Despite the tough operating environment, Fidelity Bank plc rode on the back of improved non-interest income, especially tremendous leap in earnings from trade financing and foreign exchange gains, to bolster its profitability in the first three months of 2018.
The bank improved gross revenue 6.9 per cent to N43.68 billion hinged on non-interest income, which was increased 13 per cent underpinned on 115.3 per cent upswing in foreign exchange income and trade earnings climbed 53.1 per cent in the first quarter of 2018. While many lenders in the country have lowered their risk appetites, Fidelity Bank decided to extend more credit during this period resulting in interest income swelling 6 per cent as income from loans and advances to customers rose in the same proportion. These combined to grow Fidelity Bank profit after tax (PAT) by 7 per cent to N4.63 billion.
Impairment charges on credit loss dropped -6 per cent to N702 million on the back of -59.5 per cent decline in the non-performing loans in the construction sector from N908 million in December 2017 to N368 million at the end of March 2018 and -10 per cent and -9 per cent dip in toxic loans in the power sector and oil and gas downstream sector respectively during this period. This development is traceable to the increased spending of the federal government in infrastructures and improvement in the prices of oil crude, which passed $80 per barrel mark this week.
And while operating income grew 4.2 per cent to N 20.80 billion in Q1 2017, compared to N19.97 billion in the period in prior year, operating expenses increased by 5.2 per cent, propelled by rising technology and regulatory charges (NDIC/AMCON), which led to increased cost–income ratio of 72.7 per cent from 72 per cent in Q1 2017 (2017FY:67.5 per cent), bank explained in its presentation to investors.
Fidelity Bank total deposits was up 10.8 per cent year-to-date to N859.4 billion from N775.3 billion at the end of 2017, with low cost deposits now accounting for 74.5 per cent of its total deposits. But risk assets decreased 3.9 per cent YTD to N738.7 billion from N768.7 billion in December 2017 as a result of increased provisioning under IFRS9, though there was also a marginal drop of 0.1 per cent in the gross loan book. However, total assets improved 7 per cent to N1.48 trillion and total liabilities jumped 16 per cent to N1.3 trillion.
Improvement in activities in downstream and sectors helped dragged NPL ratio to 6.3 per cent, which is still above the regulatory 5 per cent benchmark as the lender targets 6-6.5 per cent NPL ratio for 2018.
Fidelity Bank Capital Adequacy Ratio was unchanged between December 2017 and March 2018 at 16 per cent, but declined -4 per cent from 16.7 per cent in Q1 2017, but is still above the 15 per cent prudential requirement.
“Only 80 per cent of our N30 billion local debt is recognized in Tier II Capital. This will drop to 60 per cent in H1 2018, however, capitalization of H1 2018 profit will sufficiently cover this,” Fidelity Bank management told its investors.
And its liquidity which has been growing steadily since Q3 3017, was up 10 basis points to 36 per cent in March 2018 from 35.9 per cent in December 2017. Benchmark liquidity ratio still stands at 30 per cent. This is making the lender to change its funding structure.