Key Highlight
- Fidelity Bank is one of Nigeria’s largest banks and has shown consistent profitability growth over the years.
- However, like most businesses, the bank faces a major challenge due to the high cost of business operations hinged on energy prices, naira devaluation and the general price level.
- We sought to find out how the bank has coped in a very challenging business environment and what its operational outlook is for 2023.
Fidelity Bank Plc is one of Nigeria’s largest commercial banks with a total asset of about N3.9 trillion. Nairametrics considers the bank one of the most improved banks over the last 5 years, with profits surging from about N17.7 billion in 2017 to about N35.5 billion in 2021.
The bank is yet to release its 2022 audited accounts due to the need to meet regulatory obligations. Recently, it announced that it will be unable to meet the deadline for publishing its FY 2022 audited financial statement until it received approval from the CBN.
However, in its 2022 FY interim results, the bank reported gross earnings of N335.8 billion up from N250.7 billion in the prior year. Profit after tax was also N47.1 billion, up from N35.5 billion in the prior year. The bank’s share price has also risen from about N1.94 5 years ago to over N5 today, more than 150% growth.
Given the above, Nairametrics spoke to the Chief Financial Officer of Fidelity Bank, Victor Abejegah, to get a glimpse of the company’s outlook for 2023 as well as get some insights into the challenges it may have faced in 2022.
Nairametrics: How is Fidelity Bank planning to crack into Tier One banks in the country?
Victor Abejegah: Well, it depends on how you look at it. A recent report by Proshare, rated the bank as a Tier 1 bank as we had attained the parameters used for rating Tier-1 banks in Nigeria. We achieved this by expanding our market share to 6 – 7% across key indices and consistently recorded double-digit growth in key balance sheet lines in the last 5 years. This has been widely reported by the analyst community. In their report, Proshare recalibrated the tier classification in the banking industry and Fidelity was ranked as a tier 1 bank along with 5 other banks.
Nairametrics: What is your profit outlook for 2023?
Victor Abejegah: Given our status in the industry, our mid to long-term objectives are wrapped around: providing unrivalled customer services anchored on deep segment experience and solid technological distribution infrastructure; strengthening our market share in niche Corporate Banking sectors; Info Tech, Telecoms, and other fast-growing sectors etc; further leveraging value chain of our corporate clients to extract maximum value for our commercial/SME and private banking business; and expanding our service touchpoints beyond the Nigerian market and providing straight-through services that meet and exceed the needs of our growing clientele.
Nairametrics: What were the challenges faced in 2022?
Victor Abejegah: A major challenge faced by most businesses in 2022 was the high cost of business operations hinged on energy price, naira devaluation and the general price level. This resulted in a double-digit increase in our operating expenses during the year. In addition, the Monetary Policy Rate was adjusted upward 4 times in 2022, which increased our funding cost. However, we were able to boost earnings above funding costs by mobilizing low-cost deposits to 83.6% from 74.5%.
Nairametrics: How are you coping with rising inflation?
Victor Abejegah: Fidelity adopts a nimble and customer-centric approach to managing rising inflation, which allows us to optimize our operating expenses without passing on the cost to customers.
Our approach includes locking in long–term supply contracts at fixed or semi-cost; a flexible work environment, which has helped to keep our overhead costs low and process automation and innovation.
We also recognize the negative impact rising inflation could have on our staff and have continued to provide soothing relief to them to ensure our service delivery remains unparalleled.
Nairametrics: How are your borrowers responding to rising inflation?
In the last 3 – 5yrs, we have maintained a relatively low NPL ratio with the cost of risk far below the industry average. We have achieved this by riding the business cycle together with our customers (hands in cloves) and providing the needed support for them. I will say our customers are responding to the rising inflation well with us as their trusted financial partner.
Nairametrics: What is the impact of Fintech on your business and how do you plan to compete with them?
Victor Abejegah: We are not in competition with Fintech in a sense. For us, they present a unique opportunity for collaboration and co-creation. To the extent that the new paradigm is predicated on being able to provide personalized and technology-driven services, we have deployed an API strategy that allows us to integrate very seamlessly with other providers that can deliver value to our customers.
So, for anyone whose services complement ours, we are more than willing to partner with such a person and deliver unparallel service to our customers. We are already doing that with several partners. What is critical to us is the ability to bring value to our customers and meet them at the point of relevance. We see them as partners in skill and partners in service, and we are open to collaborating with them whenever and however it’s possible.
In other news, Fidelity Bank recently announced that its Private Placement of 3.04 billion Ordinary Shares of 50 Kobo each at N4.60 per share was 100% subscribed. The Private Placement was opened on Wednesday, February 22, 2023, and closed on Thursday, February 23, 2023.