Fidelity Bank Nigeria Plc’s profit position amid a myriad of challenges inhibiting the growth of banks in Africa’s most populous nation signals value addition to over 400 diverse shareholders.
The Nigerian lender has maintained a steady dividend policy amid a credit crunch caused by
a mismatch of monetary and fiscal policy.
The board of directors has recommended a dividend of 14 kobo per share to shareholders.
This translates to a dividend yield of 19.03 percent.
Currently, the bank’s guidance for dividend payment is between 30 percent and 50 percent of annual net profit.
It must be noted that the markets reacted to the results of Fidelity Bank as it closed at 0.84, 10.53 percent above the 52 week low of 0.76 set on Apr 05, 2017.
For the year ended December 2016, the lender recorded a profit after tax of N9.73 billion and a profit before tax of N11.06 billion, respectively. Gross earnings moved by 3.45 percent to N152.02 billion in December 2016 as against N146.94 billion as at December 2015.
Interest income increased by 1.65 percent to N123.15 billion in the period under review as against N121.15 billion; thanks to a 9.71 percent increase in loans and advances to N88.0 billion in the period under review.
“Interest income on loans and advances to customers of N88.06 billion (2015:N80.3 billion) includes interest income on impaired financial assets of N2.1 billion (2015:N2.7 billion), recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss, said the bank in its 20156 audited financial statement.
Fidelity Bank and other midsized banks are struggling with rising loans caused by a sudden drop in the price oil that hindered of customers from paying interest on loans borrowed from financial institutions.
Apart from the exposure to the oil and gas due to the aforementioned uncertainties, banks are owed huge monies by contractors and government agencies starved of FAAC Allocations.
Non-performing loans was 14 percent of total credit at the end of December from 11.7 percent at the end of June, according to central bank data.
Moody’s expects the ratio to remain at about 12 percent to 14 percent this year.
Despite all these challenges, Fidelity Bank remained aggressive about lending as gross loans and advances to customers spiked by 24.24 percent to N718.40 billion from N578.20 billion as at December 2015.
The loan growth can be attributed to the devaluation of the currency that ballooned the naira denominated assets in the books of lenders.
The central bank last year adopted a flexible exchange rate regime that saw the naira lose 40 percent of its value against the U.S currency.
Analysts say Nigerian banks have reduced incentive to lend to the private sector because of favorable interest on government securities.
Fidelity Bank has a total asset of N1.29 trillion as at December 2016 while shareholders’ fund stood at N185.40 billion.