Alabingo Finance Report || While many commercial lenders cut down their risk assets due to the non-performing loans (NPLs) challenge bedeviling the Nigeria’s banking industry, Fidelity Bank rode on the back of double digits growth in its interest income to post an impressive performance in the first six months of 2017.
The bank grew gross revenue 22.15 percent year-on-year to NGN85.82 billion, bolstered by 27.80 percent rise in interest income to NGN72.85 billion, which was propelled majorly by 29.43 percent increase in interest generated from loans and advances to customers to NGN51.05 billion and massive improvement in earnings from treasury bills and other investment securities held for trading, which appreciated 69.66 percent to NGN9.02 billion in H1 2017 instead of NGN5.32 billion in the reversed period of last year. It is on track on its full-year net interest income margin target, which stood at 7.4 percent at the end of June 2017 as it aiming at by 6.5 -7.0 percent at the close of this financial year.
The -30.70 percent decline in net fee and commission income to NGN7.42 billion, caused by significant -83.07 percent drop in commission on e-banking to NGN1 billion in H1 2017 (H1 2016: NGN5.93 billion could not deter Fidelity Bank from upping its post-tax profit by 65.59 percent to NGN9.04 billion, which is the highest profit increase it has recorded in the last five years.
A review of the H1 2017 financial statement showed 48.02 percent increase in interest expenses NGN38.15 billion, underpinned on 256.46 percent upsurge in spent on serving current accounts deposits from NGN503 million in H1 2016 to NGN1.79 billion in the first six months of 2017 and 55.67 percent rise in term deposits expenses to NGN26.3 billion in H1 2017 against NGN16.89 billion in the same period last year. And fee and commission cost was slightly doubled to almost NGN2 billion, while other operating expenses was up 3.76 percent to NGN17.97 billion with marketing, communication, and entertainment, which increased 21.38 percent, impacting this change during this period. The bank’s cost-income ratio dipped to 67.3 percent in H1 2017 from 74.2 percent in H1 2016.
In the first six months of the year, Fidelity Bank witnessed improvement in its asset quality as NPL Ratio improved to 5.8 percent from 6.6 percent at the end of 2016, in spite of marginal 0.27 percent increase in the lender’s impairment provision to NGN4.81 billion from N4.80 billion in H1 2017, helped by NGN2.51 billion recovery it made from term loans.
And Net loans and advances rose marginally 0.3 percent year-to-date (YTD) to N720.1 billion with cost of risk currently at 1.3 percent while coverage ratio improved to 98.6 percent in H1 2017 from 83.5 percent in 2016 FY and Coverage Ratio was up 98.6 percent from 83.5 percent in year ended December 2016. More so, foreign exchange denominated loans contribution to the bank’s Net Loans portfolio dropped to 41.3 percent from 44.4 from in 2016.
Also, total customer deposits went southwards by 4 percent to N761.1 billion in June 2017 from N793.0 billion in December 2016, “however, low-cost deposits continued to account for over 75 percent of total customer deposits.
“Savings deposits increased by 3.9 percent to NGN161.1 billion in June 2017 from NGN155.0 billion in December 2016 on the strength of improved cross-selling of our digital banking products with about 30 percent of our customers now enrolled on our flagship mobile (*770#) and internet banking products,” the lender stated in its investor presentation.
During the period under review, Fidelity Bank’s Capital Adequacy Ratio improved to 18.4 percent from 17.2 percent in December 2016 after adjusting for NGN13 billion capital charge based on Basel II computation. And it had a Liquidity Ratio of 30.2 percent, just slightly above the 30 percent regulatory minimum requirement. The bank’s Net Loans to Customer Deposits Ratio also rose to 80.4 percent from 78 percent in FY 2016, Total Equity increased 3.67 percent to NGN192.2 billion in H1 2017 compared to N185.4 billion at the end of 2016 FY.
The bank’s Managing Director, Nnamdi Okonkwo recently told journalists that “Our half-year result made us happy, but we are not relenting in our quest to deliver even better returns. Therefore, we will stay focused on executing our strategies so that the full year result will meet expectation.”
Fidelity Bank share traded NGN 1.31, having attained a 52 weeks high of NGN1.49 set on June 12, 2017, and one year return of 71.03 per cent.
