Fidelity Bank grows Q3 profit ‘despite TSA pain’

Fidelity Bank Plc’s third quarter result shows increase of 11 percent and 1.8 percent in its gross earnings and profit respectively, despite regulatory and economic pressure from implementation of federal government’s treasury single account (TSA).

Though the bank’s gross earnings grew from N96 billion in the nine month period to N106.6billion in the third quarter of 2015, it also experienced a decline of N75 billion in its deposit base due to TSA implementation during the quarter.

Its profit after tax (PAT) went up by 1.8 percent to N11.4 billion as against N11.2 billion made in the comparable period of last year.

Nnamdi Okonkwo (pictured), managing director and chief executive officer, Fidelity Bank, said business operations during the period under review were constrained by regulatory and economic pressures arising from currency devaluation concerns, tight monetary stance, and implementation of TSA.

This situation, Okonkwo explained, had culminated in negative earnings in the banking sector, a situation which the bank successfully outwitted, growing its year-on-year (y-o-y) fund and fee based income profitability resulting by 3 percent.

“Despite these challenges we continued with the disciplined execution of our medium term strategy. Profit before Tax (PBT) increased to N13.8bn despite the decline in our total assets due to the TSA implementation,” he said.

“Interestingly, net interest income increased by 10.8 percent y-o-y to N40.6 billion but declined by 4.8 percent q-o-q due to the reduction in its earning assets.”

He added that the bank continued to increase yields on earning assets faster than growth in funding costs, which improved its NIM (Net Interest Margin) to 6.9 percent in third quarter of 2015.

This growth put the bank in pole position to attain its 2015 target of 7.0 percent, while net fee income increased by 7.7 percent y-o-y to N21.4 billion but declined by 4.2 percent quarter-on-quarter (q-o-q) due to lower FX (Foreign Exchange) income on the back of trading restrictions in the market.

Total equity increased by 4.2 percent to N180.3 billion from N173.1billion as at December 2014, operating income stood at N62.0 billion, a 9.7 percent rise compared to N56.5 billion in the nine month period.

Okonkwo said “electronic banking income increased by 128.4 percent y-o-y to N4.5 billion and 115.4 percent q-o-q”, due to online banking and a rise in international card transactions.

The bank’s spending grew by 10.3 percent y-o-y to N44.8 billion and 6.3 percent q-o-q from cost lines like staff remuneration, regulatory costs (NDIC/AMCON) and branding/advertisement costs.

Cost-Income Ratio declined to 71.6 percent in 9M 2015 from 74.2 percent in the 2014 FY as revenue growth outpaced the increase in operating cost.

Net Loans, on the other hand, grew marginally by 1.1 percent YTD to N547.7 billion but declined by 4.4 percent q-o-q.

“This is as a result of customer pay-downs, amplified by the re-alignment of their respective business model and a cautious approach to asset creation in consonance with the weaker macro environment,” Okonkwo added.

Speaking on the bank’s new identity unveiled in September, Okonkwo said “our new corporate identity is inspired by our past with our eyes set on the future and always staying true to our vision.

“Our new identity comes with a renewed brand promise…your aspiration may prove to be a tough job but someone’s got to do it”.