Fidelity Bank seeks loan growth as treasury yields fall – executive

Nigeria’s Fidelity Bank expects loans to grow at a faster pace this year than the 7.5 per cent it forecast for 2017, helping lift profits after treasury yields fell, an executive told Reuters.

Nigeria, which emerged from its first recession in 25 years last year, has been working to lower its costs by borrowing abroad to redeem local debt, forcing local treasury yields down.

It redeemed 130 billion naira (307.76 million pounds) in treasury bills last week and paid off 198 billion naira bills in December, leading to rates dropping by around 300 basis points.

Fidelity Chief Operations and Information Officer Gbolahan Joshua told Reuters banks expected their net interest margins to fall to 5 and 6 percent due to the drop in treasury yields, which he said meant banks needed to boost lending this year to lift income.

Net interest margin at Fidelity was 6.4 percent in 2016, while analysts said it was 6.5 percent for the sector.

“There would be higher loan growth this year due to the improving macro-environment, deposit growth should return to positive territory and there’s extensive focus on digital and retail banking,” Joshua said in an interview in Lagos.

He said agriculture, which is receiving government support, would benefit from credit growth, as well as the retail sector, after loans shrunk at the peak of 2016 recession.

He said the mid-tier lender expected “an uptick” in loan growth in 2018 from the 7.5 percent it had said it would achieve in 2017. Lending in 2017 climbed 4.9 percent in the nine-months to September, but the bank has yet to release full year figures.

Joshua, who did not comment on the actual 2017 loan growth figure as the bank was in closed period for auditing, expected retail accounts to make up half of its loan book over the next three to five years from 38 percent now.

In 2016, lending climbed 4.5 percent, once the effect of the naira devaluation that year was stripped out.

Fidelity increased pretax profit 65 percent to 16.24 billion naira in the nine-months to September.

Nigerian treasury yields, which fetched as much as 18 percent last year, now trade at about 13 percent after the government raised eurobonds to pay off debt instead of rolling them over as it has done in the past.

The bank had 4 million retail and business accounts, Joshua said, saying 400,000 new accounts were added in the past 12 months.

He said a third of customers were now using smartphones for transactions such as funds transfer and paying utility bills rather than going through a branch, a move he said created savings for the bank and boosted income.

Shares in Fidelity, which have gained 14 percent so far this year, rose 5 percent on Monday to 2.94 naira, giving it a market value of 85.2 billion naira ($279 million). The stock climbed 193 percent last year.

Credit: Reuters