BY AMOS ADETUNJI
Few banks are as audacious as Fidelity Bank. As a tier two bank, it made an aggressive attempt for a bridge bank. Although that attempt failed the bank’s ability to grow organically left little doubt after a stellar 2017 financial year.
The bank vaulted to reckoning first quarter by dramatically improving gross earnings and about every other key revenue lines, this is as it mustered down areas of expenses especially operating expenses. This is noteworthy giving the high inflationary environment. The Bank improved gross earnings in the period by a respectful 18.3 percent in the year to N179.9 billion from N152.0bn. The rise was driven by improved yield in the bank’s earning assets, which had a 15.4 percent jump and led to a 22.4 percent increase in interest income to N150.7bn.
In the period under review, Fidelity Bank further improved its position with a robust earnings portfolio including trade finance, account maintenance fees and forex income, which all grew by 16.6 percent, 49.8 percent and 20.9 percent respectively. It is noted too that during the year, there was a giant leap in Digital banking that accounted for 25 percent of the bank’s fee based income. This was propelled primarily by customers’ adoption of mobile and internet platforms. This improvement in mobile and internet penetration helped the bank in reducing vault cash holding by an incredible 21 percent.
The focus on Digital Banking also impacted positively on the bank’s operational efficiency as total operating expenses declined by 2.3 percent to N65.7 billion leading to its cost-income ratio dropping to 67.5 percent from 77.3 percent in the 2016 financial year.
CEO, Nnamdi Okonkwo attributed the bank’s strides to discipline, and strategic focus: “ We were able to sustain our performance trend on a quarterly basis through …disciplined balance sheet management, strategic cost reduction, increased focus on the Corporate, Commercial, SME segments and continued execution of our retail and digital banking strategy”.
According to the consummate banker, 2017FY was a landmark year for the Bank “as we returned to the international capital markets and issued a very successful $400m Eurobond commenced the interim audit of our financials to improve our governance process and delivered a strong set of results through the disciplined execution of our medium-term strategy”.
It is noted that in the year under review, the bank recorded a strong showing in Net Interest Assets (NIM) with a 7.3 percent rise. This was despite the reduction in yields on liquid assets noticed in the third quarter. But fast track into the first quarter, growth in the yield on its earning assets outpaced the increase in funding costs, leading to average yield on earnings assets of 15.4 percent compared to an average funding cost of 7.2 percent.
After dealing with operational and financial costs, the bank ended up with N20.3 billion. Where did N160 billion go? They went to servicing operating and financial costs, leading to pre-tax margin of 11.3 percent, up from the 7.3 percent of the previous year. What this means is that out of every N100 gross earnings, only N11 is earned pre-tax, it was only N7 last financial year.
After tax is deducted, the bank’s bottom line shored at N18.9 billion, which is almost double what was achieved the previous year at N9.7 billion. With this improvement, net profit margin jumped to 10.5 percent from 6.4 percent. So while the bank squeezes 10 kobo out of every naira of earnings into profit, it was only 7 kobo wringed the year before.
Although it was a year that total deposits declined by 2.2 percent to N775.3 billion from N793.0 billion due to the high yields on fixed income instruments and specific one-off deposit payments, the bank’s retail banking strategy continued to deliver impressive results as savings deposits increased by 15.2 percent to N178.6bn and now accounts for 23.0 percent of total deposits from 19.5 percent in the 2016 financial year.
Non-Performing Loans ratio (NPL) improved marginally to 6.5 percent from 6.6 percent. This was despite a 5.4 percent growth in the absolute NPL numbers, 2017FY coverage ratio (including regulatory risk reserves) improved to 106.4 percent compared to 83.0 percent.
Other regulatory ratios remained above the required thresholds with Capital Adequacy Ratio (CAR) at 16.5 percent and Liquidity Ratio at 35.9 percent.
According to Rencap, Fidelity Bank has ‘opportunity to leverage on its balance sheet to improve penetration just as it has leveraged technology to drive revenue’. They note the bank has improved in cost control and efficiency, although there is scope for further improvements. Most interestingly, Rencap views the bank as having strong risk management practices compared to other tier 2 peers.
“We remain focused on the execution of our medium term strategic objectives and targets while we look forward to sustaining the momentum and delivering another strong set of results for the 2018FY” the bank said in a statement.