Banking
Fitch Affirms Fidelity Bank at ‘B-‘; Outlook Stable
By Dipo Olowookere
Fidelity Bank Plc’s Long-Term Issuer Default Rating (IDR) has been affirmed at ‘B-‘ by Fitch Ratings with the Outlook Stable. A statement yesterday from Fitch said it also affirmed Fidelity Bank’s National Long-Term Rating at ‘BBB(nga)’.
According to Fitch, the IDRs of Fidelity Bank are driven by its standalone creditworthiness, as defined by its Viability Rating (VR) as with that of other Nigerian banks, which are highly conditioned by Nigeria’s operating environment, with the fragile economic recovery restraining banks’ growth prospects and asset quality.
The statement said Fidelity Bank’s VR further reflects a moderate franchise, weak profitability, potentially vulnerable asset quality, some weaknesses in the bank’s funding and liquidity profile as well as adequate capitalisation.
It added that the stable outlook reflects Fitch’s base case expectation that Fidelity Bank’s credit profile is unlikely to change significantly over a one-to-two year period. Fidelity Bank operates exclusively in Nigeria, accounting for 4 percent of banking system assets at end-2017.
The bank’s impaired loans (stage 3 loans under IFRS 9) ratio (7.5% at end-1H18) is slightly lower than the sector average. However, Stage 2 loans are high, measuring at 21% of gross loans at end-1H18, as is the case for many Nigerian banks. Reserve coverage of impaired loans (88% at end-1H18) increased significantly following the implementation of IFRS 9, which we view positively.
Fidelity Bank is exposed to large credit concentrations. The 20-largest loans represented 53% of gross loans and 252% of Fitch Core Capital (FCC) at end-1H18. Fidelity Bank is also exposed to the oil sector, which accounted for 23% of gross loans at end-1H18.
Profitability is weak, but in line with most similarly-sized peers’. Fidelity Bank’s operating profit/risk-weighted assets ratio was 1.8% in 2017, which is weak by emerging markets standards. Weak profitability metrics reflect a low net interest margin, given a high cost of funding that is reflective of Fidelity Bank’s more expensive deposit base. Weak profitability also reflects a high cost-income ratio (68% in 2017) and loan impairment charges that have eroded around 30%-40% of pre-impairment operating profit in recent years.
“We view Fidelity’s capital position as no more than adequate with a FCC ratio of 16.8% at end-1H18. Capital, in our view, is vulnerable to deterioration in asset quality,” Fitch said.
It noted that Fidelity Bank’s loans/customer deposits ratio (92% at end-1H18) is higher than peers’, explained by a higher proportion of non-deposit funding.
In 2017, Fidelity Bank issued a five-year senior unsecured $400 million bond, easing its foreign currency liquidity position. Of this, $256 million was used to repay a $300 million Eurobond in May 2018. Near-term debt repayments are limited, with the next large repayment being in 2022 when the Eurobond becomes due.
Fitch said single-depositor concentration is in line with peers’, with the 20 largest customer deposits accounting for 20% of the total at end-1H18.
It added that Fidelity Bank’s senior unsecured debt is rated in line with the bank’s Long-Term IDR and, therefore, has been affirmed at ‘B-‘.
In Fitch’s view, the likelihood of default on these instruments reflects the likelihood of default of the bank. The Recovery Rating (RR) of ‘RR4’ indicates average recovery prospects in case of default.
Fitch said it believes that sovereign support to Nigerian banks cannot be relied upon given Nigeria’s weak ability to provide support, particularly in foreign currency.
In addition, there are no clear messages of support from the authorities regarding their willingness to support the banking system. Therefore, the Support Rating (SR) and Support Rating Floor (SRF) are ‘5’ and ‘No Floor’, respectively.
“This reflects our view that senior creditors cannot rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable,” the rating agency said.
It said Fidelity Bank’s Long-Term IDR is sensitive to a change in its VR, pointing out that downside pressure is most likely to result from a material weakening of loan credit quality, including the migration of stage 2 loans to stage 3, putting pressure on capital adequacy.
By Adedapo Adesanya
Guaranty Trust Holding Company (GTCO) Plc recently completed the raising of N209 billion out of its targeted N400.5 billion public offer in the ongoing recapitalisation efforts directed by the Central Bank of Nigeria (CBN) to create resilient banks amid rising external shocks in the global environment.
Speaking on this development, the chief executive of the firm, Mr Segun Agbaje, said the equity capital raising has set a strong foundation for accelerated development.
“We extend our sincere appreciation to our new and existing shareholders, as well as the regulatory authorities, for their unwavering support during this initial phase of our equity capital raise.
“The strong participation and successful capital verification exercise and allotment process reaffirm the confidence investors have in our fundamentals and execution capabilities.
“This sets a solid foundation for accelerating our strategic roadmap, which aims to pivot the Group for transformational growth and unlock greater value across the Group’s Banking and Non-Banking businesses,” the banker stated.
GTCO had launched a public offer of 9.0 billion ordinary shares of 50 Kobo each at N44.5 per share, with N209.41 billion realized, representing 52.3 per cent of the total offer size.
The offer garnered substantial interest from domestic retail investors, raised a total of N209.41 billion from 130,617 valid applications for 4.706 billion ordinary shares, fully allotted.
“This milestone concludes the first phase of GTCO’s phased equity capital raise programme, which is structured on a balanced allocation strategy based on an equal split between institutional and retail investors. This balanced approach aligns with GTCO Plc’s commitment to fostering a well-diversified and robust investor base,” GTCO stated.
The announcement followed completion of the capital verification exercise conducted by the CBN and the approval of the basis of allotment of the offer by the Securities and Exchange Commission (SEC).
By Modupe Gbadeyanka
No fewer than 30 pregnant women at the Mushin Primary Health Centre in Lagos have received maternity kits from Fidelity Bank Plc.
The gesture from the financial institution is part of its efforts to support improved maternal health in the metropolis.
It was gathered that the items were given to the beneficiaries through the Fidelity Helping Hands Programme (FHHP), a Corporate Social Responsibility (CSR) initiative of the lender aimed at promoting staff involvement in community development under the Great Minds Inductees Class.
“The project was borne out of the need to support pregnant women by providing them with essential materials for a safe delivery,” the Divisional Head for Brand and Communications Division at Fidelity Bank, Mr Meksley Nwagboh, explained.
“Maternal mortality remains a significant public health challenge in Nigeria, with the country accounting for a substantial proportion of global maternal deaths.
“In fact, a 2023 United Nations report indicate that nearly 28.5% of global maternal deaths occur in Nigeria.
“This is an alarming statistic and as a bank given to improving the welfare of our host communities, we deemed it fit to support initiatives to address this challenge in the Mushin community with this donation,” he stated.
One of the beneficiaries, Mrs Mary Olusanya, expressed her heartfelt appreciation for the bank’s support.
“I appreciate Fidelity Bank for helping us. Many pregnant women cannot afford these kits, but this donation ensures that we can have safe deliveries and better healthcare,” she said.
The Medical and Health Officer for Mushin Local Government Area, Dr Kayode Odufuwa, said, “This intervention by Fidelity Bank will help reduce maternal mortality and encourage more women from less-privileged backgrounds to register for antenatal care.”
“On behalf of the Chairman of Mushin LGA, Mr Emmanuel Bamgboye, we want to express our heartfelt gratitude to Fidelity Bank for extending its donation of maternity kits to pregnant women at this centre.
“We appeal for continued collaboration with the Bank to further strengthen healthcare services within the area,” he stated.
On her part, the Apex Nurse and Deputy Director of Nursing Services in Mushin LGA, Mrs Bolanle Odunlami, said, “The donation is a much-needed relief for many mothers who are unable to afford essential delivery kits. Fidelity Bank has truly shown empathy by coming to the aid of our patients, and for that, we are extremely grateful.”
Business Post reports that through the FHHP, employees of the bank identify projects that benefit their immediate community and gather funds to implement them.
The bank’s management then matches this contribution with an equivalent amount and allocates it for the chosen projects.
By Aduragbemi Omiyale
The management of First Bank of Nigeria (FBN) Holdings Plc has assured that the boardroom crisis rocking the company would not affect its operations.
Recall that a group of shareholders with 10 per cent equity stake in the financial institution asked for an Extra-ordinary General Meeting (EGM) under section 215 (1) of CAMA for the removal of the chairman of the board, Mr Femi Otedola, and a non-executive/deputy chief executive of Geregu Power Plc, Mr Julius Omodayo-Owotuga.
They argued that Mr Otedola, who owns Geregu Power, was plotting full control of FBN Holdings by planting his loyalists on the board.
The aggrieved shareholders pointed out that the businessman was planning to take charge of the proposed private placement of N360 billion shares of the firm, accusing him of removing those he felt were blocking his way.
To calm nerves, FBN Holdings issued a statement on Thursday, informing its stakeholders that the crisis does not pose a threat to its services.
“This matter does not in any way impact the operations of the company, and all the businesses within the Group continue to provide uninterrupted services to its customers.
“We assure our valued customers, shareholders, investors, other stakeholders and the general public that we are taking all necessary steps to protect the interests of the company and its subsidiaries.
“The Group’s performance continues to improve, resulting in a higher market capitalisation even as we work towards surpassing the regulatory minimum capital well ahead of the deadline.
“In the meantime, the Registrar and Lead Issuing House are collating the returns from all receiving agents in respect of the company’s rights issue which closed on December 30, 2024.
“FBN Holdings and its subsidiaries remain committed to the highest level of corporate governance,” the notice signed by its scribe, Mr Adewale Arogundade, said.
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