• Monday, March 04, 2024
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Fidelity Bank Plc: Reaping the benefits of disciplined retail strategy


Historical background

Fidelity Bank was incorporated in 1987 as a private limited company with a merchant banking license, with the primary objective of participating and contributing to the growth of the Nigerian economy through the provision of quality financial services. As part of its growth strategy,

Fidelity Bank converted to a commercial bank in 1999, became public limited company in August 1999 and secured a Universal Banking License in February 2001. In line with the Central Bank of Nigeria’s (CBN) modified Universal Banking regime, Fidelity Bank was granted an International Banking licence in 2011.

A well-experienced and highly-regarded management team has successfully grown the Bank based on the principles of passion, excellence and a sound risk-management framework. Fidelity Bank’s long term aspiration is to become one of the most profitable tier-I banks in Nigeria and plans to achieve this objective by exploring both organic and inorganic growth opportunities.

Fidelity Bank has grown from a fringe player in 1987, into a stable and respectable banking institution. Notably in 2005, Fidelity Bank acquired FSB International Bank Plc (“FSB”) and Manny Bank Plc (“Manny”) to create one of the largest tier-II Nigerian banks.

Fidelity Bank currently has a widely distributed banking presence across all the major cities in Nigeria and in all the state capitals. The Bank remains financially sound with a robust balance sheet and one of the highest Capital Adequacy Ratio in the industry.

Fidelity Bank is diversely owned. The current authorized share capital of the Bank is N16 billion  (sixteen billion Naira), divided into 32 billion (thirty two billion) ordinary shares with a nominal value of 50 kobo each. Paid up share capital currently stands at N14,48 billion .

The Bank currently has over 400,000 shareholders comprising Nigerian citizens and corporations as well as foreign investors and continues to receive significant support for its policy objectives from its shareholders, who also support its capital raising and business development efforts.


The results for the half year period ended June 2015 for Fidelity Bank is a howling success despite an environment characterized by high interest rate, stringent deposit rules and intense competition for quality service.

The growth in the company’s operation can be attributed to its increasing execution of retail strategy amid weak consumer spending following the recent economic downturn or doldrums so to speak.


Gross earnings increased by 13.6 percent to N71.89 billion in June 2015 from N63.25 billion in 2014. The growth was driven by interest income on loans, e-Banking and other transaction fees. Interest income rose by 8.70 percent to N56. 02 billion in the period under review from N51.28 billion the same period of the corresponding year (HI) 2014.

Net interest income were up 8.31 percent to N26.84 billion in June 2015 as against N24.78 billion in June 2014; due to the 14.9% growth in the volume of earning assets and a reduction in average funding cost.

Net interest income grew by 16.7 percent quarter on quarter (q-o-q) on the back of the improvement in Yields on earning assets from 13.7 percent first quarter (Q1) to 14.0 percent second quarter (Q2) and a decline in funding costs to 6.2 percent (Q2) from 6.6 percent (Q1)

Net Interest Margin (NIM) has grown steadily from 6.0 percent  in 2014 full year (FY) to 6.6 percent  H1 2015, earnings growth strategy for 2015FY is  based on improved NIMs (7.0%) and earning assets.

However, interest expenses increased 9.1 percent to N29.18 billion in June 2015 compared with N26.74 billion the preceding year due to 146.83 rise interest expense on loan borrowings in the review period. It is expected that most lenders in Africa largest oil producer will have interest expense spike as the continued hike in interest rate by the Central Bank isn’t given them a leeway to boost deposit base.

The Abuja Based Bank increased the interest rate to 13 percent to 12 percent previously held while Cash Reserve Requirement (CRR) was harmonised to 31% for both private and public sector deposits, with estimated N140bn net liquidity impact on the market.

Despite the groans by banks that the rate hike is stifling growth, the Apex said it embarked on such stringent measures in order to curb inflation and stabilize the naira from its continued fall.

Inflation rises above the target band (6 percent – 9 percent) to 9.2 percent in June, naira weakens and delayed salary payments in the Public Sector reduced consumers disposable income.


The bank’s after tax profit were up 2.65 percent to N8.21 billion in June 2015 compared with N8.0 billion in June 2014. Pretax profit jumped by 2.5 percent to N9.66 billion in June 2015 against N9.43 billion in June 2014.

Analysts had envisaged bank profits slowing as the foreign currency restrictions are squeezing liquidity flow into the system. It is really a tough year for banks, indeed. In spite of the tough operating environment, Fidelity Bank’s earnings growth outperforms peer rival Stanbic IBTC HOLDINGS PLC that recorded the worst results in three quarters with a 40 percent drop in net income.

Operating expenses however increased by 14.1 percent to N42.02 billion in the period under review as against N36.84 billion in  a June 2014; thanks to a 25.9 percent increase in to N15.15 billion in the six months through June 2014 as against  N12.06 billion the previous year.

Operating expenses however increased by 13.8 percent to N28.82 billion in June 2015 compared with N25.33 billion on the back of increased staff expenses, regulatory charges, advert costs and other expenses driven by more aggressive accruals in H1 2015.

Lenders in Africa largest economy have been grappling with the decision of the regulators mandating them to pay 0.0 5 percent of their total to a sinking fund called the Asset Management Corporation of Nigeria (AMCON). Based on current figures, Fidelity Bank will pay N5.96 billion from the total assets of N1.19 trillion.


The bank was efficient as showed in its cost to income (CIR) which reduced to 69.2 percent in June 2015 compared with 71.2 percent in June 2014. This Fidelity is deploying latest technology in keeping costs at bay while pursuing its strategic objective of increasing profit in the interest of owners. However, the bank said due to strategic initiatives planned for the second quarter (HI), 2015, there are likely to be slight increase in its cost base, however the lender is focused on achieving its CIR target for the year.


The bank’s balance sheet increased by 12.40 percent to N1.19 trillion in 2015 in June 2015 compared with N1.05 billion in June 2014. The impressive expansion in asset base was due to a 9.86 percent increase in cash and cash balances with Central Bank to N231.97 billion in June 2015 compared with N211.10 billion as at June 2014 and a 95.48 percent rise in held to maturity to N104.02 billion in June from N53.21 billion as at June 2014.

Loans and advances to customers were up by 30.30 percent to N572.83 billion in the six months through in the period under review, from N438.12 billion in June 2014 despite headwinds and liquidity squeeze bedeviling lenders in Africa’ largest economy.Major sectors driving organic loan growth include Manufacturing, Consumer and Real Estate etc.  Due to the lower oil prices some syndicated loans in the Oil and Gas Upstream Sector have been restructured for additional tenors of 18 to 36 months.

The growth in Fidelity’s Bank loan book and recoveries resulted in lower NPL of 3.7 percent in June 2015 compared to 3.8 percent   recorded in June 2014.  Though absolute NPLs declined in some sectors, additional classifications were made in General Commerce, Oil & Gas, and Transport Sectors.

Deposits to customers increased by a single digit 4.01percent to N796.55 billion in the period under review as against N765.77 billion in 2014. The single digit growth in deposits to customer was due to the stringent rules by regulator mandating all banks to place31 percent of deposit with the Apex bank.

Savings deposit grew by 7.4 percent YTD but declined marginally by 0.3 percent q-o-q, reflecting increased pressure on consumers disposable income Retail deposit growth was flat in Q2 as Public Sector salary delays and the weaker macro indices took a toll on consumers’ disposable income and savings

However, the bank is aggressive about lending as loans to deposit ratio increased to 71.96 percent in June 2015 as against 57.25 percent as at June 2014.


The bank’s disciplined execution of its retail strategy (despite pressure on consumer’s disposable income) continues to drive cross-selling of e-banking products and increased customer migration.

Debit card transactions and internet banking transactions were up by 19.0 percent and 14.7 percent in Q2, contributing largely to the 37.4 percent q-o-q (65.2 percent y-o-y) growth in E-banking Revenue.

Fidelity Bank  remains well capitalized with strong Capital Adequacy Ratio (CAR) of 22.7% compared to the regulatory minimum requirement of 15.0 percent.

Return on average equity (ROAE) fell to 10.9 percent in June 2015 compared with 11.40 percent as at June 2014. Return on average assets (ROAA) declined  to 1.6 percent in the first six months through June 2015 as against 1.80 percent the previous year.

“Business operations in H1 2015 were challenged by a difficult operating environment due to heightened political risks in Q1, weaker government revenues arising from lower crude oil prices, a tighter monetary policy environment and currency devaluation concerns which all translated to a significantly lower GDP growth rate” said Nnamdi Okonkwo, Managing Director and CEO of Fidelity Bank plc commenting on the banks financial statement.