Regulatory Context: CBN Tightens Oversight
The Central Bank of Nigeria (CBN) on June 13, 2025, issued a new directive suspending dividend payments for banks with unresolved forbearance-related exposures or breaches of the Single Obligor Limit (SOL). The move has sparked investor unease, particularly within the Tier I and Tier II segments of the banking industry.
In response, FCMB Group Plc has moved promptly to reassure shareholders and stakeholders, outlining strategic steps to align with regulatory expectations while preserving shareholder value.
Significant Progress on Forbearance Exposure
FCMB disclosed it has made meaningful strides in reducing its exposure to loans under regulatory forbearance. The bank reported a 61.5% decline in such loans—from ₦538.8 billion in September 2024 to ₦207.6 billion as of May 31, 2025. These loans, linked to three entities and two obligors, remain classified as Stage 2 under IFRS 9.
According to the Group, consistent provisioning has been made over the years, and a full resolution is anticipated in the near term. The bank also signaled that these loans may soon exit the forbearance regime entirely.
While a short-term uptick in Stage 3 non-performing loans is expected—potentially peaking at 11.5% of the total loan portfolio—FCMB projects a decline to below 10% by the end of the year, aided by ongoing loan growth.
Addressing the Single Obligor Limit Breach
The Group also responded to concerns over a temporary breach of the CBN’s Single Obligor Limit. To resolve this, FCMB is converting a ₦23.1 billion loan into equity. The conversion is designed to not only cure the regulatory infraction but also enhance the bank’s capital base, which is expected to reach ₦267 billion post-conversion.
This capital restructuring has already received approval from the CBN for verification, with additional regulatory approvals in process. The move positions the bank to remain well above capital adequacy thresholds.
Dividend Policy Intact—Thanks to Diversified Earnings
Despite the regulatory headwinds, FCMB is confident in maintaining its dividend policy. The bank emphasized that its earnings base is well diversified, noting that only 46% of dividends paid in 2024 came from its Nigerian banking arm, while 54% was contributed by non-bank subsidiaries.
“We expect to have sufficient buffers to maintain our dividend policy for the 2025 financial year and the immediate subsequent years,” the Group said in a statement, contingent on the absence of unforeseen shocks.
This balanced earnings structure provides resilience against potential restrictions affecting the banking subsidiary alone.
Market Reaction and Investor Outlook
The CBN’s directive has sharpened market focus on the financial health and capital resilience of Nigerian banks. For institutions like FCMB, which are navigating both legacy exposures and regulatory changes, transparent communication has become essential.
While FCMB’s swift disclosures have been noted positively, market jitters remain. The bank’s share price dipped 6.57% at the close of trading on June 16, 2025, reflecting investor sensitivity to the broader implications of the CBN’s actions.
Nonetheless, FCMB’s proactive steps—ranging from balance sheet optimization to strategic equity conversion—are intended to provide reassurance. As the regulatory environment evolves, the Group’s ability to adapt and communicate effectively will remain key to maintaining investor confidence.