Fidelity Bank Impressive Result

Fidelity bank recently released their half year statement, and investors saw an impressive 66% yoy increase in Profit to 10.2 billion in 2017. This post would be taking a look at the revenue drivers or cost optimization strategies of Fidelity that helped boost the profit of the company.

Taking a look at the report, we see observe that gross earnings grew 22.1 percent from N70.3billion in H1 2016 to 85.8 billion for the corresponding period in 2017. This surge in gross earnings was mainly driven by increased interest income. Interest income grew by 28 percent yoy while fee and commission income fell by 22 percent from 12.03billion in 2016 to 9.41bn in 2017. The other item making up the gross earnings (other operating income) rose by 192% from 1.22billion to 3.55billion. The other operating income was greatly supported by net foreign exchange gains which saw a growth of 165% from 2016. This indicates that the liquidity in the foreign exchange market primarily backed by the periodic interventions of the CBN was put to good use as the bank found it easier and cheaper to source the foreign exchange and maximize returns on transactions.

During the period under review, interest expenses worsened with the interest expenses making up a total of 52.4 percent of interest income compared to 45.2 percent in 2016. This indicates that funds from customers are becoming more expensive as the inflation rate was at an average of 17 percent during the period and customers are clamoring for higher interest on deposits. The high interest rates is mostly related to term deposits, as interest expenses on term deposits comprised 36 percent of interest income in 2017 and 29.6 percent of interest income in 2016.

Other performance indices sees the net interest margin at 7.4 percent, Cost / Income Ratio at 67.3 percent and capital adequacy of 18.4 percent in the period under review. The management of Fidelity on release of their Half year result made it clear that its cost optimization was as a result of process improvement and digital banking initiatives which led to a reduced cost / income ratio of 67.3%.

Also, within the period, savings deposit grew by 7% considering the high inflationary rate within the period. This increase in deposit was driven mainly by Fidelity’s cross selling of digital banking products with 30% of its customer base now enrolled on its flagship (*770#) and internet banking products.