The operating environment throughout the tenure of Nnamdi Okonkwo , the outgoing Chief Executive Officer, Fidelity Bank Plc, was a hard nut .From the first six months to the last year of his leadership , the economic environment was highly deleterious.
Half year into 2014, the oil price at international market took a dangerous side and finally crashed in 2015 ; 2016 was a year of recession that threw a spanner into the wheel of the nation’s economy .Between 2017 though 2019 , economic indices were stunted ; and 2020 was a Covid 19 virus infested year that almost grounded the economy.
However, Okonkwo ,like a genius , developed iron teeth to break the hard nut . He navigated those hectic years and was rewarded with brilliant and superior returns. He started well and ended with a howling success ;within and throughout those years, virtually all the performance metrics were sharply northward. . Analysts say, it is not the knuckles of luck at work, but competence and vision working hand in hand.
They are right .He was not only strategic, he equally executed his chosen strategy flawlessly with disciplined attention to operations while simplifying the way his organization is structured. He also built and maintained a fast, flexible and flat organization. But that is not all. His success secret from all indications, include his skills and wisdom in building the right culture and promoting an environment that champions high level performance and ethical behavior that is integral to making a company an industry. Those initiatives and resounding skills have lifted up the bank on to the path of an outstanding growth and values .Between December ,2013 ,where immediate predecessor ended his tenure and September, 2020,Okonkwo unarguably hit major milestones , building a culture of double digit profit and creating a robust balance sheet that set him apart from those behind him since the bank was founded in 1998 .
NINE MONTHS 2020
How Fidelity Bank Expands Profit From Slow Earnings
In the first nine months of 2020 ,the operating environment was unarguably intemperate, fraught with plenty uncertainties and hick-ups: and the economy was in bad shape under the claws of Covid 19 pandemic. The negative impacts on corporate organizations were overwhelming .Declining margins ,falling market share and stagnant growth were the signals that littered the corporate landscape.
However, some innovative leaders and managers navigated their terrains with better ingenuity for necessary immunity against the storms of time .Nnamdi Okonkwo ,Chief Executive Officer of Fidelity Bank Plc was one them . He mastered the art and was handsomely rewarded . Although the terrain became a hard nut, he has equally developed an iron teeth. Fidelity Bank Plc ,Nigeria’s most profitable Tier 2 lender , outperformed market and leveraged expenses to wrench up the bottom line.
By hauling up net interest income by approximately 29 percent to N75,000 billion from N 58246 billion, Fidelity Bank showed that it’s not what you get but what you make out of it that matters . The first hard nut posing a challenge to the bank’s management was the difficulty of growing its revenue . The environment became so competitive that the gross earnings marginally.
For Fidelity Bank ,the interest income marginally slumped It had a slip by 8.5 percent to N121,250 billion from N132558 billions ,a potential spoiler . This was partly responsible for a slump in the revenue . ..The bank’s gross earnings dropped year-on-year (Y-o-Y) by -3.74%, from N161.06bn in year-to-date (YTD) September 2019 to N155.03bn in YTD September 2020. This was majorly driven by a -24.77% Y-o-Y fall in fees and commission income, despite the +28.76% Y-o-Y growth in net interest income
. .Okonkwo ,indeed, was not oblivious of the challenge. .He explained that the drop in Gross Earnings was due to the decline in interest and similar income caused by lower yields and drop in fee income. “Net fee income declined by N1.3bn largely due to a reduction in FX related income on account of the revaluation gains recorded in H1 2020. .
However , the management was smart enough to snatch victory from the jaw of defeat . After suppressing interest expenses by 25 percent driving it down to N57, 469 billions from N76,870 billion ,its net interest income , which is a guide to how well a bank manages its interest rates it pays for borrowing and lending ,jumped seismically by 28.8 percent to hit Nl75,000 billions from N58,246 billions in the corresponding third quarter of 2019 .
Moreover, the bank’s cost-to-income for the period declined to 66.30% from 71.7% reported in YTD September 2019 but operating income rose Y-o-Y by +3.09% while the lenders other operating incomes increased by +20.91% To deliver the above impressive leaps ,a 64.9 percent in other interest income which increased from N2,558 billions in the third quarter of 2019 to N4,219billions could not be waived aside
Sequel to the above management dexterity , those potential spoilers were not enough to tame and stop the fortunes of Fidelity Bank from having a positive outlook at a pretax level .
With a whopping jump in the bank’s other operating income and its ability to rein operating expenses , the bank registered a positive pre tax profit of N21,348 billions against N20,598 billions in the similar time in 2019 . The growth in profit before tax was majorly driven by a +20.91% Y-o-Y increase in other operating income and the increase in other operating expenses that was minimized to +3.09%
.Moreover, a 39 percent decline in the income tax gave a further boost to the bank’s bottom line as the profit after tax inched up by 7.1 percent as the absolute amount registered hit N20,406 billions against N19,056 billions in the corresponding period last year. The above gallant performance impacted visibly on its margins. Its pre tax margin improved from 12.7 percent in 2019 to 13.7 percent in the third quarter of 2020 .In the same way, the net interest margin was lifted to 13.3 percent in 2020 from 11.8 percent in 2019 “Our 9 months results reflect our resilient business model, particularly in a very challenging operating environment. We worked closely with our customers to gradually recover from the economic impact of the pandemic and the attendant effect of the lockdown” said Fidelity Bank CEO, Mr. Nnamdi Okonkwo
The bank has continued to outperform both the market and the industry in various dimensions . The bank’s stock price has appreciated 42 percent between September,8,2020 this year from N1.80 to N 2.56 in November 6 ,2020 to underscore investors and analysts belief in the growth potential of the bank . This positive disposition of investors may be misplaced .Fidelity Bank is not significantly volatile than the rest of Nigerian stocks over the past three months typically moving at plus /minus 6 percent and its weekly volatility has been stable over the past one year . The bank’s impressive earnings power and its valuation multiples have continued to drive its market performance in the last few years . In the first nine months of 2020, its earnings per share stood at N70 compared N66 in the corresponding period of last year, a 6.1 percent jump The bank is adjudged to have quality earnings as its net profit results are believed by analysts to be a fair reflection of the company’s performance for that period. Its earnings have grown significantly by 21.7 percent per year over the past five years while its earnings growth over the past year at 60.4 percent exceeded its five years average of 21.7 percent and the banking industry which grew at 16 .3 percent. .
Like other deposit money lenders COVID-19 has taken its toll on Fidelity Bank but the bank has still managed to fend off some of the worst consequences of strong domestic economic headwinds with the country’s gross national output or GDP shrinking by -6.10% by the end of the second quarter of 2020. The outlook for the bank may seem better in Q4 2020 if the COVID-19 outcome of a gradual economic recovery turns out to be a V-shaped swoosh.
BETWEEN 2014 AND SEPTEMBER, 2020
ROBUST BALANCE SHEET POSITION
Between December ,2013 ,where immediate predecessor ended his tenure and September, 2020,Okonkwo unarguably hit major milestones creating a robust balance sheet that set him apart from those behind him since the bank was founded in 1998 .The assets skyrocketed from N1.08 trillion at the end of 2 013 ,a 138 percent jump to hit N2.58 trillion. .A puffy assets level could indicate improved strengths in mopping up transactions, including a better position in maturity transformation- the stuff banks are best suited for. It can also mean that the bank has applied some elastic to its wings in the form of more customer touch points, branches and Point of Sale devices. For Fidelity Bank , it was all of these and more. .The bank also reached deep into the business of maturity transformation as its Loans to customers also hit a roof top as increased by 197 percent fromN426,076 billion in 2013 full year to N1,272,520 trillion Yet its risk management skill is robust . Its non-performing loans of the bank dropped marginally in 2020, from 4.80% in September 2019 to 4.70% recorded in September 2020.Moreover, it has an appropriate level of loan to assets at 49 percent just as its loans to deposit of 85 percent is equally believed to be normal. However, its assets to equity ratio at 9.8 percent is adjudged to be low .
Asides that, total deposits; a measure of customer confidence, increased phenomenally. Its deposits to customers were up 86 percent from N806,320 billions to N1, 498 ,410 trillion .. This should not spring any surprise . The marketing machine of the bank, it would seem, no doubt , worked overtime, growing deposits. This was to be expected from a bank which ‘focuses and channels its resources only on its core corporate and retail banking activities’, activities which require steep marketing capabilities and in a world where IT is ubiquitous, a firm understanding of delivering tech based services. Its equity rose by 60 percent from N163,455billion to N262 174 billion presently .Meanwhile ,65 percent of its liabilities are made up of primarily low risks sources of funding .
. Its balance sheet is believed to be an edge it has over its tier 2 competitors. 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’. It was noted that 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.
Fidelity Bank equally maintained its leadership as the most profitable tier 2 bank .From N9,028 billions and N7,721 billions pre tax and net profits respectively left behind by his predecessor in 2013 , Okonkwo grew the bank’s pre tax and post tax profits to hit N30,353 billions and N28,425 billions respectively at the full year 2019 .These achievements are, no doubt, very superlative as the jumps translate to 236 percent and 268 percent increase within six years . What drove Fidelity Bank Plc ‘s double digit chain of profit in the last few years? This question continues to reverberate among many industry players, analysts and observers. Truly, the answer to this question is not far to seek. Like the saying: “a good product sells itself”, Fidelity Bank continues to re-invent itself with unmatched creativity, uncommon innovation and exceptional team work that bring out the best in its management and members of staff.
IMPRESSIVE VALUATIONS AND EARNINGS POWER
By valuations , a report in2017 by Proshare Nigeria, a financial firm, also confirmed the bank’s tier 2 leadership during the tenure of Okonkwo . “Across our Tier 2 coverage banks, the valuations of three comparable banks are showing an interesting pattern. . Fidelity Bank Plc (Fidelity) has pulled away from its peers – FCMB and Diamond Bank (Diamond), returning 90.48% YTD relative to 0.91% and 30.68% for FCMB and Diamond respectively. Fidelity currently trades at a price-to-book value (P/B) of 0.3x compared to 0.1x for its peers, commanding a premium relative to peers which has widened to 92% from 14.3% in FY 16. Price movement in recent trading appears like FCMB and Diamond are currently playing catch-up.
Fidelity outperformed consensus expectation with ROE of 9.6% compared to 3.3% for Diamond and 3.5% (est.) for FCMB with a higher Net Interest Margin (NIM) and improved asset quality as the key drivers for the better than expected result’’
No doubt , shareholders of the bank will not forget Okonkwo who superbly added howling values to their investments. Analysts are forecasting a 16 percent Return on Equity ,ROE ,at the end 2020 financial year. Its earnings power has increased impressively since Okonkwo came on board as its earnings per share indicated over years
The bank has continued to outperform both the market and the industry in various dimensions . The bank’s stock price has appreciated 42 percent between September,8,2020 this year when the price appreciated from N1.80 to N 2.56 in November 6 ,2020 to underscore investors and analysts belief in the growth potential of the bank. This may be misplaced .Fidelity Bank is not significantly volatile than the rest of Nigerian stocks over the past three months typically moving at plus /minus 6 percent and its weekly volatility and has been stable over the past one year . The bank’s impressive earnings power and its valuation multiples have continued to drive its market performance in the last few years . In the first nine months of 2020, its earnings per share stood at N70 compared N66 in the corresponding period of last year, a 6.1 percent jump .The bank is adjudged to have quality earnings as its net profit results are believed by analysts to be a fair reflection of the company’s performance for that period. Its earnings have grown significantly by 21.7 percent per year over the past five years while its earnings growth over the past year at 60.4 percent exceeded its five years average of 21.7 percent and the banking industry which grew at 16 .3 percent. .
Analysts believe that Fidelity Bank is good value based on its 2.2x Price Earnings, PE , Ratio when compared with both industry and market of 3.6x and 7.6 x respectively. Its PE growth ratio of 0.2x and Price to Book ratio of 0.3x are also adjudged to be good value when compared to the industry 0.4x ratio. Its PE ratio of 2.2x times multiple indicate that investors are willing to part with more to own the bank’s stocks. It’s difficult not to do so since the bank delivered higher Returns on equity and assets .Its Return On Equity, ROE, of 12.7 and Return On Assets, ROA ,of 1.3 percent are very above the industry average . Also, its current net profit margins at 28.5 percent are higher than last year’s 19.3 percent.
Its earnings power has continued to its yield strongly. The bank’s current dividend yield of 7.78 percent is higher than the bottom 25 percent of dividend payers in the Nigerian market at its 3.88 percent. Moreover, dividend payments have increased over the past ten years and is well covered by earnings. The above performance profile has continued to drive its market performance and outperform both the industry daily and on yearly basis .. The bank outperforms both the industry and the market with its 2.4 percent daily and 40.4 percent yearly shareholders returns compared to the daily industry and market returns of 1.4 percent and 1.9 percent as well as yearly returns of 10.4 percent and 16.4 percent respectively . Fidelity Bank exceeded the industry which returned 11.4 percent over the past year and the market with a return of 14.4 percent. Its five year of 83.6 percent and 3year return of 53 percent exceeded the industry 20.2 percent and a 18.8 percent negative returns respectively.
Fidelity Bank earnings of 13.9 percent per year are forecast to grow faster than the market 11 percent per year. However, its earnings forecast of 13.9 percent per year is below the saving rate of 14.3 percent
A STRATEGIC LEADER
To deliver superior performance while building the capacity to do it again and again, is the definition of a great organization and that is exactly what Okonkwo has turned Fidelity Bank to in the last few years. Quite unsurprisingly, the bank has been able to expand growth levels year in, year out. And despite the limiting conditions of operations and other related challenges, Fidelity Bank stands like the rock of Gibraltar, unshakeable and adaptable to new challenges.
2017FY was a landmark year for the Bank as it returned to the international capital markets and issued a very successful $400m Eurobond, commenced the interim audit of the bank’s financials to improve its governance process and delivered a strong set of results through the disciplined execution of its medium-term strategy . In 2017, he created a 5-year strategic plan and the management led by him has been pursuing this passionately. According to him, the bank is resolutely determined to show it has “what it takes to achieve and surpass “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.
Okonkwo has continued to exhibit some sterling traits of a quintessential corporate manager. He exhibited and demonstrated undisputable knowledge in the fundamentals of business. He has not only demonstrated to be firmly rooted in necessary and relevant strategy but continued to communicate his strategy to the bank’s customers, employees and shareholders with simple, focused value proposition that is not only rooted in deep, but certain knowledge about his company’s target customers and realistic approach to his own capacities.
RETAIL AND DIGITAL AS A STRATEGIC CHOICE
The bank’s retail strategy is fully complemented by a strong foothold in digital banking. Fidelity bank’s retail strategy has become a major game changer for the business. This has continued to be buoyed and driven by innovative digital technologies and creative mobile or internet banking products . The bank under him has gained traction in digital banking and driven by new initiatives in retails lending segment and increased cross selling of its digital banking products He launched a new digital lending product dubbed: Fidelity Fast Loan and deepened lending partnerships with select Financial Technology, [Fintech ] companies. “In line with our digitization drive, we will continue to push for the adoption and migration of customers to our digital platforms and increase our retail banking market share through innovative products and services. Leveraging on our robust electronic banking processes and products, we will continue to deepen our play in the retail and commercial markets, Small and Medium Scale Enterprises (SMEs) sectors”.
Indeed to remain competitive in Nigeria’s financial services industry, Fidelity Bank is taking advantage of digital technologies to evolve into an inclusive lender and a dominant player, offering innovative solutions well beyond mundane banking services. As a reputable lender that places customers’ needs at the heart of its business, the Bank has continued to expand its service channels through the provision of best-in-class electronic banking offerings.
According to sources within the bank, these solutions are tailored specifically to meet and exceed the aspirations of the Bank’s customers. Recently, brand and IT journalists reported that the Bank unveiled the new Fidelity Online, a more advanced and user friendly online banking platform than the previous one with an upgrade which incorporates a new look and additional functionalities. And it makes financial service activities easier and faster for an unmatched customer experience.
With its new responsive design and rich capabilities, customers can conveniently carry out transaction on computers and mobile device without a token. Some of the innovative features on this platform include: fingerprint (biometric) authentication, single sign-on for both web and mobile app, customizable user profiles and ability to set transaction limit, among others. 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”
ORGANIZATION CULTURAL INNOVATIONS .
He has not only been strategic, he equally executed his chosen strategy flawlessly with disciplined attention to operations while simplifying the way his organization is structured. He also built and maintained a fast, flexible and flat organization. But that is not all. His success secret from all indications, include his skills and wisdom in building the right culture and promoting an environment that champions high level performance and ethical behavior that is integral to making a company an industry. Those initiatives and resounding skills have lifted up the bank on the path of an outstanding growth and values. The outstanding fortunes registered over time, may not be farfetched.
POWER OF FOCUS
Another fulcrum driving the success of Fidelity bank under the tenure of the incumbent chief executive is the power of focus Fidelity Bank is in the business of keeping their word and the bank is not leaving in doubt about this . The stakeholders have become used to the “we keep our word” tagline. Without a doubt, keeping promises has taken the bank very far since the assumption of office of Managing Director and Chief Executive, Nnamdi Okonkwo.
Okonkwo’s focus has been corporate banking, Commercial banking and the Small and Medium Scale Enterprises segments of the banking business. This is in addition to leveraging the value from retail and digital banking. The rewards have been quite handsome as the its results show with strong double-digit growth in Deposits, Revenues and Profitability. That Okonkwo maintained that results is no accident but a result of focus and discipline on how the bank harnessed the potential of its balance sheet, it’s strategic cost containment initiatives; focused attention to chosen business segments and determined execution of it’s retail and digital banking strategy.“As we have communicated to the market, we will continue to focus on redesigning our systems and processes to enhance service delivery, deepen our cost optimization initiatives to reduce operating expenses and cost to serve and enhance our overall risk monitoring capacities to ensure both internal and external risks are identified and mitigated before they crystallize.
Okonkwo, a quintessential manager of human and financial resources re-invented Fidelity Bank with his skills nurturing it to a world class brand . Quite expectedly , he is keeping the image and brand unique, untainted, dynamic and mobile. Indeed, he has done creditably well, inspiring others with his deeply ingrained knowledge, skill, professionalism, attitude and depth.
Okonkwo equally helped others to find their voices within and outside his organization. He confirmed this as much .“While doing well, we are also mindful of the need to do good by giving back our robust Corporate Social Responsibility (CSR) policy allows us to do this through such focus as education, environment, health, social welfare and youth empowerment.We have performed creditably well in these areas and it gladdens my heart to see what we have done with our unique CSR approach; the Fidelity Helping Hands Programme (FHHP)
However , the bank’s laudable project,Doing Good , a vehicle of giving back to the general public, might have been a mere dream without efficient management of its human and material resources .The question however remains –what are the jokers that delivered these megabucks ?
Okonkwo cruises through life and impacts his environment in a most remarkable and positive manner just as he keeps an eagle on Fidelity Bank’s interests world-wide. It is therefore fitting to say that Nnamdi Okonkwo has distinguished himself in the corporate world where he bestrides as a thorough-bred professional with unique footprints.
Under FHHP, Fidelity Bank has collectively, as a bank executed several projects “That have directly impacted on the lives of host communities across the country.The bank claimed it had built schools, adopted orphanages, renovated hospitals, trained and empowered over 1000 youth to name a few.Beyond FHHP, the bank said it had been “Doing Good” in other ways through Small Medium Enterprises (SME) offering. Through SME, Fidelity Bank had supported businesses that would and normally remain unbanked. One of the initiatives to sensitize its SME project, is Fidelity SME Forum on radio that has continued to prove to be a veritable platform for knowledge sharing, mentoring and financial education.
Fidelity has equally contributed heavily in the area of gender equality. In 2018, according to the bank it registered its presence as it strengthened its gender sensitivity focus by increasing support for businesses owned by women. “We also introduced a training programme that grooms our young women folk to be complete bankers, with sound financial knowledge” Okonkwo declared.
In the area of unemployment, the bank commenced a scheme that would keep young unemployed graduates who might use their Information Technology skills to perpetrates cyber-related fraud gainfully employed and making positive contributions to society.
“We set up a digital lab, where 24 carefully selected graduates are given the freedom and opportunity to solve corporate challenges, using their IT skills. The result have been quit encouraging,” the bank added.
According to the bank’s Chief Executive, Okonkwo, giving back has now become an integral part of us, with some staff members personally executing their own CSR projects ranging from providing free health care services to taking up and rehabilitating the homeless and destitute!!!
The philosophy behind the Fidelity Bank’s Doing Good Project may not be farfetched in a society bedevilled by inequality, and high competition, fostering co-operation, no doubt, is necessary step towards arresting many societal challenges and nurturing harmonious relationships.
What drove Fidelity Bank Plc ‘s double digit chain of returns in the last few years? This question continues to reverberate among many industry players, analysts and observers. Truly, the answer to this question is not far to seek. Like the saying: “a good product sells itself”, Fidelity Bank continues to re-invent itself with unmatched creativity, uncommon innovation and exceptional team work that bring out the best in its management and members of staff.
No doubt ,any attempt to imagine Fidelity Bank without an accompanying image of Nnamdi Okonkwo is a daunting task for many people. Since 2014, both Fidelity Bank and Okonkwo have enjoyed more acclaim than other banks and MDs dare to enjoy in three decades