Fidelity Bank exchange gain speeds up profit to N53bn 

Foreign exchange gain of N32.2 billion in the second quarter has sped up Fidelity Bank’s elevated first quarter earnings further, lifting after-tax profit two and a third times year-on-year to N53 billion at half-year.

The bank raked in N38 billion profit in the second quarter, a more than 185 percent rise from N13 billion posted in the same quarter in 2022. That added to the N15.6 billion after-tax profit realised in the first quarter to set the bank on another year of outstanding earnings growth.

The bank’s interim financial report for the half year ended June 2023 shows it is yet gaining speed from a 64 percent profit advance in the first quarter to over 133 percent upsurge year-on-year at the half year.

Fidelity Bank had doubled its restated 2021 profit to N46.6 billion in 2022 and is yet looking quite good to achieve much stronger growth this year.

The foreign exchange gain appears to have clouded some major operating challenges the bank faced in the second quarter, however. These include a deep plunge in other interest and similar income from over N8 billion in the same quarter last year to negative N3.7 billion in the second quarter.

Also, credit loss expenses went seemingly out of control, shooting up from N1.1 billion to N13.3 billion over the same period.

The increase in credit losses consumed more than all the increase of N9.6 billion in net interest income in the second quarter and slashed net income by N2.5 billion to less than N42 billion over the period.

The rising costs were however more than compensated for by the foreign exchange windfall that jerked up other operating income all the way from below N1.2 billion in the second quarter of last year to over N33 billion in the second quarter of the current financial year.

Further reinforcing the foreign exchange gain are net gains from financial assets, which multiplied from N433 million to N5.4 billion over the same period.

The two favorable developments changed the bank’s earnings story in the second quarter from a drop in net income to a leap of 184 percent in pre-tax profit for the quarter to N43.6 billion.

The bank’s half-year numbers show that management continues to keep interest and operating expenses moderated – which added to the revenue boost and took margins to new highs.

Interest income accelerated from less than 44 percent growth in the first quarter to almost one-half to close at over N190 billion in the half year. Interest expenses grew less rapidly at 33 percent to N82 billion over the same period.

A disappointing performance however came from the negative figure of other interest and similar income in the second quarter – which consumed the earnings on that income line in the first quarter and left a negative figure of N518 million for half a year. That is a crash from the corresponding figure of N9.9 billion in the preceding financial year.

Net interest earnings still grew by 42.5 per cent year-on-year to N107.8 billion but this was further squeezed by huge credit losses that built up in the second quarter.

Loan loss expenses jumped all the way from N1.3 billion in the same period last year to N16.8 billion in half a year. That lowered the growth in net income to 22.5 percent to close at less than N91 billion at the end of June 2023.

Towering growth in other operating income led by foreign exchange gain and net gain from financial assets plus a relative slowdown in operating costs quickened the bank’s earnings force from a 22.5 percent increase in net income to 138.4 percent upsurge in pre-tax profit to close at over N61 billion at the half year.

Fidelity Bank closed its half-year operations with after-tax profits up from N22.8 billion in the same period last year to N53.3 billion at the end of June 2023.

Net profit margin has improved further from 13.9 percent in the first quarter and from 14.7 percent in the same period last year to 21.6 percent at half year – the highest net profit margin the bank has seen in more than a decade.

The bank closed the half-year operations with earnings per share of N1.84, rising from 79 Kobo per share in the same period in 2022.