FCMB Group Plc (FCMB) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the FCMB Group H1 2022 Investors and Analyst Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Ladipupo Balogun, Group Chief Executive FCMB Group Plc. Please go ahead.

Thank you. Good afternoon, ladies and gentlemen, and welcome to our half year investors and analyst presentation. With me in the room today are the Group Chief Operating Officer Gbolahan Joshua. We also have the CEO of the bank, Mr. Yemisi Edun. We have the CFO of the holding company, Mr. Deji Fayose. We have the CEO of Credit Direct, who will be speaking on our consumer finance business, that is Akinwande Ademosu. We have the CEO of FCMB Asset Management, who will be speaking on our investment management business and that's Mr. James Ilori. We also have the Executive Director in Chartered Investment Banking and coverage in the holding company, Mr. Olufemi Badeji, and he will be talking us through the performance of the investment banking business. Also in the room with me today supporting will be Mrs. Bimpe Odunuga, who will be covering for the Chief Risk Officer who is currently on leave. And the Head of Investor Relations Mr. Tunji Onamusi. I will now move to the second slide, just to give an overview of the agenda. So I'll be talking you through an introduction. And in the introduction, I will be sort of giving some insights into not just our performance, but also the overall strategy. Then I'll be handing over to the group's CFO to talk us through the results overview. Our group Chief Operating Officer will talk us through the review of digital business. And then we will move to the various operating businesses, starting with the Banking Group from Yemisi, Consumer Finance from Akin, a review of Investment Banking from Femi, and then Investment Management review from James. I will then come back and give you an outlook for the second half of the year. So if we move to Slide 4 -- on the Slide 3. What this shows is what has already been shared with the public. So I don't want to spend too much time on this slide. Generally, we see that most areas are in the green. So we've had a very strong first half of the year on a relative basis compared to H1 2021, most indices have grown by more than 20%. And in the case of earnings, obviously, we saw 73% growth year-on-year. We'll be unpacking the drivers of that earnings growth in subsequent slides. Important to note that cap adequacy ratio has come down to 15.1%. We will be doing an audit of our 9-month numbers, which should shore up capital substantially, but we will also -- we now have approval from the regulators for an alternative Tier 1 capital raising program of, I believe, it's NGN 300 billion, and we'll be tapping into that AT1 program over the next few months, ensuring our capital base so that we can sustain our growth. Moving on to the next slide, which is Slide 4. I want to just recap a slide like this was shared at the last presentation. And I'll be speaking to some of the specifics in the next slide, but we are focused on building an ecosystem. This is an ecosystem that will leverage our own platforms and the products we provide and give our customers access to not just our products, but also third-party products. We feel that we will be able to oil the wheels of this ecosystem with our balance sheet as well as third-party capital. And equally importantly, as we move increasingly into a digital business, leveraging data to enable us make better decisions, whether it be credit or marketing. We are beginning to see this ecosystem take effect, we believe that this strategy is partly responsible for the performance improvements that we're seeing as we continue to build this ecosystem and strengthen the connections between the different parts, what we believe we will achieve is almost like a flywheel effect where we will be able to see continuous momentum in the growth of the business far more than the sort of expense side, so revenue would be growing much fast and expenses. And if we look at the next slide, Slide 5. This sort of give some highlights to certain aspects of this ecosystem and how they've been performing. Our 4 existing platforms have done fairly well in the last year. All of them have recorded very strong growth: 84% from Banking; 42% from Consumer Finance; 254% from Investment Banking; and 42% from Asset & Wealth Management. We are in the process of launching 2 technology platforms that are entirely digital and cloud native. These will be key for the future growth and expansion of the business. The first is a Borderless Banking platform, which is being incubated within our FCMB U.K. business. You will think of that as basically a U.K.-based challenger bank that is focused on the African diaspora and African global citizens and that would support businesses such as remittances, investments and payments. That business itself is riding on a platform that we intend to use as a Banking as a Service provider to accelerate the digital transformation of other members of the group. So this is, as I mentioned, a cloud-based platform running on micro services, giving us better scalability, better agility, ability to move to new geographies much more rapidly. And the first customer of this Banking as a Service platform, is FCMB U.K. with the Borderless Banking business that we're launching and then we will be extending it to other group members. So we see the ability for other group members that may not typically offer banking services that have large numbers of customers to be able to offer wallets, to be able to offer debit cards, to be able to offer payment solutions directly from their own apps and platforms so that we can retain a lot of the potential banking revenues for the customers that we're supporting in the group who may not be using FCMB as their primary bank. So what we call TP1, which the name will be shared in the next presentation, is going live in this month end of August and TP2, we will be obviously launching with FCMB Group members during the course of 2022. And by 2023, we will begin moving up [indiscernible] Banking as a Service business. We're already offer Banking as a Service to our customers on our existing FCMB platform, but because our core banking is not cloud based, we cannot scale as easily, and we cannot give the same levels of sort of reliability and resilience. So we'll migrate our banking services into existing business onto that platform, and start serving external customers on that platform in 2023. We think these 2 businesses have the potential to create exponential value creation for the group, but more on that in subsequent investor presentation. In terms of customers, we've seen 900,000 additional customers added to our customer base and that was partially aided by about -- excuse me, 200,000 or thereabouts that came from the acquisition of an integration of AIICO pensions. We now have 10 million customers overall. A number of our products have done very well during this period, I'm just highlighting a few. SME lending has had a very strong first half of the year. That's been largely driven digitally. We've seen profits grew by about NGN 3.8 billion in our SME business as a result. Treasury has had a very good first half of the year with treasury sales of various products and fixed income and that led to about a NGN 3.9 billion growth. And we believe that because our treasury business is increasingly sales-driven as opposed to trading, that we are beginning to build a fairly healthy sort of stable annuity-based income from treasury. On the wealth side, the big push in the first half of the year has been around digital wealth where we're offering high-yield products to customers through our mobile app, and we've seen about 60,000 customers acquired on digital wealth and AUM has grown to about NGN 8.9 billion. We believe that during the second half of the year, we should be able to double our AUM in the digital wealth business and continue to grow from that. The financial advisory side, we have also had a fairly strong first half, and we advised and raised about NGN 294 billion compared to NGN 264 billion in H1 2021. Looking at third-party products. This will become increasingly important. The first stage is upselling third-party products to our own customers. And traditionally, where we've done this in areas like insurance and we saw 10% growth on the insurance side, largely because it has been focused more on, I would say, sort of corporate customers. I think there's significant opportunity on the retail insurance side to work to be done to really sort of ramp that up. But with a customer base of $10 million, the potential is significant. Of course, airtime & data are services that are available through our app, and we've seen about NGN 670 million of revenue generated in the first half from this, which is up 24%. Other lifestyle services, we do see that naturally, when banking groups think of offering third-party products, the question is always, why should I buy these services from a bank or a financial service platform. the best reason we feel is credit? So we spent some time working with a BNPL-focused Fintech to embed credit in our customers' purchase journey for some of these third-party products and services. This BNPL solution for these services will be activated in -- again, in August this year. And we expect to see not only growth in terms of commissions that we will earn in selling third-party products via airtime, via school fees, or education and health, but that we believe there could be a number of other things there as well, but of course, also the credit income that we would also earn. So we feel, certainly, in -- from the second half of this year, we'll begin reporting the impact of that. Capital, we've used our own capital really to help drive a more inclusive growth in our ecosystem, lending to agricultural sector, which I think is very important, particularly in these times of high inflation and exchange rate depreciation. We've grown our lending [indiscernible] sector by about NGN 34 billion that accounts for about 7% of our total loans. We've also been very heavily focused on the SME space, and the -- or the micro SME space, where we've crossed about 52,000 loans in the first half of this year, closing about $6.3 billion. 77% of these have been for women. Now our focus on inclusive growth is helping to unlock new sources of capital. We received approval from the AFDB for about $50 million in Q1, actually, which is being targeted towards SME and women in particular. And then we've also received another $17.3 million grant from the MasterCard Foundation to support our lending -- our micro finance activities. So these things, I feel, will continue to happen, and we'll continue to complement our own capital that we are deploying in this space as more and more DFI's, the banks and financial groups as ourselves as some of the most reliable channels for them to achieve their own objectives at scale. Finally, I think it's worth mentioning that we have now moved about 150 of our branches to solar power. And this has helped to reduce our carbon footprint by about 60% year-on-year. and we're saving about NGN 64 million monthly on diesel, which, obviously, is important with the relatively high fuel costs that we're facing at the moment. That's it from me in terms of strategy overview. I'll now hand you over to our CFO, Deji, to talk us through the results in a little bit more detail.

All right. Thank you, Ladi. Good afternoon, everyone. In terms of the numbers for half year, our revenue is moved by 3.8% year-on-year, which was largely driven by a combination of factors. So the twin factors of net interest income and noninterest income [indiscernible] movements. Net interest income increased by 14% quarter-on-quarter and 40% year-on-year. The year-on-year growth in our net interest income was due to a 35% increase in interest income as our loan book grew by 22% year-on-year. Noninterest income also grew by 29%, largely driven by growth in service fees and trading income despite some headwinds that we had in foreign exchange revenues at the start of the year. Trading income grew by 132% from higher volumes of fixed income trades during the year. However, recorded increases in operating expenses quarter-on-quarter and year-on-year of 12% and 19%. This will lead to increased regulatory costs and the investments that we've been making in technology as well as general inflationary pressures. Impairment charges grew 59% quarter-on-quarter, 167% year-on-year on the back of increased provisions on our risk assets and as evidenced by the growth in our balance sheet. Overall, combination of these factors led Group PBT to 73% growth year-on-year from NGN 8.9 billion in the previous year to NGN 15.4 billion in the current year. Slide 8, please. This performance led to a Q2 return on average equity for the group at 13.5%. We brought our half year RoAE to 11.1%. This was as a direct result of our growth in profitability year-on-year. Net interest margins also increased by 7.2% and 8% quarter-on-quarter and year-on-year, driven by growth in our earning asset yield over the period. Cost-to-income ratio also improved by 10.1% and 12.9% Q-on-Q and year-on-year, respectively. Slide 9. So Slide 9 looks at the contribution by all operating companies and all operating companies recorded strong double-digit year-on-year growth over the period, where the Banking Group recorded an 84% growth, and Consumer Finance 43%, Investment Management 42%, and Investment Banking 254%. In terms of contribution to profits, our Banking Group contributed 71% of Group profits with all our other nonbanking subsidiaries contributing 29%. 14% from Consumer Finance, Investment Management 11% and 4% from Investment Banking. And Slide 10 just looks like a waterfall and [ I'd say to just include ] [indiscernible] buildup of well over last year. So I will close half year with the performance of all operating companies. With that said, I will hand you over to Group Chief Operating Officer, Gbolahan Joshua, to take us through digital business review. Thank you.

Thank you, Deji. Good afternoon. My name is Gbolahan Joshua. I'll be taking us to Slide 12 to 18, which speaks about our digital business. On Slide 12, we just contained key results from our digital business recorded a 51% year-on-year growth in digital revenues to NGN 17.3 billion for H1 2022. That accounts for 14% of our gross earnings. For digital lending, we disbursed over NGN 114 billion to 455,000 customers. Our digital lending portfolio has grown by over 111% year-on-year to NGN 74 billion and digital lending now accounts for 61% of our total digital income. Customer enrolled in our digital platforms have grown by 15% to NGN 8.3 million. Slide 13, please. Slide 13 speaks to our customer acquisition. We acquired over 900,000 customers in H1, which is about 2x the 400,000 customers we acquired in H1 2021. We see the growth across all our platforms and our customer base is crossing 10 million mark with digital penetration above 82%. Next slide. On Slide 14, which leads to our Agency business. We continue to see traction in that business. It's been a key driver of our customer acquisition. We acquired over 110,000 customers on our Agency Banking business for H1, and that's about 12% of the total customer acquisition for the period. Agency revenues increased by 54% in Q2. However, we expect a temporary slowdown in Q3 as we're introducing lower transaction limits and implementing new operational risk management measures. However, we expect the revenues to rebound in Q4. On Slide 15, which shows the breakdown of our digital revenues. Lending is the highest contributor at 61%, which, in absolute terms, about NGN 10.6 billion, is driven primarily by 100% growth in both our digital lending portfolio in the retail and SME business. Payments accounts for 36.7% of our digital revenues, agency 1.8% and wealth 0.2%. In summary, lending and payments are 98% are the key drivers of digital revenue, and we see agency and wealth inching up gradually. On Slide 16, which just shows the trend of our digital revenues with a strong growth of 14% quarter-on-quarter from NGN 8 billion to NGN 9.2 billion. Digital contribution to gross earnings improved from 13% in H1 2021 to 14% in H1 2022. And that's despite a 34% growth in gross earnings, and digital's contribution to interest income improved significantly from 5% in H1 '21 to 9% in H1 '22 and that's despite the 35% growth in interest income. On Slide 17, which shows the trend of our digital loans portfolio. The portfolio has grown by over 144% year-on-year from NGN 30 billion in H1 '21 to NGN 74 billion in H1 '22. In absolute terms, the digital loan portfolio grew by NGN 44 billion and accounted for 21% of our total loan growth on a year-on-year basis. This strong growth led to digital loan portfolio now accounting for 6.6% of our total loan book from 3.3% in H1 2021. On Slide 18, it just shows key highlights of our digital business across various segments. I'll start with the breakdown of the payments revenue, which shows that Mobile, Cards and ATMs accounts for about 89% of our payments revenue. For digital wealth, we've onboarded over 60,000 customers. AUM has grown by about 144% to NGN 8.9 billion and revenues grew by 44%. We -- for retail, we disbursed over NGN 21 billion to 442,000 customers, average ticket size of NGN 40,000. Portfolio size is currently NGN 16.9 billion, and we have over 227,000 customers in that portfolio. For SMEs, we disbursed over NGN 93 billion to 12,000 customers, average ticket size of NGN 7.5 million. Portfolio size is currently NGN 57 billion, and we currently have over 23,000 customers in that portfolio. Thank you. I'll now hand you over to Yemisi, who will take us through the Banking Group business.

Thank you, Gbolahan. Good day, ladies and gentlemen. I'll be taking from Slides 20 through 28 on the review of the Banking Group. Slide 20 is a dashboard showing the key performance metrics. Customer deposits grew year-on-year by 22% and 4% quarter-on-quarter to NGN 1.64 trillion. The growth was a result of the accurate execution of the retail strategy in the face of a challenging operating environment and increased competition. Gross net loans grew 2% quarter-on-quarter to NGN 1.09 trillion. The cost of risk also grew 20% quarter-on-quarter, closing at 1.2%. This is due to increased impairments on the loan book. Revenue witnessed a 20% year-on-year growth and 90% quarter-on-quarter growth. This was driven by increase in noninterest income and net interest margin due to growth in loans and advances. Return on average equity increased by just 8% quarter-on-quarter, so closed at 12.8%. Cost of income ratio, trended downwards to 67.1% in H1 due to growth in revenue for the period. Moving on to Slide 21, which contains the analysis of the Banking Group performance for the period. The PBT grew from NGN 3.6 billion in Q1 to NGN 7.1 billion in Q2, amounting to an 85% increase quarter-on-quarter and an 84% growth year-on-year amidst the challenging macroeconomic environment. This was likely due to significant performance recorded in net interest income and noninterest income, most especially in our corporate, SME and treasury and financial market segments. Net interest income improved by 15% quarter-on-quarter and 44% year-on-year. The year-on-year growth is predominantly driven by growth in loans and advances. Noninterest income also increased 77% quarter-on-quarter and 23% year-on-year. The growth was driven by increase in fees and commissions, trading income and FX income. Operating expenses increased 13% quarter-on-quarter and 19% year-on-year due to increase in regulatory costs and high inflation environment, and also the IT maintenance costs. Risk assets grew 2% (sic) [ 4% ] quarter-on-quarter and at 23% (sic) [ 22% ] year-on-year as additional funding was provided to productive sectors of the economy. Customer deposits also increased by 4% (sic) [ 2% ] quarter-on-quarter and 22% (sic) [ 23% ] year-on-year, respectively, driven mainly by customer acquisition via our retail channels. Slide 22 contains noninterest income analysis. The net fees and commissions grew by 30% quarter-on-quarter and 21% year-on-year, driven by growth in electronic fees and commissions. Trading income grew by 47% quarter-on-quarter and 127% year-on-year due to higher trading activities in government-backed securities. FX income, however, decreased by 111% quarter-on-quarter and 201% year-on-year decline was recorded due to FX revaluation loss in Q1 2022. Other income increased 682% quarter-on-quarter and 27% year-on-year due to dividends received on investments. On Slide 23, we have our PBT distributed by segments. Our Personal Banking segment, PBT, grew NGN 0.7 billion quarter-on-quarter, which, however, declined NGN 3.3 billion year-on-year, slightly driven by increased branch operating and allocation costs, about NGN 2.7 billion. Growth in impairments was about NGN 203 million and a one-off write-back session charge 2021 of NGN 1.7 billion. This is expected -- this result is expected to improve in subsequent quarters. SME banking, we continue to see traction in our SME business as we remain on course with our strategy of using innovation and technology to drive the business. Our year-on-year PBT grew by NGN 3.6 billion (sic) [ NGN 3.8 billion ] and NGN 0.3 billion quarter-on-quarter, respectively. We continue to attract cost-effective funds and grants from DFI's to support critical sectors in our retail business. As mentioned earlier, we were able to obtain grant -- funds AFDB of about $50 million in Q1 this year and also $17 million from MasterCard Foundation in support of our business. Treasury and Financial Markets segment PBT grew by NGN 3.9 billion year-on-year and NGN 0.6 billion quarter-on-quarter. The growth in PBT is mainly from treasury sales and fixed income trading. The Corporate Banking segment recorded a loss of NGN 1.7 billion. Though the business is still loss-making, but we are seeing significant improvement. We have seen a significant reduction in losses with losses declining by NGN 0.9 billion year-on-year and NGN 1.5 billion quarter-on-quarter. The Commercial Banking segment returned to profitability in Q2 2022, with profits growing by NGN 0.2 billion year-on-year and quarter-on-quarter. Our Institutional Banking segment PBT declined NGN 0.8 billion year-on-year and NGN 0.2 billion quarter-on-quarter. This segment is being repositioned for better performance during the next 1 year. Moving on to Slide 24, which analyze the deposit trend for the period. Total deposits rose 4% quarter-on-quarter and 22% year-on-year. Local deposits now accounts for 73% of our total deposits. It's grew by 13% quarter-on-quarter and 22% year-on-year, respectively. Retail deposits, that is our personal and SME banking segments, now constitutes about 63% of total deposits. However, remained flat last quarter-on-quarter, but increased 13% year-on-year. On Slide 25, we provide the cost analysis and reduction plans for the year. Operating expenses increased 13% quarter-on-quarter and 19% year-on-year due to increase in regulatory costs and technology enhancements. Regulatory costs, that is NDIC and AMCON levy, grew year-on-year because of growth in balance sheet size and deposit liabilities. Technology costs grew 35% year-on-year and accounted for 9% of operating expenses in the first half of 2022. This is due to the currency devaluation impact and increased investments in IT technology. Our reduction plans include, but are not limited to: Internal process realignment and automation for greater cost efficiency, resources reallocation for optimization of performance, and our focus remains on driving efficiencies and reducing cost-to-serve. Slide 26 analyzes the group's loan book by sector, currency and segments. Our loan portfolio remains well diversified across sectors, segments and currency. We achieved a growth of 22% year-on-year, in line with our plans for the year 2022. The quarter ended with a 2.2% growth over first quarter 2022 numbers. Year-on-year growth was likely driven by our focal sectors in commerce, agriculture, manufacturing and individual sectors. These sectors contributed about 73.6% of the growth. The 2.2% quarter-on-quarter growth in the loan book was likely driven by the individual oil and gas upstream and government sectors. Concentration in foreign currency loans remained flat quarter-on-quarter at 40%. Foreign currency loans, however, grew by 2% at the end of the quarter, partly induced by a 1.2% movement in the exchange rate. 18% of the foreign currency loan is from our U.K. subsidiary, most of which are from financial institutions. Segment concentration improved with SME and personal banking gaining 1.4% of the share of the portfolio. All sectors are within the planned and regulatory limits. Slide 27 shows our loan book performance by sectors, currency and segment. We had a 7% growth in NPL ratio to close at 4.6%. NPL also grew by 7% quarter-on-quarter and 85% year-on-year. The quarter-on-quarter growth came likely from the individual sectors. These are largely retails loans with delayed salaries or cash flows. They usually reverse and the prognosis of recovery is high. 99.6% of NPL are from the LCY portfolio while personal and SME segment contributed 68% of the current NPL. The quality of value book remains a major focus for us. Slide 28 speaks to the trend in our NPL, cost of risk, net impairment and coverage. Quarter-on-quarter growth in NPL ratio was due to deterioration in the personal banking portfolio, as earlier mentioned. Resolutions and recovery are ongoing on the portfolio and prognosis of recovery remains very high. Cost of risk was 1.2% with 20 bps growth Q-on-Q. This represents charge to cover for growth in NPL and loan book. Accumulated impairments grew by 10% quarter-on-quarter, representing charge for increased NPL as well as growth in the loan book. Coverage remained above 100%, in line with our plan and grew by 220 basis points quarter-on-quarter. Thank you for listening. I will now hand you over to Akinwande Ademosu, Managing Director, Credit Direct Limited, who will present the Consumer Finance performance.

Yes. Good Afternoon, and thank you Mr. Edun. My name is Akinwande Ademosu. I lead the nonbank consumer lending business. So I'll just tick in on Slide 30 and 31. So on Slide 30, this slide shows our financial performance as you compare 2022 quarters 1 and 2 and last year 2021 to the half year 2022. The business loan book continued to expand. It grew by 8% year-on-year, and to about NGN 26 billion in quarter 2 2022. Our profit before tax grew 3% quarter-on-quarter, and 43% year-on-year to NGN 2.1 billion by the end of H1. Year-on-year growth was sustained by the increase in net interest income. Net interest income grew by 6% quarter-on-quarter down 5% year-on-year. Our noninterest income grew by 3% quarter-on-quarter and 19% year-on-year, attributed to a growth in fees and commissions. Operating expenses grew marginally by 3% quarter-on-quarter, and 1% year-on-year. In terms of asset quality, our net impairment declined by 35% year-on-year. And this massive improvement was aided by our proprietary and robust risk management framework. However, it recorded an increase of 26% quarter-on-quarter. Today, our digital channels account for 31% of global sales, up 55% compared to quarter 1 -- quarter 2 2021, and this trend is expected to continue. Slide 31 detailed the business performance ratios. I'll only take a few key ratios. The business maintained strong profitability ratios for the second quarter 2022, as return on average equity grew by 35% from H1 2021. In terms of asset quality, nonperforming loans and the ratio of total loans improved drastically, dropping by 38% year-on-year. The business continued to maintain a good liquidity position and capital buffers. In closing, this is it for me on our consumer business. I will now hand you over to Femi Badeji, Executive Director, Investment Banking business.

Thank you, Akinwande, and good afternoon, everyone. My name is Femi Badeji, and I'll take you through the Investment Banking section of the presentation, which is Slide 33 and 34. Year-over-year profit before tax for the reporting period increased by 252% from NGN 185 million to NGN 650 million for the Investment Banking business. Gross earnings improved year-over-year by 72% with noninterest income improving by 68% from NGN 864 million(sic) [ NGN 846 million ] to NGN 1.42 billion. Whilst operating expenses increased year-over-year by 26% to NGN 917 million, the cost-to-income ratio improved by 27% to 58% and the return on average equity improved from 5% to 23%, representing a 364% growth. Moving on to Slide 34. Whilst PBT for the Investment Banking business declined by 45% quarter-over-quarter, it grew 251% year-over-year. The year-over-year growth was driven by increased capital markets activity both in the primary and secondary capital markets during the period, which led to an increase in financial advisory fees as well as improvements in brokerage commission and trading income. The value of stockbroking trades grew 220% year-over-year from NGN 9.4 billion in the second quarter of 2021 to NGN 30.1 billion in the second quarter of 2022, contributed significantly to the 142% growth in brokerage commissions year-over-year. Trading income, which declined quarter-over-quarter, was driven by a decline in the proprietary trading portfolio in the second quarter of 2022. It did, however, grow by 969% year-over-year. Operating expenses increased 26% year-over-year on the back of business expansion costs predominantly for CSL incurred during the period with quarter-over-quarter operating expenses growing marginally by 1%. As mentioned before, CIR for the business improved significantly in the first half of 2022 moving to 58% from the 80% recorded for the same period in 2021. The pipeline for the rest of the year for this business remains strong, and the segment remains focused on execution. I will now hand you over to James Ilori, CEO of FCMB Asset Management, to take us through the investment management section of the presentation. Thank you, once again.

Thank you, Femi. Good afternoon, everyone. Slide 35 to 37, and I'll start with Slide 36. Assets under management grew by 30% quarter-on-quarter and by 47% year-on-year to close the first half at NGN 736 billion. The relatively large year-on-year growth shows the effect of the consolidation of AIICO Pensions' AUM with that of FCMB's. Investment income accounted for 52% of the [ NGN 66 billion ] half year AUM increase, with the balance coming from net contribution from customers. Our Pensions business contributed 84% of AUM in the second quarter, which was unchanged from what we recorded in the first quarter, but was higher than the 77% contribution recorded in the same period last year. The number of retirement savings accounts grew by almost 2% in the first half of the year to close at 724,690. In addition, registration via our digital platform accounted for 60% of the growth in the number of retirement savings accounts. Looking at the transfer window, we were net recipient of funds from the transfer window in the first half, and we closed with a net inflow of about NGN 1.3 billion. In terms of PBT, that increased by 48% quarter-on-quarter and by 42% year-on-year, reflecting the full second quarter impact from the consolidation of AIICO's accounts. Also looking at the cost-to-income ratio, that fell by 7% to close the second quarter at 50%. Moving to Slide 37. Our primary goals for the rest of the year include the following: First item there is AIICO Pension integration. The benefits in the first half of 2020 from the acquisition of AIICO Pensions were reflected in 3 things: AUM, cost savings and PBT. In terms of AUM, that grew by NGN 9 billion. That's in addition to the NGN 154 billion inherited from 2021. Our cost savings increased to NGN 513 million from synergies. That figure was NGN 220 million in the first quarter and PBT rose by an additional NGN 630 million. That was NGN 825 million in the first quarter. We remain on track to achieve our full year target of incremental AUM of NGN 18 billion. So total AUM contribution from the AIICO acquisition would hit NGN 172 billion. Cost savings, we expect to come in at NGN 1.1 billion and additional PBC is expected to hit NGN 1.3 billion. Looking at digital distribution. The implementation of our digital distribution plan remains on track. AUM and management fee from digital products increased by 41% and 144% quarter-on-quarter. We expect the strong growth in AUM and management fee to continue in the second half as work on improving customer experience on our platforms and increasing collaboration with internal and external parties gather momentum. Finally, alternative audits. We plan to seek regulatory approval to launch our first fund in alternative assets by September. We expect to open the offer to investors the following month, that's in October and the aim is to raise a minimum of NGN 10 billion under Series 1. Thank you. I'll now hand you back to Ladi for an overview of the group's plan for the rest of the year, that second half of the year.

Thank you, James. So based on the performance in the first half of the year, I think we can confidently revise our year-on-year PBT growth target for the full year to about 40%. This will be driven by the following: Digital revenues, we expect to grow by about 30% year-on-year. And at the current run rate, we expect that we will exceed about NGN 34 billion, which is a growth of NGN 8 billion on prior year. The Investment Management business, we will continue to drive the efficiencies on the acquisition that we made last year, and we expect to see AUM growth of about 47% year-on-year. There are a number of new initiatives also going on around digital asset management as well as the alternative assets business, but I think that you're really seeing the impact of those from 2023. The Banking Group, I think, will sustain the profit growth that we're seeing. And typically, we would have a stronger Q4, all other things being equal, because there will be about NGN 4 billion to NGN 5 billion of regulatory costs that we have each quarter that will not repeat in Q4. On the Investment Banking side, there's a fairly healthy transaction pipeline that suggest that profits should be stronger in H2 than H1. And finally, on the Consumer Finance side, we expect that we will sustain the trajectory. So all in all, we believe that we should certainly see a much stronger performance in H2, and we should be able to round up at least 40% up on last year. Thank you, and we're happy to start taking your questions.

[Operator Instructions] There are no questions at this time. I'll hand the call back to yourselves.

We do have one rather long question, which I have to read out and then we will answer. So question -- or questions are from Tunde Ogunleye as follows: What is your outlook on the interest rates environment, political environment and FX? So I think just to take that first. Certainly, we see continued tightening in the interest rates environment as the Central Bank tries to curtail the impact of inflation. So [indiscernible] environment, we don't see any unusual events certainly this year other than, I would say, the sort of insecurity issues that we've been having around the country. I would say thankfully, so far, that has posed limited risk to our business. And on the FX side, I think you'll guess -- our guess is as good as yours. Certainly, we see that there is pressure, but it will depend on the policy stance of those that manage the exchange rate. Now can we share guidance on loan growth, deposit growth, NPL, cost of risk and cost to income ratio? What I'd say on loan growth is that we would slow down definitely in terms of loan growth. There will be modest loan growth for the rest of the year. I wouldn't anticipate that we would see up to 5% in H2. So what we will see is a lot of churn and our average yield on our loans will continue to rise. So what we may sacrifice in terms of volume growth, we would make up for in terms of pricing improvement. Deposit growth I think that we would expect maybe something in the region of same sort of momentum that we're seeing so far. I think that certainly, as interest rates rise, you will find more fixed deposits coming to banks than we saw in prior period, but I would say that the trend should be consistent to what we saw in H1. Cost of risk. I would maybe suggest that Bimpe give us a guidance on that. So Bimpe, are you on the call, can you quickly just give a view on cost of risk?

Good Afternoon. Yes, I'm on the call. Our cost of risk shows somewhere around 1% to 1.2%. We don't expect it to be more than 1% to 1.2%.

Okay. I think that's from the bank. And when we look at the entire group, I think we would probably be pushing somewhere in the region of close to 2% [indiscernible] Okay. Cost-income ratio, all other things being equal, we do expect to improve. As you saw with our Q2 cost-income ratio, it was better than Q1, a number of our costs fall away in Q4. So we will -- if we just assume that Q2 and Q3 are about flat on cost/income ratio and then Q4 is an improvement because we don't have the regulatory costs then naturally, we will see cost-income ratio trending down probably as an average for the year in the early [indiscernible]. Our aim is to get sub-60 certainly by next year. . Now how should we be looking at our funding costs? And what are -- what rate are we considering for the AT1 issuance? Funding costs, I think we will do our best to ensure that they do not rise materially. We're seeing very strong growth in current and savings accounts. We expect that low-cost deposits will probably grow faster than our loan book or growth. So hopefully, we will be replacing purchase funds with low-cost funds as the year proceeds and our loan growth being relatively modest in H2 should, therefore, mean that even if there is a slight rise as we're seeing in the cost of fixed deposits, we don't expect a significant rise in our overall cost of funds. In terms of the AT1 pricing, it's hard to say at this stage. It really depends where the market is at the time. But certainly, we feel that what it would enable us to do in terms of asset -- continued asset growth, given the fairly high yields of our own asset book, we would be more than able to leverage that capital to be profitable. In terms of the surging impairments, we will ask what is driving that. I would also take maybe there are -- I'm just trying to count now, there are -- okay, I'll just take the first 2 questions here together. What is driving the surge in impairment charges and any update on NPL in manufacturing and oil and gas sector? So maybe I'll ask Bimpe to answer those 2 questions.