Fidelity Bank targets retail, SMEs as corporate margins narrow

Fidelity Bank Plc is raising its play in the retail, commercial and small and medium enterprises sector, where opportunities abound for higher returns, John Obi, executive director, corporate bank, has said.

He said  corporates are witnessing shrinking margins.

The new policy does not mean that Fidelity is de-emphasising its operations in the corporate sector, but will seek to operate along the entire value chain in each industry to maximise the opportunities emerging in the areas where it operates, Obi explained in an interview in Lagos on Thursday.

The bank will use its operations in the corporate sector to complement the new initiative, he added.

“As it is now, retail and commercial banking and SMEs appear to be the game changer because the margins in lending to these ones are much higher than margins in lending to corporates,” Obi said.

“Once you get the right structure to work with them, you find out that it makes life much easier for you.”

Margins are shrinking in corporate banking because of the financial sophistication of the managers of those companies, as well as increasing competition, according to Obi.

“In the corporate bank, we don’t charge high rate and then the people you are banking are very knowledgeable about the system. They know how to price their risk, so you find out that the margins are thinner.  And because quite a number of banks in the country are also involved in the corporate bank, competition is high,” he said.

In the telecoms sector, where the Fidelity is quite active with the operators, the bank will seek to extend its hold by also engaging the major distributors and dealers who sell the call cards for these companies, Obi explained.

While these players down the value chain already have those who are banking them, “we want to make sure we get” them ,  Obi said. “And that is where the retail and commercial play comes in.”

Fidelity will grow its loan book by between 15% and 20% this year, managing director and chief executive officer, Nnamdi Okonkwo, said at a meeting between the bank’s management and financial analysts in Lagos last week.

This growth will cut across all the divisions of the bank, including corporate banking, according to the bank.

Growth opportunities exist in the Nigerian economy in such sectors as oil and gas, power, telecoms, manufacturing, among others, and these are the areas where the bank hopes to deploy the loans it plans to make this year, Obi said.