Thursday, November 03, 2016 5:22 PM / Research
The microeconomic challenges that influenced business outlook during the 2015 financial year are largely unresolved in 2016 as bearish macroeconomic conditions had shown. Nigerian Banks are still facing headwinds within a tougher operating environment.
The recessionary environment, shortage of FX, technical devaluation and floating of the Naira, increase in MPR by 200bpts to 14% in the face of growing inflation and sustained negative GDP growth had impacted and still impacting both top-line and bottom-line of banks across board.
As a result of these mounting challenges, Fidelity Bank Plc sustained mixed performance outlook, with modest top-line growth of 3% to close at N110.35billiion while the bank sustained negative growth in its bottom-line. The bank posted 28.7% decline in PBT to close at N9.84billion.
The unimpressive bottom-line performance could be traced to significant surge in impairment losses by 102% to the tune of N7.96billion. This gives us much concern about the qualities of risk assets of the bank as cost of risk moved up to 1.5%.
Also, we observed that the NPL ratio had gone up to 4.5% from 3.4% recorded in half-year earnings report. Though, NPL ratio still closed below regulatory threshold of 5%. The Non-performing Loan has climbed from N26.00bilion to N34.00billion.
Summarily, below are the key takeaways from the Q3 2016 presentation as presented by the management of the bank:
· The impairment losses is due to weakness in macro economics
· Key exposures have been restructured adequately
· 60% to 70% of exposures in oil &Gas sector have been restructured
· The bank is currently meeting 15% of its FX obligations to customers
· All assets are in good shape despite decline in liquid assets
· The bank is not expected to exceed the 1.5% risk cost
· The bank recorded N7.2billion impairment charges in the last two quarters
· Increase in provisions and decline in dividend income impact bottom-line
· The restructured loans suggest better prospect and positive outlook
· Exposure to Oando and Transcorp portfolio had been restructured
· The bank maintains modest FX liquidity posture