How Fidelity Bank’s 166% profit growth defied headwinds

The profit of Fidelity Bank more than doubled in one year amid the country’s tough operating environment.

According to the bank’s financial statements, its profit after tax rose by 166.1 percent to N62 billion in the first half of 2023 from N23.3 billion in the same period of 2022.

The bank recorded 204 percent growth in profit before tax to N76.3 billion from N25.1 billion, and net interest income rose to N107.8 billion from N75.6 billion.

“Net interest income increased by 42.6 percent to N107.8 billion on the back of higher asset yield which increased by 57 basis points to 12.7 percent,” the bank said in a statement.

The bank said average funding cost dropped by 10 basis points to 4.5 percent, reflecting an improved deposit mix as it mobilised low-cost funds to 90.3 percent of total deposits from 83.6 percent in 2022. Gross earnings grew to N247.1 billion from N154.84 billion.

“Gross earnings increased by 59.6 percent to N247.1 billion, driven by a 39.4 percent growth in interest income and a 207.2 percent increase in non-interest income,” the bank said.

Read also: Fidelity Bank completes 100% acquisition of Union Bank UK

“Growth in interest income reflects a higher yield environment and 27.6 percent year-to-date expansion in earning assets base,” it added.

According to the bank, the increase in non-interest income was spurred by foreign currency gains and double-digit growth in key income lines: trade (66.6 percent), digital income (53.6 percent), banking services (50.2 percent) and account maintenance (44.2 percent). Total interest income was N189.9 billion up from N136.23 billion.

“Growth in interest income was led by a high-interest rate environment and 27.6 percent year-to-date expansion in earning assets base,” Fidelity Bank said.

Other income grew to N180.8 billion from N89.1 billion.

Last Wednesday, the bank announced the completion of its 100 percent acquisition of Union Bank UK, a subsidiary of Union Bank Plc.

Read also: Fidelity Bank proposes N8bn interim dividend payout from retained earnings

This development was disclosed in the corporate disclosure filed with the Nigerian Exchange Limited. The bank said that this completion was furtherance to its notice of acquisition made on August 2, 2022, and signified the bank’s intent to expand its international portfolio.

“The bank is pleased to announce the completion of the transaction and receipt of the approval of the Bank of England’s Prudential Regulatory Authority (PRA) for the change of control of UBUK,” it said.

Operating expenses increased to N84.55 billion in H1 2023 from N62.03 billion in the similar period of 2022.

“Operating expenses increased by 36.3 percent to N84.6 billion. AMCON, deposit insurance, staff cost, communication, and technology were the key drivers and responsible for 72.1 percent of the absolute growth in operating expenses,” Fidelity Bank said.

The bank’s total customer deposits increased by 23.2 percent year to date to N3.2 trillion from N2.6 trillion in 2022.

Read also: NGX reclassifies Fidelity Bank as medium price stock

The bank said the increase was driven by 33.0 percent year-to-date growth in low-cost funds (demand, savings, and domiciliary), while tenured funds declined by 27.0 percent year-to-date which resulted in improved margins.

Net loans and advances increased by 25.1 percent year to date to N2.6 trillion in June from N2.1 trillion in the full year of 2022.

Non-performing loan ratio grew to 3.2 percent in H1 from 2.9 percent in 2022 while the capital adequacy ratio stood at 16.1 percent compared to 18.1 percent last year.

“The compression in CAR is attributable to the recent Naira devaluation which had an estimated 250 – 300 basis points negative impact. We will continue to monitor and proactively manage the evolving risks in the economy while ensuring our commitments to our customers and shareholders are fulfilled,” it said.

The bank’s return on equity inched up to 34.9 percent from 15.6 percent while net interest margin grew to 7.2 percent to 6.3 percent.

It declared an interim dividend of 25 kobo per share, a 150 percent increase compared to 10 kobo declared in the full year of 2022.

Fidelity Bank is a full-fledged commercial bank with over eight million customers who are serviced across its 250 business offices and various digital banking channels.

The bank is focused on select niche corporate banking sectors, and small and medium enterprises and has rapidly implemented a digital-led retail banking strategy which led to over 400 percent growth in savings deposits in the last seven years.