Nigeria’s Fidelity Bank Plans Bond Issuance To Boost Lending

Helped by the favourable domestic bond market conditions and sliding inflation that may encourage an eventual cut in Monetary Policy Rate by the Central Bank of Nigeria (CBN), Fidelity Bank is considering issuing domestic bond to raise funds to boost lending.
The recourse to the domestic bond market is coming at a time Nigeria’s Federal Government is shifting towards borrowing overseas to cut yields at home, according to Reuters.

Reuters quoted Fidelity Bank’s Chief Operations and Information Officer, Gbolahan Joshua, as saying the mid-tier lender could look to the local funding market this year after it raised a $400m Eurobond in October to refinance existing debt and boost lending.
Joshua said the bank would target the consumer goods sector, manufacturing and retailers, aiming to boost total loans this year by between 7.5 and 10%, up from 7% growth last year.

He said the bank increased provisions against indebted telecoms firm 9mobile, placing it on a watchlist, after raising provisioning on its N17.3bn loan to the company to 50%.
In October it said it had taken only a 5% impairment charge against 9mobile.
Formerly Etisalat Nigeria, 9mobile obtained a $1.2bn syndicated loan from Fidelity and 12 other local banks in 2013 but failed to make repayments last year. It is now up for sale.

Joshua said Fidelity expected 9mobile’s sale to new investors to be concluded by the second half of the year, by which time the exact loss on the loan would be known.
“By H1 2018, the 9mobile sale may have been completed and there would be clarity for all lenders. We’ve made 50 percent (provision) on the exposure to 9mobile, we don’t expect that by the time the sale would be concluded we would see another classification,” he told an analysts’ call.

Joshua said that if the bank took a 100 percent provision on loans to 9mobile it would amount to less than 40 percent of its 2017 annual profits and it would be able to generate sufficient earnings to continue its business.
Fidelity Bank reported an 84% jump in pretax profit for 2017 to N20.3bn, driven by higher interest rates on loans, and it paid out 17 percent of its income as dividend.

Joshua said the mid-tier lender decided to maintain a conservative payout ratio after the regulator introduced a stricter accounting standard which affects capital ratios.
Fidelity ended 2017 with a capital ratio of 16%, Joshua said, noting that the bank aimed to compete with local rivals that have international subsidiaries and require higher capital ratios. But he added that Fidelity had no plans to expand outside Nigeria.

https://investdata.com.ng/2018/05/nigerias-fidelity-bank-plans-bond-issuance-boost-lending/