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Fidelity Bank: A commitment To Retail Banking

Posted: Jul 3, 2015 at 12:02 am   /   by   /   comments (0)

By Andy Nssien


Fidelity Bank Plc, a quintessence of the Systemically Important Bank (SIB)  phraseology of the Central Bank of Nigeria (CBN), had to strategise to wade through the turbulent economic and investment headwinds that characterized banking operations in the country last year. The CBN employs the SIB terminology to refer to eight financial institutions  whose failure could pose a systemic risk to the banking industry and the  larger economy. Fidelity Bank Plc is a member of this group which  accounts for 70 per cent of the banking industry’s total assets. Owing to their size and import, the CBN has adopted a more robust regulatory regime to monitor and scrutinise the eight banks, in order to ensure that they are healthy.

Not to be caught napping in the highly competitive environment, Fidelity Bank has embarked on aggressive retail banking strategy  to broaden its income base and equip the bank for the challenges ahead.

The lender’s retail banking strategy gathered increased momentum last year with the bank acquiring over 471,000 new retail customers.             Consumer loans grew by over 21 per cent, while core low-cost retail deposits rose by 18 per cent, with the  impact of lowering the bank’s average cost of customer deposits.

To further deepen its retail market, the bank recruited over 850 consumer sales agents for the purpose of reaching out to the underserved and the unbanked market. It also launched a savings promo christened: “Save 4 Scholarship”, in July 2014. The first of its kind in the industry, the promo seeks to provide scholarship packages and gift items to support the educational aspirations of loyal customers. With the same passion, the bank  continued to partner with the youth segment through various interactive and entertainment programs rolled out in campuses.  These were  complemented by  the bank’s reinvigorated student-focused products such as; Fidelity Green Screen Tuesday and Fidelity Flex Account, which are designed for students in higher institutions, polytechnics and universities and NYSC Members, who are seeking reliable and convenient banking services. That’s not all, the lender also increased the physical and electronic distribution channels by growing the number of Automated Teller Machines (ATMs) and Point of Sales (PoS) channels across the country to  685 and 9,156 respectively. These  strategies  were pivotal to the marked growth in the bank’s retail deposit base in 2014.

The effect of this accretion bolstered the overall performance of the bank for the period ended December 31, 2014


Performance Ratios

Gross Earnings went up by 4.3% to N132.4 billion in 2014 compared to N126.9 billion in the corresponding period in 2013.

Net Interest Income inched up by 58.5% to N48.8 billion, while profit before tax shot up by 71.9% to N15.5 billion in 2014 as against N9 billion in the previous year.

Also, Net Interest Margin increased to 6% in 2014, up from 4.1% in 2013.

Cost of Risk improved to 0.8% in 2014  from 1.86, while Return on Equity rose to 9%  from 5.5% of the previous year.

The bank recorded  Liquidity Ratio of 38% compared to regulatory minimum of 30% while net loans to customer deposits improved to 66.1% from 52.8% during the same period.


Capital Adequacy Ratio

Capital Adequacy Ratio (CAR) of 23.2%, based on Basel II computation, compared  with the minimum regulatory CAR of 15 per cent.

Further capital structure breakdown showed that total qualifying tier 1 capital rose from  N140 billion from 2013 to N149.1 billion, while qualifying tier 2 capital  increased from  N46.8 billion to N49.7 billion in 2014. Consequently, total tier 1 and tier 2 capital grew from N187.2 billion to N198.9 billion.

The total risk weighted assets comprising  credit risk, market risk, and operational risk weighted assets  dropped to N821.5 billion in 2014 from N860.3 billion recorded in the previous year.


Segment Results

However, a cursory look into the segment results of its operations showed that the interest expense has drilled a hole, to the extent of N55.5 billion, on the segment bottom line.  For instance, of the combined interest income of the segment which stood at N104.3 billion, interest expense  claimed 53.2 per cent.  Specifically, interest expense on interest incomes from retail banking, corporate banking and investment banking stood at 64 per cent, 38 per cent, and  30 per cent respectively. Even so, interest expense from the public segment takes the biscuit, accounting for more than 246  per cent of the interest income. Compared with the previous year’s segment analysis, even though the combined income expense has maintained an even keel of N55.4 billion, that of retail banking has increased by  86 per cent during the same period. While concerted efforts have been made to prune down  segment liabilities in some units, compared to the previous year,  the  liabilities  in retail banking has jumped by  over 105 per cent  in 2014.



The bank’s operations appear to be hamstrung by its high debt profile. These include loans obtained from Standard Chartered Bank, London;  Citibank and HSBC London; Proparco Paris; African Development Bank and Citibank International Limited.  Some particulars of   these debts are as follows:

The amount of N6.025 billion (USD33 million) 2013 (N6.424 billion) representing the outstanding balance in the on-lending facility granted to the Bank by Standard Chartered Bank (SCB) London on November 4, 2013  to mature on November 4, 2015 at an interest rate of Libor (London Interbank Offer Rate) plus 4.25% per annum.

The amount of N18.591 billion (USD101 million), 2013 (N16.060 billion) representing the outstanding balance in the syndicated on-lending facility granted to the Bank by Citibank London and HSBC London on  April 24, 2013 to mature April 2015 at an interest rate of Libor plus 4.50% per annum.

Also, the amount of N7.460 billion (USD41 million,) 2013 (Nil) representing the outstanding balance in the syndicated on-lending facility granted to the Bank by Proparco Paris on  April  4, 2014  to mature   April  4,2016 at an interest rate of Libor plus 4.75% per annum.


Other indebtedness are as follow:

The amount of N7.447 billion (USD40 million), 2013 (Nil) representing the outstanding balance in the on- lending facility granted to the Bank by ADB on October  6, 2014 to mature  October  6,  2021 at an interest rate of Libor plus 4.75% per annum.

The amount of N23 billion (USD125 million), 2013 (Nil) representing the outstanding balance in the syndicated on-lending facility granted to the Bank by Citibank, N.A. London Branch, Commerzbank Luxemburg, HSBC Bank Plc and Standard Chartered Bank on December  22, 2014 to mature December  22, 2016. This is renewable every 2 years at an interest rate of Libor plus 4.5% per annum.

Also,  the amount of N54.994 billion, 2013 (N47.844 billion) representing the amortised cost of a USD300 million, 5 year, 6.875% Eurobond issued at 99.48 percent in May 2013. The principal amount is repayable in May 2018, while the coupon is paid semi annually. The purpose of the debt issuance is to finance foreign currency lending to the Power and Oil sectors of the economy of Nigeria


Quarter 1  Result

Meanwhile, Fidelity Bank has submitted its first quarter  result for the period ended March 31, 2015 to the management of The Nigerian Stock Exchange (NSE).

The bank announced a profit before tax of N4.7 billion , up from N4.4 billion recorded in the comparable period of 2014.

Gross earnings increased by 12.5 percent to N34.8 billion from N30.9 billion reported in 2014; fee income increased by 54.0 percent to N9.2 billion from N6.0 billion; while operating income increased by 14.4 percent to N21.6 billion from N18.9 billion in 2014.

Profit after tax rose by 5.6 percent to N4 billion from N3.8 billion; net loans increased by 1.0 percent to N546.9 billion from N541.7 billion; pushing up total expenses by 12.9 per cent to N14.4 billion from N12.7 billion

Total equity increased by 2.9 percent to N178.0 billion from N173.1 billion, total assets increased by 0.8 percent to N1,196 billion from N1,187 billion in December 2014.

However, deposits declined by 2.7 per cent to  N797.5 billion from N820 billion in December 2014.

The bank’s Managing Director and Chief Executive Officer, Nnamdi Okonkwo, commenting on the result said:  “In the quarter ended March 2015, we built on the successes of the last financial year as we remain committed to delivering sustainable earnings and improved asset quality. Notwithstanding the headwinds witnessed in our industry, we recorded a 5.6 percent growth in profit before tax to N4.7 billion putting us on the right path to achieving our 2015 FYE guidance.

“Deposits declined by 2.7 percent in the quarter under review as we continue to replace more expensive wholesale funds with cheaper retail deposits. Our retail banking strategy continued to deliver impressive results as core retail liabilities increased by 7.7 percent in Q1 2015, while E-banking income from increased cross-selling of products to the expanding retail customer base also grew by 49.3 percent.

“The bank’s risk assets grew marginally by 1.0 percent with Non Performing loans (NPL) declining to 3.8 percent and cost of risk at 0.8 percent”.



Fdelity Bank Plc began operations in 1988 as Fidelity Union Merchant Bank Limited. By 1990, it 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, in 1999, it converted to commercial banking and changed its name to Fidelity Bank Plc. It became a universal bank in February 2001, with a license to offer the entire spectrum of commercial, consumer, corporate and investment banking services.