FCMB clears N500bn license hurdle as profits surge, but stock remains undervalued

FCMB Group Plc has crossed an important regulatory milestone, successfully raising N500 billion, allowing its banking subsidiary to meet the international banking license capital requirement set by the Central Bank of Nigeria.

The recapitalization places FCMB among banks that have satisfied the apex bank’s new capital thresholds as Nigeria’s banking sector undergoes its most significant capital restructuring.

Large capital raises typically raise concerns about share dilution, as issuing new shares spreads profits across a larger shareholder base.

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In FCMB’s case, shares outstanding rose from 39.6 billion in 2024 to about 42.8 billion in 2025, reflecting the impact of the capital raise.

**Earnings momentum accelerates  **

However, the bank’s 2025 results show that strong earnings growth masked the dilution effect.

For the year ended 2025, FCMB reported profit before tax of N200.9 billion, representing an 80% increase from N111.9 billion in the previous year. Profit after tax surged 141% to N176.9 billion, driven primarily by expansion in interest income, which crossed N1 trillion.

Despite the larger share base, earnings per share rebounded to N3.96 in 2025, up from N2.46 in 2024, indicating that profit growth has outpaced dilution.

Looking beyond the one-year surge, the bank’s earnings trajectory has improved significantly in recent years. Between 2021 and 2025, FCMB’s EPS grew from N1.05 to N3.96, implying an annualized growth rate of about 39%.

Yet the stock continues to trade at relatively modest valuation multiples. At current levels, FCMB trades at roughly 3.28 times earnings, 0.73 times book value, and about 0.53 times sales.

Using the bank’s projected profits of N62.6 billion for Q1 and N67.9 billion for Q2, FCMB could generate roughly N260 billion in profit for 2026 if earnings momentum is sustained through the second half of the year. That would imply earnings per share of about N6.1.

At the current market price of about N13, the stock therefore trades at roughly 2x forward earnings, a steep discount to most Nigerian banking peers, many of which trade between 3x and 6x earnings.

Even modest re-rating toward sector averages could significantly narrow this valuation gap.

**Risks remain, but the outlook is stronger  **

The bank’s exit from regulatory forbearance has led to a sharp increase in credit provisioning as previously restructured exposures were reassessed under stricter regulatory classification.

• Net impairment losses on financial instruments rose to N86.0 billion in 2025, up from N41.2 billion in 2024, with the bulk of the increase driven by loan impairment charges, which climbed to N92.5 billion from N43.8 billion a year earlier.
• Although recoveries on previously written-off loans helped offset part of the charge, elevated credit costs could continue to pressure profitability if asset quality weakens further.

Outlook

However, FCMB’s expanding net interest margins, stronger capital base, and growing deposit base suggest the bank is better positioned to absorb these risks than it was a year ago.

• The bank’s earnings outlook also remains strong. Based on projected profits of N62.6 billion for Q1 and N67.9 billion for Q2, FCMB could generate roughly N260 billion in profit for 2026 if earnings momentum is sustained through the second half of the year.
• If earnings momentum holds, a move toward N16 per share over the next six months would still leave the stock trading at relatively modest multiples while better reflecting the bank’s improved profitability and stronger capital position.

**For deeper analysis and our recommendations on FCMB and others, follow us via Follow the Money ftm.ng **