Fidelity Bank’s record earnings excite shareholders

By Okey Onyenweaku

Each time there is a change of guard, citizens of a country, shareholders of a company and members of associations become a bit jittery. They are usually not comfortable not knowing what the new leader would bring on board. Sincerely, shareholders of Fidelity Bank who would not want their names mentioned in print said that much when a change of baton took place at the financial institution earlier on.

But they seem over the moon now with their new management team. Nneka Onyeali-Ikpe, the new helmsperson of Fidelity Bank and her team have in fact delivered strong and impressive figures for the bank with confidence.

The fear of how to fill Nnamdi Okonkwo’s large shoes seem to have abated. Nneka Onyeali-Ikpe has proved to be strong, confident and focused having grown Fidelity Bank’s profit before tax by 72 percent against the previous year.

Among Okonkwo’s towering achievements in his six years in the saddle, he led the bank in implementing first a greater emphasis on the cultivation of retail deposits and then a Digital-led Strategy which led to significant growth across key performance matrix and increased market share, with the Bank currently ranked 6th among Nigerian Banks on most performance indices.

This has helped in his securing some of his other key achievements in number terms which include a Profit Before Tax, PBT growth of 236% from N9.0bn to N30.4bn; Return on Equity, RoE increase from 5.5% to 13.3%; Customer Deposits growth of 68% from N806.3bn to N1,352.3bn and Savings Deposit growth of 275% from N83.3bn to N312.1bn.

Other notable number achievements include Net Loans and Advances growth of 174% from N426.1bn to N1, 165.8bn; Customer Base increase by 121% from 2.4 million to 5.3 million and Digital Banking penetration improvement from 1.0% to 50.1%, accounting for 28.4% of total fee income.

In the area of institutional finance mobilisation, the Bank under the leadership of Okonkwo successfully accessed the local and international markets through the issuance of N30bn Corporate Bonds in 2015 and $400million Eurobonds in 2017.

Nneka Ikpe appears to be determined to take the lender higher than she met it. She has already shown her stuff with the current H1 2021 results.

Details show that the Nigerian lender posted a profit before tax (PBT) of N20.6 billion for the first half of the year, ended June 30, 2021.

This is according to the bank’s audited half-year (H1) results released to the Nigerian Exchange (NGX) Limited on Sunday in Lagos.

Managing Director/Chief Executive Officer of Fidelity Bank, Mrs. Nneka Onyeali-Ikpe, in her comments said the bank’s PBT represented a 72.4 per cent growth when compared to N12.0 billion recorded in the comparative period of 2020.

According to her, profit after tax (PAT) rose to N19.31 billion from N11.30 billion recorded in the corresponding period.
She said the growth was on the Back of Increased customer transactions and improved operational efficiency.

“We sustained our impressive financial performance with double-digit growth in profit as increased customer transactions drove non-interest revenue while improved operational efficiency continued to moderate cost-to-serve,” she said.

Onyeali-Ikpe also said that the financial result for the period indicated that Gross Earnings increased by 6.2 per cent Year-on-Year (YoY) to N112.3 billion on account of 27.8 per cent growth in Non-Interest Revenue (NIR) to N23.8 billion from N18.1 billion in H1 2020.

She added that the bank’s NIR was driven by strong growth in commission on banking services by 57.7 per cent, account maintenance charges by 50.6 per cent, digital banking income by 49.4 per cent and trade income by 33.7 per cent among others.

Total customer induced transactions across all distribution channels increased by 58.0 per cent YoY and 21.2 Per cent QoQ.

The bank showed a good appetite in funding the real sector with net loans and advances increasing by 15.8 per cent YTD to N1.53 billion from N1.32 billion in 2020FY.

However, the actual growth was 14.7 per cent while the impact of the currency adjustment (2020FY: N400.3/dollars-H1 2021: N410.6/dollars) accounted for a 1.1 per cent YTD growth in the loan book.

Cost of risk came in at 0.3 per cent and the NPL ratio (stage 3 loans) dropped to 2.8 per cent from 3.8 per cent in 2020FY.
Other regulatory ratios remain well above the minimum requirement: capital adequacy ratio at 18.8 per cent from 18.2 per cent in 2020FY.

Total Deposits increased by 16.5 per cent YTD to N1.98 billion from N1.69 billion in 2020FY, driven by increased deposit mobilisation across all deposit types.
“Digital Banking gained further traction as we now have 55.1 per cent of our customers enrolled on the mobile/internet banking products and 89.3 per cent of customer-induced transactions were done on digital platforms.”

She also explained that the bank’s foreign currency deposits increased by 23.1 per cent YTD at 149 million dollars and now accounted for 18.5 per cent of total deposits from 17.5 per cent in 2020FY.
According to her, this is as the bank continues to harness the benefits of its renewed drive in the diaspora banking space.

“We look forward to sustaining the current momentum in H2 by optimising our balance sheet and lowering our cost–to–serve.

“This will translate to improved earnings while we remain committed to our medium to long-term strategic objectives,” Onyeali-Ikpe said.

OPERATIONAL ENVIRONMENT

Notably, Fidelity achieved this impressive result despite that the Nigerian economy has not been strong lately and no immediate indications show otherwise. The economy only recorded a paltry growth of 5.1 per cent in half year 2021from a negative position of -6.10 in second quarter 2020.

Recent statistics also reveal that the rate of unemployment, the second highest in the world is 33%; Underemployment rate stood at 22%; inflation which stood at 18.6 per cent has just eased to 17.01 per cent; diaspora remittances inflow in the country fell by 24 per cent from $5.6billion in 2020 to $4.2billion in half year 2021.

Remittances had plunged 27 per cent year on year (YoY) to $17.2billion in 2020 from $23.55billion in 2019.

Many have not forgotten that the operating environment last year was choking for almost all the business sectors including banks. In addition to the devastating effect of Covid-19 on the economy which 2021 budget runs a deficit of N5.2trillion representing 3.6 per cent, while the country owes N35trillion debt. The fear here is hinged on the fact that the federal government spends about 90 per cent of its revenue to service debt.
The major revenue earner for the country, crude oil price, which hovers between $72 pbd and $75.46 pbd as at September 16, 2021 still fluctuates.

Insecurity has not only hobbled agriculture, many parts of the Northern part of Nigeria have been taken over by bandits that not much business activities can subsist.

With the fearful scenario above, economic trajectory of the country is still uncertain.
This is because even the apex bank has warned that care must be taken to galvanize and push the economy out of slumber. The Apex regulator reportedly even warned its staff against unnecessary outings in Abuja, the capital of Nigeria for fear of kidnappers and bandits.

Recently, the Chief Executive Officer/Managing Director, Onyeali-Ikpe of the bank explained that the agenda is focused on brand architecture, brand building and refresh, talent development and transformation, product and service delivery, agility and performance discipline, digital transformation, and regulatory compliance.

In May 2021, the management had announced plans to make Fidelity Bank one of the tier-1 banks by 2025 and achieve a 7.5 percent total market share of deposits in the same year.

Onyeali-Ikpe said her sight is fixed on positioning the bank as one of Nigeria’s leading financial institutions, leveraging automation and robotics to replace manual and repetitive processes.

In attaining the set objectives, the CEO said the bank would embark on an innovation drive to increase profitability and competitiveness, raise awareness of its brand, create a high performing and empowered workforce.

She added that Fidelity Bank would also build brand loyalty through personalised and seamless customer experience delivery, develop an end-to-end digitisation, boost performance discipline, and drive aggressive market penetration and business diversification.

“Other initiatives geared towards deepening growth include; accelerated play in the SME segment, renewal of institutional banking, and drive for transaction-based propositions in corporate banking,” she said.

Agenda highlights

In line with the strategies towards achieving its objectives, the bank intends to embark on an innovation drive through the implementation of new processes, techniques. It is also executing fresh ideas to ensure continuous process improvement, reduce cost to serve, increase competitiveness, improve brand recognition and value, build new partnerships and relationships, drive turnover, and increase profitability. There is also brand refresh with the aim to increase top-of-mind awareness of the Fidelity brand by external and internal stakeholders.

Workforce transformation to create a future readily supported by a high performing and empowered workforce is also part of the strategies. This will be achieved by deepening the skills and competencies of staff across the bank, entrenching a culture of high performance, and embedding new ways of working in the bank. So far, the commencement of capacity building training for staff and senior management training are some of the initiatives implemented.

There is also service excellence which is intended to build brand loyalty through personalized and seamless customer experience delivery. This is already underway with the award-winning virtual assistant IVY. This revolutionary chatbot handles simple tasks like account opening to complex tasks such as complaint resolution, bill payment, transferring users to a live agent, loans, fixed deposit applications, and answering random questions.

And then there is digital transformation which involves an end-to-end digitization across all facets of the business is also part of it. In line with this, the bank has launched a novel digital service —Pay Yourself —which revolutionized payday for salary earners and SMEs.

There is also performance discipline to ensure focus on strong fundamentals, asset quality, and strategic cost management. Initiatives already carried out in this regard include; the Policy Familiarization Program, a capacity-building project geared towards building a knowledgeable and versatile staff network/raising subject matter experts in all business areas that kicked off in March; the One Culture Project, which was initiated to reinforce enabling behaviours and value systems towards fulfilling the bank’s goals.

It also has accelerated growth which will drive aggressive market penetration and business diversification. This will be achieved through deeper penetration in key retail markets.

Other initiatives geared towards deepening growth include; accelerated play in the SME segment, renewal of institutional banking, and drive for transaction-based propositions in corporate banking, the bank said.

Many who feared otherwise now believe Onyeali-Ikpe can indeed do a great job despite the challenges ahead. Unfortunately, she is coming at a time the head and tail winds arising from the pandemic are still strong.

With the above, there is no doubt that she has been part of the tradition, character and experience that built the bank and its successes in recent times.

Analysts say she has been part of the banking industry system in Nigeria and can navigate her way through the bumps.
The Managing Director of Cowry Asset Management Company, Mr. Johnson Chukwu told Business Hallmark that Mrs. Onyeali-Ikpe has worked in many banks in Nigeria and has as a result garnered all the needed experiences required for the top position.

”She can deliver but I advise that the consolidates on the strength of the bank while exploring other business areas’’, Mr. Chukwu said.

On his part, the Managing Director of Highcap Securities limited, Mr. David Adonri who shares in the views of Mr. Johnson Chukwu told Business Hallmark in a telephone interview that Mrs. Onyeali-Ikpe must have studied the structure of the bank to know its strengths and weaknesses which will enable launch her strategies to achieve greater things for the bank. “She inherited a viable bank. She can build on it”, said David Adonri

‘’She has the qualification and experience to sustain and add value to the institution’’ said Olisa Egbunike of Renaissance group. And for us, there is nothing else to add. Presently.