to note is that whilst its contribution is relatively small, we do also anticipate growth from the investment banking side in terms of fees as we see a number of critical transactions coming in 2026, both on the equity side as well as the continued momentum that we see on debt capital markets. We are also introducing new investment banking products, particularly in the area of structured finance, which will be more in the form of structured trade and commodity finance. And we expect that, that would also impact materially the fee income coming in from the investment banking side of the business. So we do believe there are a number of areas that will continue to support noninterest income in spite of the fact that our NIMs, we believe, contrary to what we may see in the rest of the industry that we think our NIMs are also going to hold up quite well. So capital allocation and returns. Following the recent capital raise and the increase in shareholders' funds over NGN 1 trillion, how does the company plan to deploy this? So firstly, I think it's important to note that we expect that ROE will continue to grow. The biggest growth -- I think we're going to see the biggest jump will be in 2027 after we've cleared out the additional impairments that we're going to take to write off the NPLs that we have under NGAAP. But we still expect that there will be modest growth in terms of ROE in 2026 in spite of almost 30% increase in shareholders' funds. Deployment of this capital, as mentioned, the most significant chunk will go towards paying down on fixed deposits. We also expect that some of that will go towards one international M&A transaction, which should be accretive from an ROE perspective. And gradually, we expect as we move into late '26 that we will start seeing some of this deployed towards risk assets. I say that because in the first 2 or 3 quarters of the year, the write-offs would mean that we don't actually need additional capital to support risk asset growth in '26, but we will certainly be consuming some of that capital in '27 to support risk asset growth. So can management quantify the group's capital surplus or shortfall under the CBN holdco rules and what specific actions would be required if the guidelines are implemented in their current form? As mentioned, it will be premature. We're still going through that and the implications at the moment, but certainly, we'll be able to give an update at the end of H1. The next question is FCMB continues to trade at significant discount to peers despite strong improvement in profitability and returns. What needs to happen for that gap to close? I think ultimately, it's going to be for us to maintain an ROE that is above the cost of capital. I think we're trending towards that steadily, and I think we'll be in a position to be there sustainably. The -- in spite of the impairments that we'll be taking this year, ROE will still be coming out north of 23%. We believe that if we look at the ROE that was achieved in Q1, I think this gives an indication of where we think we should be coming out in 2027 and beyond. So for us, I think what's critical is that we maintain sustainably a return on equity that is above the cost of capital. And in addition to that, of course, maintain a reasonable and healthy dividend payment and dividend yield. Operating expenses were quite elevated. Could management provide more insight into the key cost drivers and whether this trend is expected to persist? I can speak a bit to that, at least the second part. It's certainly not expected to persist. I think we've seen from Q1 that OpEx growth is now in the teens. I think based on our plans for this year is to keep it in that range for the rest of the year. Our OpEx growth historically has been driven by inflation and naira depreciation. As that moderates, I think we will see a significant reduction in the rate of growth of OpEx and consequently, an improved cost-to-income ratio. Question from [ Stephen Chima. ] Why has the group moved such a significant portion of its liquidity into placements with foreign banks? And should we expect this trend to continue? I don't know who could speak to that, whether -- either the bank's CFO or the group COO.

Okay. So I've spoken to that earlier. That was a deliberate strategy by the treasury team. We think that number comes down this year. So you see a reduction in that line this year. You also see a reduction in the income on that line. We're likely to see a corresponding growth in revenues from investments in bonds and treasury bills. Thank you.

And then the second question, could we speak to the NGN 13 billion of FX losses and bond trading losses booked in Q1 that undermine the noninterest income for the quarter?

Okay. So I've spoken to the bond trading losses. So there was an absolute loss of about NGN 6 billion. We said about 40% of it is realized, about 60% is mark-to-market losses. From an FX perspective, that was largely due to a revaluation of the currency because we have a net long position, I think, in excess of $200 million. Thank you.

And then the third question, I want to confirm that there would be aggressive loan write-offs in 2026. Could we just elaborate on that again, Gbolahan?

So we projected net loan write-offs of about NGN 250 billion. And maybe I'll just take it all together. So we're projecting a loan growth of about NGN 320 billion there. And then just based on the loan book, we think we're going to have to write off about NGN 250 billion after taking the required provisions on that book. And we're also projecting that end of the year, we think the currency ends at about NGN 1,350 because we have a loan book of about $950 million in foreign currency with an exchange rate of about NGN 1,350 coming from NGN 1,479. We project the FX revaluation leads to a reduction in that loan book by about NGN 120 billion. So technically, you have write-offs of about NGN 250 billion, FX revaluation accounting for NGN 120 billion, that's NGN 370 billion, absolute loan growth of about NGN 320 billion leads to about a reduction of about 50%, 60% in the loan book. That's how we have a negative loan growth for the year. Thank you.

Okay. And then from -- the next question, clarity on the component of your interest income, please? Any info why the bulk of the headline growth came from cash and cash equivalents rather than loan book?

Yes, that's what I just spoke about. So if you also look at the composition of the cash and cash equivalents, like I said earlier, you would see about NGN 1.2 trillion, which is [indiscernible] foreign banks. That's the key driver of that revenue.

Okay. And then again from Stephen, with the NGN 13 billion FX losses derivative related?

No, they were not derivative related. They were actually due to revaluation of the currency on the net long position we have in dollars.

I believe the questions from [indiscernible] are repetition. So we'll skip that. And then from Stephen, I don't know if this question has been asked already. Why has the group moved certain portion of its liquidity into placements with foreign banks? And should we expect this trend to continue?

No, that's what I just answered, yes.

Okay. And then finally, what is the sustainability of the CIR and ROEs? Cost-to-income ratio sustainability in the mid-40s, we think, is absolutely sustainable. ROE of Q1 that was 31%, I think will come down in subsequent quarters because of the charges that we would be taking to fully provision nonperforming forbearance loans so that we can write them off and bring the bank's NPL ratio in line with the thresholds to be able to pay dividend. So we expect that barring that elevated level of provision, once we get back to -- I expect in 2027 or at least Q4 2026, when we get back to sort of a more normalized cost of risk, we should be comfortably north of 30% ROE from Q4 '26 onwards. That is the last question I have here. I don't know if there's any other questions?

Mr. Balogun, there are no further questions on audio lines. Please continue.

Thank you. Okay. On that note, we will bring the call to a close. We thank you very much for your -- taking time to hear our presentation and for the extensive questions received. We look forward to updating you on the performance of the business as at the end of H1 2026. Thank you, and enjoy the rest of your day.