Earnings assets, lower impairment charge propel Fidelity Bank profit to rise 23.6%

Nnamdi Okonkwo, CEO, Fidelity Bank Plc

Growth in earnings assets and decline in impairment charges on loans and advances helped Fidelity Bank to post an impressive financial performance as it profit -after-tax (PAT) increased by 23.6 per cent to N17.85 billion at the end of September 2018.

The bank’s gross earnings was up 6.9 per cent to close at N139.0 billion primarily driven by 19.2 per cent year-on-year growth in earning assets, which led to a 9.1 per cent increase in interest income to N120.4 billion, but net fee income declined by 8.7 per cent y-o-y to N15.7 billion.

Fidelity Bank impairment charges on loans and advances decreased by 55.1 per cent to N3.3 billion from N7.3 billion in the third quarter of 2017.

Nnamdi Okonkwo, Managing Director, Fidelity Bank Plc explained that the bank reclassified N7.2 billion from non-interest income to interest and similar income in Q3 2018 after a review of the underlying transactional income with our Auditors.

Fidelity Bank saw revenue from its digital Banking leaping over 40 per cent as its customers now enrolled on the mobile/internet banking products and over 80 per cent of total transactions are now done on its digital platforms.

Operating Income increased by 10.8 per cent to N70.6 billion from N63.7 billion in Q3 2017, while total expenses rose 6.5 per cent to N50.6 billion from N47.5bn in the comparable period last year.

“We are delighted with our 9M 2018 Results which showed strong double-digit growth in Deposits, Revenues and Profitability. We continued to increase our market share driven by significant traction in our chosen business segments. We were able to sustain our performance trend on a y-o-y basis through the following: disciplined balance sheet growth, increased focus on the Corporate|Commercial|SME segments and continued execution of our retail and digital banking strategy,” Okonkwo asserted.

He maintained that NIM remained resilient at 6.7 per cent despite the reduction in yields on earning assets. Though the decline in yields on earning assets outpaced the drop in funding costs, NIM still remains within the bank’s guidance for the year as its average yield on earning assets stood at 13.8 per cent compared to an average funding cost of 6.2 per cent.

Despite the double-digit inflationary environment, expenses grew by 6.5 per cent to N50.6 billion due to increased technology investment and higher AMCON Charges. Our cost to income ratio remained relatively stable at 68.4 per cent compared to 67.5 per cent in the 2017FY. The strong double-digit revenue growth of N6.9 billion (10.8 per cent growth) and the moderate growth in total expenses by N3.1 billion (6.5 per cent) translated to a N3.8 billion (23.6 per cent) increase in Profit Before Tax (PBT) to N20.1 billion from N16.2 billion in 9M 2017.

Total deposits increased by over N211.6 billion (27.3 per cent) to N986.8 billion from N775.3 billion as it recorded strong double-digit growth on all the deposit products, while lowering funding costs.

“Our retail banking strategy continued to deliver impressive results as savings deposits increased by 12.9% to N201.7 billion leading to the 5th consecutive year of double-digit savings growth. Low cost deposits now account for 73.6 per cent of total deposits,” the bank boss added.

Risk assets increased by 8.0 per cent to N830.4 billion from N768.7 billion in the 2017FY, while Cost of risk declined to 0.5 per cent from 1.5 per cent in the 2017FY due to impairment charges passed through equity on IFRS 9 adoption and reduced impairment charges in the telecommunications and downstream sectors.

Non-performing Loans (NPLs) Ratio improved to 6.0 per cent from 6.4 per cent in the 2017FY despite a 3.4 per cent growth in the absolute NPL numbers with the NPL coverage ratio at 109.9 per cent.

Other regulatory ratios remained above the required thresholds with Capital Adequacy Ratio (CAR) at 17.0 per cent and Liquidity Ratio at 38.3 per cent.

“We remain focused on the execution of our medium-term strategic objectives and targets for the 2018FY while we look forward to sustaining the momentum and delivering another strong set of results for the 2018FY,” Okonkwo concluded.