Exogenous factors such as the upward adjustment to the Cash Reserve Ratio (CRR) and higher interest rates have led to liquidity constraints for FCMB, with cost-of-funds (CoF) rising by 2.6ppts to 8.3% in 9M'24. Nevertheless, management is optimistic that the bank can assuage the funding cost pressures in FY'25 by utilizing inflows from its capital raise exercise to reduce its stock of expensive borrowings.
Consequently, we project a moderation in CoF to 7.5% in FY'25 (FY'24: 8.3%) on the back of expected temperance in interest charges on its expensive Interest-Bearing Liabilities (IBL) due to the aforementioned plan to use capital raise proceeds to reduce IBL and potential interest rate cut in H2'25. We expect a positive passthrough to Net Interest Income (NII) (+40.7% YoY) that would be further aided by an 18.0% increase in Interest-Earning Assets (IEA).
