Fidelity Bank: Drop in impairment charges, growth in gross profit boost profits


With a drop in impairment charges and growth in gross earnings, Fidelity Bank Plc in its unaudited result and account for nine months ended September 30, 2017 shows impressive growth in profitability, one of its best results lately.

Fidelity Bank, its profitability and balance sheet were sustained as the management was prudent in managing cost and rapid deployment of electronic products to drive retail banking penetration.

The Bank’s management was able to grow margins and improve key-ratios despite the prevailing tight liquidity and harsh regulatory environment.

Over high inflationary environment, Fidelity Bank reported 2.6 per cent drop in operating expenses, leading to a reduction in Cost to Income Ratio (CIR) to 66.8 per cent in nine months of 2017 as against 77.3 per cent reported in nine months of 2016.

The drop in operating expenses was driven by personnel costs, process improvement and digital banking initiatives which have continued to optimize the bank’s cost profile.

For the nine months ended September 30, 2017, Fidelity reported a growth of 17.9 per cent in gross earnings, impacting positively on profit after tax that increased by 65.1 per cent.

Growth in gross earnings was primarily driven by increased yield on earning assets to 15.1per cent which led to a 20.7per cent increase in interest income to N110.4billion and a 7.7per cent increase in net fee and commission income to N17.2 billion driven primarily by the following products; Trade Finance (91.1per cent growth), foreign exchange Income (64.3per cent growth) and Account Maintenance Fees (48.9per cent growth).

Total assets thus rose marginally by 2.3 per cent to N1.3 trillion as at September 30, 2017 from N1.29 trillion in 2016, attributable to increase in loan and advances to customers and total equity in the period under review.

Of recent, the   bank notified The Nigerian Stock Exchange (NSE) and the investing public of its intention to launch up to $500 million senior unsecured medium term debit notes as well as  a  tender  offer to purchase  the Bank’s outstanding $300million  6.875per cent  notes due May 9, 2018.

The Bank intends to list the notes on the Irish Stock Exchange with expectation that the Notes will be traded on its regulated market. The Central Bank of Nigeria (CBN) and the Securities and Exchange Commission have given “No Objection” approvals to the transaction.

Fidelity Bank intends to utilize the net proceeds of the Notes to finance the tender offer of the Existing Notes and for general banking purposes.

The Bank has been able to consistently sustain its effective cost management strategies and hence profitability. Despite running 240 local branches network and 887 consumer sales agents, the Bank conveniently generates more competitive profits.

The Bank currently has over 400,000 shareholders with the majority being Nigerian citizens and corporations and its strategic focus is on the SME, niche corporate banking and retail banking driven by electronic banking services and products

Drop in impairment charges impact on profits

Fidelity Bank delivered an impressive growth in gross earnings and overall performance in its income statement in nine months results and account of September 30, 2017.

The bank’s gross earnings rose by 17.9 per cent to N130.1 billion in nine months of 2017 from N110.34 billion reported in nine months of 2017.

Net Interest Margin (NIM) increased to 6.5 per cent in nine months of 2017 to N53.8 billion from N50.5 billion while impairment charges dropped by eight per cent to N7.69 billion from N7.3 billion reported in nine months ended September 30, 2016.

Net Operating Income increased by 8.8 per cent to N63.7billlion from N58.6 billion in nine months of 2016.

Fidelity Bank’s total operating expenses dropped by 2.6 per cent (despite the high inflationary environment) to N63.7 billion from N58.6 billion.

The drop in operating expenses was driven by personnel costs, process improvement and digital banking initiatives which have continued to optimize cost profile.

However, Profit before Tax increased by 65.1per cent to N16.2billion from N9.8 billion while  Profit after Tax closed at  N14.45 billion from  N8.75 billion reported in nine months of 2016.

Steady growth in profit also impacted on Earnings Per Share (EPS) gained N0.4 to N0.70 from N0.3 per share reported in nine months of 2016.

Stronger growth in assets driven by customers’ deposit

Fidelity Bank total assets moved from N1.29 trillion reported in full year ended December 31, 2016 to N1.3 trillion in nine months of 2017.

Total customer deposits decreased by 2.3 per cent to N774.38 billion in September 2017 from N792.97 billion in December 2016.

Drop in total deposits was driven by pay-off Treasury Single Account (TSA) deposits of N53 billion. However, savings deposits increased by 5.7per cent to N163.8 billion driven by retail banking strategy while low cost deposits now accounted for 73.5per cent of total deposits.

Net loans and advances increased by 4.9per cent YTD to N753.8 billion from N718.4 billion  with Loan to Deposit moving from  78 per cent to 82.8 per cent.

Meanwhile, Shareholders’ funds grew by 6.4 per cent to N197 billion as at June 2017 from N185 billion as at December 2016.

In absolute terms, growth was driven principally by the Downstream Oil & Gas Sector, Agriculture, General Commerce and Construction Sector, among others.

Non Performing Loans (NPL) improved to 5.9 per cent from 6.6 per cent in the 2016 due to the subtle growth in the loan book.

Key regulatory ratios remained above the required thresholds with Capital Adequacy Ratio (CAR) increasing to 17.3per cent from 17.2 per cent in 2016 while liquidity ratio gained 1.2 per cent to 34.4 per cent in nine months of 2017 from 33.2per cent in nine months of 2016.

Return on Equity (pre-tax) grew to 10.8 per cent from six per cent in 2016 financial year.

Risk assets increased by 4.9per cent to N753.8 billion from N718.4 billion in 2016. However, actual real growth in risk assets was 1.1per cent while the impact of the change in currency conversion rate was 3.8per cent.

CEO comments

Fidelity Bank CEO, Mr. Nnamdi Okonkwo, said, “We are delighted with our 9-month financial performance which showed strong growth in key revenue lines and a corresponding decline in our operating expenses despite the high inflationary environment.

“We have been able to sustain our performance trend this year through the following: disciplined balance sheet management, strategic cost reduction and driving our digital banking aspirations which are all in line with the execution of our medium term strategy.

“We remain focused on the execution of our medium term strategic objectives and targets while we look forward to sustaining the momentum and delivering a strong set of results for the 2017”.