The Group CEO of FCMB Group, Ladi Balogun has stated that only about 10% of the bank’s foreign exchange gains recorded in 2023 are realized.
He made the statement during his presentation at the group’s “Facts Behind the Offer” presentation which was held at the NGX premises on July 30.
Balogun made the statement while referring to the 70% windfall tax which has been on the bank’s realized FX gains from 2023.
He highlighted that the tax would not significantly impact the bank’s capital or its earnings.
He said, “We do recognize that’s there a bill that is yet to be signed by the President, which will impose a tax on revaluation gains, but I must stress that it is realized gains and not unrealized gains.”
“And barely 10% of our gains are actually realized, so the impact on our capital or our earnings is relatively muted.”
Most of our FX gains have been channelled to impairments
The Group CEO noted that most of the group’s revaluation gains have been provisioned as impairments. He noted that the group’s net FX gain in 2023 was about N24.5 billion.
Ladi Balogun said, “We’ve set aside a significant amount of our FX revaluation gains as provisioning, such that the net gain in 2023 was barely about N20 billion. In 2024 so far, we’ve almost provisioned the entire revaluation gain, such that the net gain is barely up to N2 billion.”
“In fact, revaluation gain has been having a muted impact in terms of our earnings because we’ve building provisioning buffers to support our business and avoid any spikes in non-performing loan ratio in the future when we don’t have these gains.”
In 2023, FCMB Group posted FX revaluation gains of N84 billion, a significant improvement from the N4.3 billion gains recorded in 2022. However, during the period, the group posted net impairment losses of N59.5 billion, thus leading to a net FX gain of N24.5 billion.
In the first half of 2024, FCMB’s revaluation gains were about N35.2 billion, with its net impairment at about N33.0 billion, thus translating to a net FX gain of N1.8 billion.
Based on the statement of the group’s CEO, its realized net FX gains for 2023 translate to about N2.5 billion, with a 70% windfall tax further amounting to N1.75 billion.
70% windfall tax
- The yet-to-be-signed one-time 70% windfall tax on the realized FX gains of banks in 2023, has been a source of significant controversy in the Nigerian banking space in recent weeks. However, no bank has released any statement on the issue, since the start.
- The announcement of the tax led to a bearish sentiment about banking stocks in the NGX. As of July 26, banking stocks lost about N398 billion in market capitalization since the announcement of the tax.
- However, FCMB Group was one of the few stocks whose price appreciated since the announcement of the tax. The group’s share price appreciated from N7.70 to N7.90 between July 17 and July 26.
- FCMB is also on the market with a public offering programme targeted at raising N110.9 billion by offering 15.197 billion shares at N7.30 per share.