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Fidelity Bank promises better deal for shareholders

By BusinessNews Staff on June 4, 2015

Investors stake funds on stocks and expect returns on their investments. The returns can be in form of cash dividends, bonus shares or capital appreciation. Retail shareholders in Nigerian market prefer cash dividend. This is why they do not hide their disappointment when companies fail to pay dividend at the end of every year. In as much as most of companies would want to pay regular dividend, the operating environment has not been able to do so due to the challenging operating environment. However, some companies have been able to remain consistent with return to the shareholders.

One of the companies that has been putting smiles on the faces of shareholders is Fidelity Bank Plc. And the bank has assured shareholders of higher dividend going forward. Addressing the stockbroking community recently, the Managing Director/Chief Executive Officer of the bank, Mr. Nnamdi Okonkwo the bank would increase the payment to 50 per cent this year, against 37.8 per cent paid out in 2014.

Corporate History
Fidelity Bank Plc commenced business in 1988 as Fidelity Union Merchant Bank Limited. By 1990, the bank had distinguished itself as the fastest growing merchant bank in the country. However, to leverage the emerging opportunities in the commercial and consumer end of financial services in Nigeria, it converted to commercial banking and changed its name to Fidelity Bank Plc in 1999.

It became a universal bank in February 2001, with a license to offer the entire spectrum of commercial, consumer, corporate and investment banking services. Fidelity Bank is ranked amongst the top 10 with presence in the major cities and commercial centres of Nigeria. The bank also enjoys the respect and partnership of a network of off-shore institutions with which it has correspondent banking, confirmation lines, credit and other relationships. These include, ANZ London, Afreximbank, Cairo, Egypt, ABSA South Africa, Commerce Bank.

The board of Fidelity Bank is led by Christopher Ezeh as chairman while Okonkwo is the MD/CEO.Executive directors include: Chijioke Ugochukwu, Ik. Mbagwu, Onome Olaolu, John Obi, and Mohammed Balarabe.

Other non-executive directors are: Elias Nwosu, Mallam Yahaya,- Ichie Orazulike, Gabriel Olowoniyi, Nnamdi Oji, Bessie Ejeckam, Alhaji Gumel, Stanley Lawson, and Robert Nnana-Kalu.

2014 Financial Performance

The Fidelity Bank Plc ended 2014 with an interest income of N104.3 billion, up 21 per cent from N86 billion in 2013, while net interest income before impairments increased by 58 per cent to N48.8 billion from N30.8 billion in 2013. Profit before tax (PBT) increased by 72 per cent to N15.5 billion from N9.0 billion in 2013, while profit after tax (PAT) jumped by 79 per cent from N7.7 billion to N13.8 billion.

Okonkwo had said the 2014 performance was testament to the significantly improved optimisation of its balance sheet.

“PBT growth of 72 per cent was driven by a 27 per cent growth in the loan book while cost of funds declined over the period. This translated to a 58 per cent growth in net interest income and a 200bps growth in net interest margin (NIM) to 6.0 per cent. Cost of risk normalised to 0.8 per cent from1.9 per cent in the 2013,” he said.

According to him, retail banking strategy gathered increased momentum in 2014 with the bank acquiring over 471,000 new retail customers and core low-cost retail deposits grew by 18 per cent, which impacted positively on our funding cost.

“We also witnessed improved operational efficiency as the bank leveraged alternative electronic channels to reduce our cost to serve, operating expenses (excluding regulatory costs) grew by three, which was significantly below the inflation rate. Key regulatory ratios remained well above set limits, which has resulted in the bank paying a dividend of 18k per share which translates to a dividend yield of 11.5 per cent,” Okonkwo said.

He noted that the operating environment remains challenging due to strong macro-economic headwinds, they remained committed to the execution of their medium term strategic objectives which are focused on the retail/small medium enterprise/e-banking/niche corporate banking segments.

Good Beginning in 2015
Going by the first quarter (Q1) of the Fidelity Bank Plc, has consolidated on the performance momentum in 2014 to recorded a modest growth on key indices despite a very conservative view on the macro-economy.

PBT was driven by strong growth in non interest income. PBT increased by 5.6 per cent to N4.7 billion despite the over 100 per cent growth in provisions due to a conservative outlook by the bank. Interest expense growth largely coming from long term borrowings, the 3.6 per cent growth in interest expense on customer deposits lagged the six per cent growth in customer deposits.

NIM improved to 6.2 per cent due to better pricing which improved the average yield on earning assets to 13.7 per cent. Total fee and commission income up by 54 per cent to N9.2 billion from N6.0 billion reported in Q1 2014 driven by strong foreign exchange trading income and E-banking fees.

The bank’s cost income ratio trended downwards to 71.5 per cent in Q1 2015 from 78.5 per cent Q4 2014 and 72.4 per cent in Q1 2014, as revenue growth outpaced cost acceleration.

Cost of risk remained low at 0.8 per cent, a confirmation to the bank’s improved loan book quality which translated to 3.8 per cent non-performing loans (NPL) ratio.
Strategic Moves
Speaking on the future strategic plans, Okonkwo said the bank is strengthening its distributions capabilities. This entails branch expansion, strategic alliances, deployment of ATM network, co-location, increase operating efficiency through consistent business process improvements. Also the bank is also strengthening its role in small and medium enterprises (SME) and retail segments in mobilising cheap deposits,deepen participation in energy, oil & gas, telecom and other fast-growing sectors by leveraging enhanced balance sheet and expanded distribution network.

In the medium term, from 2015 to 2017, Okonkwo said Fidelity Bank intends to the leverage on the value chain of its corporate play to extract maximum value from its commercial and retail businesses towards a 50:50 loan split between corporate and commercial loans.
“We will diversify earning base by developing new products and selling franchised products, particularly in e-banking. Deploy customer relationship management system and business, analytics tools to gain deeper customer insights and increased penetration ratio for our branded retail and electronic products,” he said.

Okonkwo said that the bank would open 25 branches in 2015 and would also use electronic channels to reach out to more customers.

According to him, the bank is targeting a NPL ratio of 4.0 per cent against 4.4 per cent achieved in 2014 on a net interest margin of seven per cent compared with six per cent posted in 2014.

On the bank’s recent bond, Okonkwo said that the N30 billion 16.48 per cent fixed rate subordinated unsecured bonds due 2022 would enable the bank to be a dominate player in the (SMEs) sector of the economy.

Okonkwo said that the fund would be used to expand its support to the SMEs and retail segments of the market. He added that the fund would count as tier II capital in line with the guidelines of Basel II of the Central Bank of Nigeria (CBN).

On long term plan, which will be from 2018, he said the bank would continuously expand distribution capacities in targeted markets to maintain a leading position and provide unrivalled customer service based on deep segment experience and solid technological distribution base. It will also build a strong consumer finance, offering distributed through a wider traditional electronic platform.

[ThisDay]

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