Fidelity Bank Q3 earnings delink from struggling economy

Fidelity Bank, a Nigeria lender that is pivotal to Small and Medium Enterprises (SMEs) in Africa’s largest economy have grown its earnings amid a struggling economy and stringent regulations from the Central Bank.

The bank has overcome macroeconomic conditions as net income increased by 5.53 percent to N11.44 billion, from N10.84 billion in the same period of the corresponding year 2014.

Further, interest income moved by 10.26 percent to N84.70 billion in September 2015 as against N76.81 billion the previous year.

Net interest income jumped by 10.27 percent to N40.60 billion in the period under review period under review compared with N36.65 billion last year.

The impressive performance can be attributed to growth in the volume of earning assets, a reduction in average funding costs, improvement in yields on earning assets and decline in funding costs.

Analysts say the shareholders and investors of the bank should expect an upswing in earnings as full year results are expected to be stellar despite regulatory pressures.

The Nigeria Central Bank applied rules and restrictions to stabilize the naira after oil price, the nation’s major foreign exchange earner fell more than 50 percent since early this year.

The Abuja based bank also imposed a deposit rule that requires all lenders to place with it 25 percent of their deposits.

Business Day’s calculations showed Fidelity’s operating income grew by 6.47 percent to N58.48 billion in the period under review from N54.51 billion last year.

Operating expenses moved by 10.57 percent to N44.75 billion.

Fidelity’s loans and advances to customer increased by 11.88 percent to N547.70 billion in September 2015, compared with N489.50 billion the previous year.

Deposits from customers fell by 5.67 percent to N765.78 billion in September 2015 as against N811.85 billion last year.

The loans to deposit ratio increased to 71.52 percent in 2015 as against 60.30 percent last year, making it the fastest increase among peers.

“Our core view is that sector’s loan growth will be influenced by the monetary policy of the CBN, capital adequacy requirement, and industry competition,” said analysts at Chapel Hill Denham, securities Limited, in their June 30 banking sector report.

“We see Zenith, Stanbic and Fidelity as the, major drivers of our sector loan growth forecast,” said analysts at Chapel Hill Denham.

Fidelity’s disciplined execution of its retail strategy despite pressure on consumer’s disposable income has continued to drive cross-selling of e-banking products and increased customer migration.

The aforementioned focus and market penetration  strategy has paid off  as debit card transactions and internet banking transactions were up by 19.0 percent and 14.7 percent in the second quarter of the year, contributing largely to the 37.4 percent q-o-q (65.14 percent y-o-y) growth in e-banking Revenue, according to the bank’s website.

Fidelity bank’s total assets increased by 3.60 percent to N1.15 trillion in 2015, from N1.11 trillion in the earlier period.

The bank’s share price closed at N1.38 on the floor of the exchange while market capitalization stood at N39.98 billion.

OUR REPORTER