Banking
Fitch Affirms Fidelity Bank at ‘B-‘, Gets Positive Reviews
By Dipo Olowookere
Nigerian medium-sized lender, Fidelity Bank Plc, has had its Long-Term Issuer Default Rating (IDR) rating affirmed by Fitch Ratings at ‘B-‘ with the outlook stable.
Fitch said in a statement that the bank’s Viability Rating (VR) has been also affirmed at ‘b-‘ and Support Rating at ‘5’, while its National Ratings were also confirmed.
Fidelity Bank is a financial institution with a market share of around 4%-5% of domestic loans and deposits. Its small franchise limits the size and scope of business it can undertake and the bank has developed a niche focus on selected corporate business sectors and relatively underbanked sectors, such as the financing of SMEs. Fidelity Bank operates solely in Nigeria.
Lending to SMEs in Nigeria requires more flexible underwriting standards to address their limitations and underwriting standards are adapted to meet the needs of the bank’s niche customer base.
Despite a focus on SMEs, Fidelity Bank’s impaired loans/total loans ratios (5.9% at end-September 2017) are broadly in line with the average for rated second-tier Nigerian banks (around 6.5%). Asset quality trends are favourable, reflecting loan restructuring and some recoveries in 2017. The sustainability of this trend will become clear over time.
Fidelity Bank’s earnings and profitability ratios are in line with the sector averages although performance metrics for second-tier banks vary considerably. There were some positive earnings developments in 2017.
Margins are improving, loan impairment charges are reducing as a percentage of pre-impairment operating profit and investments in technology are helping to improve cost/income ratios.
Fidelity Bank’s funding profile is fairly typical of a smaller Nigerian bank. Franchise limitations make deposit collection more difficult and Fidelity’s loans/deposit ratio hovers around 100%. Depositor concentrations are fairly high, with the top 10 deposits typically representing about 13% of total customer deposits. Low-cost demand and savings deposits represent around 75% of customer deposits, which is positive. Naira liquidity ratios are at levels that are marginally above the 30% regulatory minimum.
Access to foreign currency (FC) was particularly tight for Nigerian banks in 2016 but the bank did not delay any payments on its FC trade-related and bank obligations, even at the height of the liquidity squeeze.
The FC liquidity situation eased in Nigeria throughout 2017 and in October Fidelity Bank raised a senior five-year $400 million bond on the international capital markets. This has eased the bank’s FC liquidity position. Funds raised were partly used to repay $256 million of a $300 million Eurobond bond originally maturing in May 2018.
Loan loss cover ratios (68% at end-September 2017) are slightly lower than peer averages (75% – 80%).
Fidelity Bank meets minimum 15% capital ratios requirements, but the bank’s ability to withstand even moderate shocks may be limited considering below average loan-loss cover ratios, high single name concentrations and potential asset-quality deterioration.
Fidelity Bank’s National Long-Term Ratings reflect its creditworthiness relative to the country’s best credit and to peers operating in Nigeria.
Fidelity Bank’s senior unsecured bonds are rated in line with the bank’s IDRs. In our view, the likelihood of default on these notes reflects the likelihood of default of the bank. The Recovery Rating (RR) assigned to these bonds is ‘RR4’, indicting average recovery prospects.
Fitch believes that sovereign support to Nigerian banks cannot be relied on given Nigeria’s (B+/Negative) weak ability to provide support, particularly in FC. In addition, there are no clear messages from the authorities regarding their willingness to support the banking system. Therefore, the Support Rating Floor (SRF) of all Nigerian banks is ‘No Floor’ and all Support Ratings (SR) are ‘5’. 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.
By Modupe Gbadeyanka
About N3.6 trillion has been repaid to the Central Bank of Nigeria (CBN) by the Asset Management Corporation of Nigeria (AMCON) since its inception in 2010.
This information was revealed by the chief executive of AMCON, Mr Gbenga Alade, during a media parley to update the press on the activities of the agency.
Mr Alade said at the moment, the organisation still owes the central bank about N3 trillion for toxic assets of banks in the country.
He praised the organisation for its asset recovery drive, stressing that when compared with others across the world, Nigeria has done well.
“It is important to stress that the corporation has done tremendously well, especially when compared to other notable government-owned Asset Management Corporations around the world.
“Based on the balance at purchase, AMCON outperformed other Asset Management Corporations all over the world by achieving over 87 per cent in recoveries despite the unique challenges associated with debt recovery in Nigeria.
“The Malaysian Danaharta, which is adjudged one of the best performing Asset Management Corporation’s, only achieved 58 per cent. The Chinese Asset Management Corporation, despite its stricter laws, achieved just 33 per cent.
“Only the Korean Asset Management Corporation (KAMCO), South Korea, has achieved more recoveries than AMCON, with about 100 per cent. This was due to their brute force with which they chased the obligors.
“Despite KAMCO’s recovery records, the agency is still operational to date with slight realignments in its mandate.
“Other noted Asset Management Corporations that have transitioned into a perpetual institution of the various governments include, China Asset Management Company, Federal Deposit Insurance Corporation (FDIC) USA, and KFW Germany.
“So, gentlemen, without sounding immodest, AMCON has done well, and we will not relent until all the outstanding debts are fully realized,” Mr Alade stated.
On the financial performance of AMCON, he said last year, the firm posted a revenue of N156.25 billion and operating expenses of N29.04 billion, while for the 2025 fiscal year should be a revenue of N215.15 billion and operating expenses of N29.06 billion.
By Modupe Gbadeyanka
One of the non-interest banks in Nigeria, The Alternative Bank (AltBank), has opened a new branch in Effurun, Delta State.
The new office will serve the Edo-Delta region and provide purposeful banking and real financial empowerment for individuals, entrepreneurs, and businesses, a statement from the firm stated.
The lender disclosed that the Effurun branch is a bold move in its mission to reshape banking in Nigeria.
The launch was graced by key dignitaries, including the Ovie of Uvwie Kingdom, Emmanuel Ekemejewa Sideso Abe I; the Chairman of Uvwie Local Government, Anthony O. Ofoni, represented his vice, Andrew Agagbo; and the Special Adviser to the Governor of Delta State on Community Development, Mr Ernest Airoboyi; amongst others.
The Divisional Head for South at The Alternative Bank, Mr Chukwuemeka Agada, emphasised the institution’s commitment to Warri and its surrounding communities.
“By establishing a presence here, we are initiating a transformation in the way banking serves the people of Delta. Our purpose-driven approach ensures that customers’ financial goals are not just met but exceeded,” he stated.
“This branch represents our pledge to empower Warri’s dynamic businesses and families, providing them with the tools to grow without compromise,” Mr Agada added.
“We understand the heartbeat of this community, and we are excited to integrate our bank into the fabric of this dynamic region,” he stated further.
On his part, the representative of the Ovie, Mr Samuel Eshenake, challenged the bank to facilitate development and employment within the Effurun community.
The Regional Head for Edo/Delta at The Alternative Bank, Mr Akanni Owolabi, embraced this challenge, pledging that the bank will work sustainably to drive local commerce.
“At The Alternative Bank, we are committed to being an active partner in the development of Effurun. We see this branch as a catalyst for creating opportunities, driving employment, and supporting the growth of local businesses.
“Our mission is to empower this community, ensuring that every step forward is one of progress, prosperity, and shared success.”
By Aduragbemi Omiyale
A partnership aimed to enable seamless, real-time and secure transactions for cardholders across Africa and the rest of the world has been entered into by Payattitude and PAPSSCARD, the card scheme initiative of the Pan-African Payment & Settlement System (PAPSS).
The collaboration will allow Payattitude cards issued by banks and other deposit-taking institutions to be co-branded with PAPSSCARD, Discover, Diners and Pulse for acceptance across their networks in Nigeria, Africa and worldwide.
As an initiative of the African Export-Import Bank (Afreximbank) and a key financial infrastructure supporting the African Continental Free Trade Area (AfCFTA), the PAPSSCARD scheme will facilitate instant cross-border payments in local currencies.
“This partnership reflects our commitment to cross-enterprise alliances and enabling inclusive, efficient, and borderless payments across Africa and the world
“With Payattitude, Nigerian cardholders and financial institutions can now enjoy the benefits of a Nigerian card that can be used worldwide,” a director at Payattitude, Dr Agada Apochi, said.
The acting chief executive of PAPSSCARD, Mr John Bosco Sebabi, said the aim is “to connect African payment ecosystems, reduce the cost and inefficiencies of cross-border payments, and strengthen African sovereignty over payments infrastructure.
“Collaborating with Payattitude, a key innovator in Nigeria’s payment space, represents a significant step towards a more unified African payment landscape.”
The chief executive of PAPSS, Mr Mike Ogbalu, said, “By bringing together PAPSSCARD’s robust cross-border payment capabilities with Payattitude’s leadership in the Nigerian digital payments, we are taking tangible steps toward building a single African market where individuals and businesses can transact easily and securely, both within and beyond Africa.”
Payattitude is the first-in-kind Nigerian Payment Scheme to pioneer multibank App and USSD Code *569#.
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