Fidelity Bank: Impressive customer deposits, loan drive total assets
By Kayode Tokede
Fidelity Bank plc audited result and accounts for financial year ended December 31, 2020 showed impressive performance in customer deposits and loans and advances to customers.
This impacted positively on total assets in the year under review amid numerous challenges facing the banking sector in 2020. The Group’s audited results for the period under review shows a stable performance in balance sheets position as customer deposits and gross loans advance by 38.7 per cent and 17.7per cent respectively, to drive total assets to N2.76trillion in 2020 from N2.11trillion reported in 2019.
The solid financial performance for the period ended December 31, 2019 affirms Fidelity Bank’s as one of the leading banks in terms stronger assets, resilience and consistency in achieving its strategic objectives despite the challenging business environment.
The 2020 result and accounts revealed a number of positive performances as the management continued to create value for shareholders and transform businesses.
Despite reporting 6.2per cent decline in profit, the management of Fidelity Bank proposed to shareholders a dividend of N0.22 per share for every 50 kobo ordinary share in its 2020 result and accounts, an increase of 10 per cent from N0.20 paid to shareholders in 2019.
Stronger total assets amid CBN lending policy
The bank closed the year with 30.5 per cent increase in total assets to N2.76 trillion in 2020 from N2.11trillion reported in 2019 following a impressive performance in gross loans and advances to customers and customer deposits.
The Central Bank of Nigeria (CBN) had mandated commercial banks to lend 65 per cent of the deposit to support real sectors of the economy and Fidelity Bank last year did a loans and advances that grew by 17.7per cent Year-on-Year to N1.33 billion in 2020 from N1.13billion reported in 2019.
Fidelity Bank’s customer deposits rose by 38.7per cent Year-on-Year to N1.7 trillion in 2020 from N1.23 billion reported in 2019.
The increase in customer deposits was driven by double-digit growth across all product lines (Demand | Savings | Tenor). Local currency deposits grew by 49.6per cent and now accounts for 82.5 per cent of total deposit while foreign currency deposits increased by 3.3 per cent and accounts for 17.5 per cent of total deposits.
Also, low-cost deposits increased by 35.3 per cent to close at N1.31billion from N966.8billion, which explains the 38.6 per cent drop in interest expenses on customer deposits.
Retail Banking sustained its growth trajectory with 54.2 per cent (N149.2billion absolute) growth in savings deposits to N424.4billion from N275.2billion in 2019, making it the 8th consecutive year of double-digit growth in savings deposits.
Net Risk Assets increased by 17.7 per cent to N1.33billion from N1.13billion in 2019. However, the actual growth in risk assets was 13.3 per cent while the impact of the currency adjustment (2019FY: N364.7/$ – 2020FY: N400.3/$) accounted for a 4.4 per cent growth in the loan book.
Cost of risk came in at 1.4 per cent as it increased its loan provision buffers against possible headwinds. Non-Performing Loans (NPL) ratio is now 3.8 per cent from 3.3 per cent in 2019.
Other Regulatory Ratios remained above the required thresholds with liquidity ratio at 37.8 per cent and capital adequacy ratio (CAR) at 18.2 per cent.
This reflects increased customer confidence, enhanced customer experience, early wins from the ongoing business transformation programme and the deepening of its retail banking franchise.
Furthermore, Fidelity Bank’s Total equity moved from N234.03billion in 2019 to N273.5billion reported in 2020.
The financial institution continued to maintain a disciplined and prudent approach to loan growth in line with its Risk Management framework.
However, Fidelity Bank’s Gross Earnings dropped by 5.4 per cent to N206.2billion due to a decline in interest & similar income as well as a drop in net fee income.
Net fee income declined by N4.3billion largely due to the downward revision of fees in line with the new bankers’ tariff. Digital Banking income dropped by 18.8 per cent due to the revised banker’s tariff but it increased by 19.6 per cent QoQ on account of increased customer adoption as more services are migrated to digital channels.
The bank reported that 52.8per cent of its customers enrolled on the mobile/internet banking compared to 47.4 per cent in 2019, while 88.4 per cent of its customers’ transactions were done on the digital platforms.
Net Interest Margin improved to 6.3 per cent from 6.2 per cent in 2019, largely due to 270bpts drop in average funding cost to 3.6 per cent from 6.3 per cent in 2019.
This resulted in a 28.6 per cent drop in total interest expenses and 25.4 per cent increase in net interest income to N104.1billion despite a 31.3 per cent increase in interest bearing liabilities.
Average yields on earnings assets dropped to 10.7 per cent from 13.8 per cent in 2019 largely due to a combination of lower yields in the market and downward review of lending rates especially on loans funded with the intervention funds, which represents 40 per cent of local currency loan book.
Operating Expenses increased by N1.6illion or two per cent to N83.6billion largely driven by N2.2billion growth in regulatory charges (NDIC and AMCON Charges). Over 50 per cent of our cost lines declined in 2020 as the management harnessed the benefits of remote working which contributed to the drop in our cost-to-income ratio to 65.1 per cent.
However, Profit before Tax (PBT) dropped by 7.6per cent to N28.1billion in 2020 from N30.4billion in 2019 as the management proactively increased provisions on risk assets to N16.9billion from a net write-back of N0.6billion in 2019.
The MD/CEO, Fidelity Bank, Nneka Onyeali-Ikpe stated that, “We are pleased with our financial performance, which clearly showed the resilience of our business model as core operating profit increased by 50.9per cent to N44.9billion from N29.8billion in 2019.
“We also saw a significant improvement in our efficiency indices as cost-to-income ratio moderated downward to 65.1per cent from 73.4per cent in 2019.
“We took a conservative stance in recognition of the impact of the global pandemic, which has redefined business risks and opportunities in the new normal.
“We successfully issued 10-year N41.2billion Tier II Local Bonds due 2031 at 8.5per cent coupon.
“The transaction was a landmark achievement in the Nigerian domestic debt market as the largest corporate bonds ever issued by any Nigerian Bank. It also validates the continued investors’ confidence in our long-term aspirations and strong corporate governance.”
