Fidelity Bank Expects Lower FX Income, NIM in H1 2020

Fidelity Bank Nnamdi Okonkwo

By Dipo Olowookere

Fidelity Bank Plc has said it is not expecting to get higher foreign exchange (FX) income in the second half of 2020.

This disclosure was made by the financial institution during its analyst call last week in Lagos, where the MD/CEO of the company, Mr Nnamdi Okonkwo, also stated that much is not anticipated from the net interest margin (NIM) for the rest of the financial year.

Business Post reports that the NIM measures the difference between the interest income generated by a bank and the amount paid as interest to other banks. The NIM mainly shows how well a lender utilises its assets to produce profit.

“We do not expect to have the same level of FX income coming through in Q3 and Q4,” the bank executive informed participants at the conference monitored by Business Post.

According to the audited results of Fidelity Bank for the first half of the year ended June 30, 2020, the FX income grew significantly by 84.8 per cent to N4.5 billion from N8.3 billion.

This was due to the significant 223.4 per cent increase in the FX income recorded in the second quarter of the year; N6.4 billion in Q2 2020 versus N2.0 billion in Q1 2020 and the second quarter rise was largely due to the currency devaluation by the Central Bank of Nigeria (CBN).

It was observed that between April 2020 and June 2020, the significant growth in the FX income of Fidelity Bank contributed largely to the 120.6 per cent growth in its net fee income of N12.6 billion versus N5.7 billion recorded in Q1 2020.

Speaking on the NIM, the Chief Operations and Information Officer of Fidelity Bank, Mr Gbolahan Joshua, stated that though there was an improvement to 6.4 per cent in H1 2020 from 6.2 per cent in FY 2019, the lender is not expecting this to go higher for the rest of the year.

However, he said the management expects the recent downward review of savings rate to have about 0.20 per cent positive impact on the bank’s NIM.

He attributed the 6.4 per cent improvement in the H1 2020 NIM to the 2 per cent decline in “average funding cost despite a drop in yields on earnings assets.”

It was stated that during the first half of the year, the drop in average funding cost was due to a combination of 2.7 per cent decline in the average cost of deposits to 4.0 per cent and 0.40 per cent drop in average borrowing cost to 5.1 per cent.

“The NIM is still strong at 6.4 per cent as at H1 but we think it is still going to go down slightly as we get into H2,” Mr Joshua said at the call.

In terms of its expenses, the bank said it expects a lower OPEX because, according to the CEO, Mr Okonkwo, “we have taken the AMCON cost in full in H1. This means we will be free of any AMCON charge for the rest of the year.”

By December 2020, Mr Okonkwo will be retiring as the MD/CEO of Fidelity Bank, while Mrs Nneka Onyeali-Ikpe is expected to take over from January 2021.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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