FX hurts Fidelity’s earnings but assets increase

The current foreign exchange policy has adversely impacted Fidelity Bank Plc’s gross earnings, with a decline of N4.2 billion in forex income.

The bank’s financial result for the first quarter of 2015 shows that it recorded a profit before tax of N4 billion, about N700 million less than it posted a year ago.

In a statement by the bank on the financial performance, the bank said: “The quarter is reflective of the continued slowdown in business activities due to lower government revenues arising from depressed oil prices, lower interest rate regime and weaker macro-economic environment.

“We continued to improve the earnings capacity of our balance sheet (fund based income) despite the decline in fee income.

“Though gross earnings declined by 5.5% (due to a N4.2 billion drop in our foreign exchange income), net interest income increased by 30.0%, e-banking income by 216% and net operating income by 6.2% respectively.”

Fidelity Bank said it ensured a reduction in funding costs, outpacing the decline on yields on earning assets.

“This improved our NIM to 7.3% from 6.9% in the 2015FY,” the bank said.

“Though operating expenses increased by 15.7% YOY, expense growth was flat when compared with 2015FY quarterly annualized figures and actually declined by 24.1% from Q4 2015.

“Our cost of risk remained within our guidance of 1.0% as we saw a decline of our risk asset portfolio in most sectors due to the weaker macro-economic indices, overall loan growth of 2.1% was basically driven by public sector on-lending facilities.

“Our NPL ratio declined to 4.3% largely due to the growth in the loan book while our regulatory ratios remained well above the set thresholds, our capital adequacy ratio at 19.3% gives us ample leverage to take advantage of emerging business opportunities.”

Fidelity Bank saw total deposits increase by 1.9%, while savings deposits grew by 13.4% in the quarter under review.

The bank committed to redesigning its systems and processes to enhance service delivery, as well as to “cost optimization initiatives to reduce expenses by five percent, proactive risk management, increased customer adoption/migration to our digital platforms and increasing our retail banking market share”.