Fortis Microfinance Bank taps Nigeria Large Market as Earnings Spike

Fortis Microfinance Bank (FMB) Plc has tapped into the large Nigerian market as half year earnings upsurge amid a tough operating environments crimping the growth of companies in Africa’s largest economy.

 

The consistent surge in earnings since 2012 financial year means the microfinance giant is increasing investors’ appetite for its shares.

For the first six months through June 2015, Fortis Microfinance bank’s net income surged by 315.2 percent to N234.22 million from N56.34 million the previous year.

Interest income also increased by 51.50 percent to N1.30 billion in June 2015 as against N858 million last years. 

The growth in interest income was driven by the company’s market penetrating products such as loan/credit that includes inventory finance, overdraft, and shop rent loan and salary advance.

The bank’s profitability indicators are also impressive as net interest margin increased to 36.55 percent in June 2015 as against 13.50 percent in last year. Cost to income ratio also increased to 59.12 percent during the six months ended June 2015.

While interest expense rose by 12 percent to N829.67 million in the period under review, the bank has utilized the resources of its owners in generating higher profit as return on equity (ROE) jumped to 10.03 percent in June 2015 from 2.68 percent last year.

Analysts say the growth in FMB earnings was driven largely by the reluctance of commercial banks to fund emerging microenterprises. 

Lenders in Africa largest oil producer say the lack of collaterals, absence of a business plan and lack of good accounting system makes it difficult to give long term loans to small businesses.

Banks can only lend to organization that have the aforementioned criteria as most lenders want to be sure they are paid for fear of spiralling Non Performing Loans (NPL) ratios.

Indeed Fortis has overcome the slow growth in economic activities as net interest income spiked by 305.08 percent to N475.16 million in June 2015 as against N117.30 million as at June 2014.

Total operating income moved by 87.60 percent to N771.43 million in the period under review compared with N411.21 million last year. Operating expenses were up by 32.08 percent to N436.82 million in June 2015 compared with N330.72 million the previous year.

As at 30 June, 2014, Fortis Microfinance bank had total shareholders’ funds of N2.03 billion, representing an 11 percent growth from 2014. This is at par with regulatory minimum of N2bilion for a national microfinance bank.

Total assets were up 1.3 percent to N16.81 billion in June 2015 compared with N16.58 billion last year. Loans and advances to customers were flattish at N11.73 billion while deposits from customers increased by 2.08 percent to N9.78 billion.

Fortis share price closed at N5.21 on the floor of the exchange while market capitalization stood at N8.83 billion.

BALA AUGIE