Fidelity Bank Plc (FIDELITYBK) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Fidelity Bank 2023 Financial Year Earnings Call. [Operator Instructions] Also note that this event is recorded. I will now hand the conference over to the Group Managing Director and Chief Executive Officer, Nneka Onyeali-Ikpe. Please go ahead.

Good day. My name is Nneka Onyeali-Ikpe. I am the CEO of Fidelity Bank Plc. I am pleased to welcome you to our full year earnings call. With me on this call today are the following executives, principal officers of Fidelity Bank: Kevin Ugwuoke, Executive Director, Chief Risk Officer; Ken Opara, Executive Director in charge of Lagos and South West business; Pamela Shodipo, Executive Director in charge of our business in the South; Stan Amuchie, Executive Director, Chief Operations and Information Officer; Abolore Solebo, Executive Director, Corporate Banking business; Victor Abejegah, Financial Controller; Akintoye Babalola, our Treasurer; Adetunji Mustafa, the divisional head in charge of Strategy, Innovation and Business Transformation; Sam Obioha, Head of Investor Relations. We have uploaded the IR presentation on our website. So I will speak mainly of the fact behind the figures. On the macro front, the domestic economy faces the same headwinds that have plagued it over the years: high inflation, low capital importation, foreign exchange [ currency ] and a decreased external reserve. However, in the last fiscal year, the federal government introduced several policy changes, including removing oil subsidies and free floating the national currency. The inflation rate was 29% in December 2023 and the monetary policy rate was 18.75%. This year, our strategic objectives as of [indiscernible] balance sheet by expanding our earnings base, improve the NIM, increase noninterest revenue, reduce the cost to serve and keep cost to income ratio within acceptable limits. I will now speak specifically to each of these measures. We will improve our NIM by achieving optimal risk-asset pricing and reducing the cost of funding. Total deposits increased by 56% from NGN 2.6 trillion in December to NGN 4 trillion in the reporting period. A breakdown of the deposit numbers showed that we increased deposits -- demand deposits by NGN 1.5 trillion, savings by NGN 280 billion and reduced [indiscernible] funds by NGN 300 billion. Low-cost funds now account for 97% of our total deposits, up from 84% in the 2022 financial year. As a result, our cost of funds reduced to 4.4% from 6% in December 2022. We also optimized the pricing [indiscernible] assets, which led to an increase in yield from 12% in December 2022 to 13.5% in the [indiscernible]. Overall NIM improved by almost 200 basis points, and net interest margin closed at 8% in the review period compared to 6% in December 2022. We improved noninterest revenue by driving fee-based income and increasing the volume of customer transactions. We grew noninterest revenue by increasing activities around our electronic banking platform. We also provided advisory and wealth management services to our customers. Our net fee income increased by 300% [indiscernible] billion in December 2022 to NGN 109 billion in the review period. A breakdown of the fee income on Page 18 of the investor presentation show double-digit growth in almost all our commission lines. We kept cost-to-income ratio within acceptable limit. Year-on-year, our OpEx increased by NGN 74 billion from NGN 120 billion in December 2022 to NGN 195 billion in the reporting period. The major drivers of the increase in OpEx were staff costs, regulatory charges and technology spend. The rise in the staff cost was due to increased wages, salaries across all cadence. Regulatory costs were NDIC and [indiscernible]. Technology also increased to improve customer experience on our electronic platform. Overall, [indiscernible] reduced to 50% from 67% in December 2022, and the increase in income outpaced the rise in cost. We optimized our balance sheet by increasing the rate of earning assets. Our total assets increased by NGN 22.2 trillion in the review period. Net loans and expenses increased by 46% to NGN 3.1 trillion. 44% of our loan book has 12 months or less maturity. Naira devaluation was responsible for 83% of the absolute growth in our loan book. Finally, I want to assure all our esteemed stakeholders that despite the challenging operational environment, we will sustain our performance trajectory. Consequently, we will innovate and disrupt using technology as an enabler. We will continue to support our customers to ensure their businesses grow, drive and prosper. We will also sustain our course of increasing shareholder value by paying dividends on our interim and full year audited numbers. Thank you for your support. I will now take questions. Thank you.

[Operator Instructions] Our first question is from Oluwaseun Arambada, FBNQuest.

Thank you very much for the opportunity to ask questions and congratulations on the results. So I have a couple of questions, please indulge me. The first one would be around the new directive by the Central Bank regarding new minimum capital. I mean, when we compare the new minimum capital with what you have currently, by my calculation, since you have a shortfall of about NGN 370 billion, I just wanted to know what are your plans to make up with the capital requirements within the time frame. What specifically are you looking at options that the Central Bank has given? The second one is also similar in terms of CBN directive. I just want to know your compliance level with the net open position directive. Are you at 0% of shareholders' funds at the moment. And then third question is [ away ] from that. I would like to know how much [indiscernible] has in swaps with the CBN currently. Other questions will be around your asset quality. In looking at the distribution across sectors, I would observe some deterioration in your exposure to the communication sector. I think NPLs went from around 4% to about 20% in that sector. I have guesses in my mind as to why that is, but I just want to know specifics from you because the duration is quite significant. And what do you expect for those exposures going forward? Still with NPLs, how much of the NPLs that you have currently was inherited from the acquisition [indiscernible] of numbers to that? Then I also want to know you expect cost of risk to drop in 2024. I just want to know your thinking about the operating environment in terms of riskiness given where interest rates are currently. How do you perceive the rates environment in 2024? And do you expect to see some impairment rate back in the year given the level of impairments that were booked in 2023. Lastly, my question will be around your loan growth and deposit growth. I appreciate if you could give me numbers, constant currency numbers, what your loan growth and deposit growth was in terms of constant currency in 2023? And also I'd like to know your 2024 guidance is also on a constant currency basis.

Thank you very much. Those questions of the minimal capital was expected. Yes. Thank you. So you would -- Fidelity is expected to cover a gap of NGN 750 billion [indiscernible]. If you recall, in August 2023, we held an AGM where we obtained the approval of our shareholders to issue 13.2 billion new shares through a public offer and rights issue. We're ahead of the [indiscernible]. So this process is ongoing, and we hope to be in the market before June 2024 to raise between NGN 120 billion or NGN 150 billion in fresh capital. Obviously, the estimated proceeds will not close the gap, but we will reduce it to about NGN 270 billion. So we have 3-step approach. Once we are done with the public offerings [indiscernible], we will close the remaining gaps through a combination of private and special placement and public offer -- a second public offer and rights issue. So we are going to obtain the approval at the AGM any time soon, and then that would be the plan. Then on the second question that you asked about compliance with the net open position, I will let my treasurer take that question, because I know we're fully compliant.

Okay. Thank you. My name is Akintoye Babalola. So on the compliance with the net open position we are fully compliant. Of course, the Central Bank will [indiscernible] for compliance. That we have actually done. [indiscernible] directive [indiscernible] 1255 at year end of 2023. So when this was given or directive given, it was [indiscernible] for us to sell those positions and then comply with the directive. So they were sold to eligible transactions in our group. Thank you.

Okay. I think I made an error in the initial question about the gap. The figure that I gave was an error, it's NGN 370 billion. That's our gap. Thank you. So I'll go on to the next question that you asked, I think it was around the communications sector, the iteration of the loans in the communication sector, one of the questions you asked. So I'm aware that came from some of our mobile operators, but I will let the Head of the Corporate Banking take that question.

Okay. Thank you very much. My name is Abolore Solebo. Once again, I'm the Executive Director of Corporate Bank. Quite clearly, 2 major obligors contributed to the significant amount that [indiscernible]. One is a marginal mobile network operator and the second is value-added service operator. Both witnessed challenges in the last 1 year due to the devaluation and the operating environment. So what we're doing at the moment is to work with them, looking at the cash flow and we structured the facility to tally with the current cash generating capacity. And if this is successful, we will see migration from current stage 3 to stage 2. Thank you.

Thank you very much. There's another question on the swap. How much swaps have the Central Bank currently. I am aware that $315 million. But I don't know if the treasurer has something else. And there was another question on NPL. I have [indiscernible] 1510 acquisition. There was no NPL attached to that acquisition. But I'll have Stanley speak to it, because I'm aware that there was no NPLs in that acquisition.

Okay. Good afternoon. So the acquisition of the loans are in the -- all the loans are performing. So there's more -- 0 NPL after the [indiscernible].

Okay. The last question, I thought -- I thought all of it was on the cost of risk. Do you expect it to drop in 2024 given the interest environment and then the headwinds? I know that we are very bullish in our provisioning in year 2023. But I would have the Chief Risk Officer speak to it. I'm aware that the cost of risk, the modeling for 2024 is 2%, down from 2.6% in the period. But I'll have the CRO speak to it. Thank you.

Thank you very much. Yes, indeed, we have modeled for a cost of risk guidance of 2% for 2024. And that's taking into account all of the issues you've raised about the macro environment and the riskiness of the environment as well. So that's basically where we stand. We'll keep to that guidance of a cost of risk of 2% for 2024. Thank you.

Your loan growth constant currency in 2023 [indiscernible] and guidance on a constant currency basis.

Organic loan growth for 2023 was 8% when you take off rate. You can make a reference to Slide 24 of this presentation; we try to break it down there, the -- with the valuation impact also shown there. It was [indiscernible] 34% -- 32% is the devaluation impact. The actual growth in our loan in 2023 was [ 18% ]. And like I said, you will see that in Slide 24 of the investor presentation. But this year 2024, we modeled to grow at about 10%, to grow our loans at about 10%, and show that issue was [indiscernible] of the regulator. Aggressive loan growth is not what we 1808. So everything points to the fact that we have to have moderate loan growth for year 2024. But I will have the CRO speak to it a little bit more. Thank you.

Yes. Thank you very much. Indeed, the projection for 2024 is a moderate loan growth at 10%. Currently, if you look at the entire macro environment, it's not the most conducive for loan growth. So we are guided by that, in constant currency basis 10% growth in the loan book.

[Operator Instructions] The next question is from [indiscernible].

[indiscernible] to ask questions. I have a couple of [ them ]. The first is just on your recapitalization. I know you people hold an international license. Is the plan to still retain that international license? I know that your international footprint compared to others is quite minimal. So is the intention to still hold your international license. And as [indiscernible] has spoken to your intention for raising capital, then for the time line for the private capital are you intending to complete it this year? Will you be placing that this year? And then what do you expect the important drivers of earnings in 2024 will be?

For international license, we intend to keep our international license, which means that we expect that we will achieve the NGN 500 billion capital. So international license stays. The second question was what are the timelines -- if I understand what you said, timelines for achieving NGN 100 billion. We are working with a timeline of achieving it before -- first of all, the regulation has given 2 years, which is March 2026. And we expect to start recapitalization this year, like I said. And we'll do, like I said, a 3-step approach. We have the POs that's going to kick off any minute. So at least very sooner than later. Once we are done with that, we will do just the private placement and rights issue. That will be the second. Then we will now have a spread PO. What that means is that we will now, after the private placement, the timing works how much more the gap that we have. So at that point, how the options open [indiscernible] position if need be. So it just depends on what the gap is at that time. But definitely, we are doing a NGN 100 billion target. And I'll have my EDCOI speak to it.

Okay. Thank you very much. I think it's very important for us to emphasize that we've been this market. We are almost ahead of the market when it comes to this capital raising. We started off last year once we got approval of our shareholder. So strategically we have noticed we needed this capital raise for our business, not because of the regulatory requirement, first of all. So we're well ahead of the market, as I mentioned. We expect to be ahead to be able to do the initial [indiscernible] and rights issue and move very fast to see how to close off this gap quickly as possible. So we are determined to keep our license the way it is [indiscernible] a long time. They find that we don't have a lot of footprint outside [indiscernible] because we believe that [indiscernible] license is within our strategy and our group plan. I want to keep it and make sure that we get the capital required to keep that going forward.

In terms of the timeline that you asked, we expect that we'll be able to achieve this first quarter of 2026. Thank you.

Okay. Thank you. I just have a couple more questions. Based on your capital adequacy ratio of 16.2%, I wanted to know how realistic it is with your guidance for a 25% to 40% NPL ratio for 2024. And then on asset quality, we saw about your oil and gas upstream exposures; it's doubled. Is this safe to say that this was primarily due to currency movements? And how do you assess the risk in this space given that 60% of the exposures are classified as [indiscernible]. And then also have you considered the average movement in oil prices and have those factored in your worst-case scenario for the loan assets? And then also your power sector exposure, when do you expect the potential reclassification to stage 1? And based on your assessment, is it more likely to see a movement to stage 1 or a downgrade to stage 3? And then also, for 2024, I just wanted to know what do you expect the key drivers for earnings will be this year? I mean given the normalization -- [indiscernible] normalization in FX markets, how do you expect this would [indiscernible] non-interest earning this year? And what sort of contribution are you expecting from noninterest income this year? And lastly, how would you assess the appetite for credit for from customers just given the rate environment.

Thank you very much. I will take the questions one by one, and I will be supported by my lieutenant. Okay. And if you remember, I spoke to the earning strategy, what will be our important drivers of earnings in 2024, in my opening remarks. Our strategy over the years is to drive improvement on our NIM, that we call the NIM game. We will focus on ensuring that our NIM [indiscernible]. We will focus on growing noninterest revenue, and will also limit our CIR to acceptable levels and as well as optimize our balance sheet. This is what we have done in the last 2 to 3 years that has thrown out a CAGR of 64% year-on-year. So it's something we have done before and we will continue to do it. And then it is the strategy that we have orchestrated very well. Thank you very much on that -- for that question. Then the second question, I think, is on capital adequacy and how realistic is our guidance for 25% dividend payout ratio, if I remember. Our previous guidance for 2024 full year is NGN 175 billion. And then after dividend payout of 25%, we will have enough accretion to reserve. But I will have to have my CRO speak to it. Thank you. Kevin?

Thank you. Thank you very much. Our dividend payout has already factored in sufficient room for where we expect our capital adequacy ratio to be. So we've simulated all of that, and we are quite comfortable that even at where we are now, we can achieve the guidance we've given as far as dividend payout is, which is between 25% to 40%. That is really in our policy, and we've simulated for that, and we are quite comfortable with that. Thank you.

I think there was another question on the power loan, an update on the power loans and the possible reclassification to stage 1. What I know is that the power loans has improved significantly in terms of recovery on that side, and in terms of the business getting a lot better. I will have a couple of positive developments in our power books -- on the books -- in our books. And then I will have the Head of Corporate Bank speak to them and then -- about possible timelines for the classification [indiscernible] 2826 classify before the end of the year due to positive development in that sector. But I'll have head of Head of Power speak to it. His name is Hilary Dukor.

Thank you very much. The question was on when we expect to reclassify our power loans and also move them to stage 1. So like the M.D. has said [Technical Difficulty]

Sorry, ladies and gentlemen, our connection to the main room seems to be having some technical difficulties. Would you please just remain online.

Okay. Can you hear us?

Yes, sir, we can hear you now.

Okay. As I was saying, there are 2 major government initiatives, which is encouraging all of us in the power sector. The very first one is the Electricity Act, which was signed into law in June 2023. That act intends to open up the power space a bit more for more people to come in and invest in the power space. The second one is the recent increase in tariffs across board, even though it's specifically targeted at the second category of customers, which they call an A customers. Now what all of these has done in the last month -- in the last 9 to 12 months is that there's been an increase in revenues across board for the distribution to about 35% increase in the last few months and that we think will continue to growth over time, especially with the increase in tariffs for A customers. Again, what this has also done is that it encouraged the distribution efficient and improve our supply across the country. That's one. The second one is that it's going to improve liquidity in the power sector such that there will be sufficient funds that go through the power sector value chain. So these events are impacting positively on the power sector and the outlook continues to look good. On moving our loans from where they are now to stage 1 or reclassification, these events that I've mentioned earlier have also encouraged more investment, encouraged more collaboration in the power sector. So we are beginning to see a lot of collaboration between the core investors and new investors. And these investments coming into also trickle down to the repayment of our loans. So we are having a lot of positive cash flows coming into those loans. And then we think that before the end of this year, those loans will definitely move from where they are now to stage 1 and they'll be reclassified certainly. Thank you.

I think there was a question on appetite for credit from our customers. [indiscernible] I think there was a question on credit from our customer. [indiscernible].

So I was -- what's your assessment of your customers' credit appetite just given the interest rate environment, seeing that it is elevated. So are you seeing more in terms of loan volume? Are you seeing still a healthy demand for credit? Or is it seeming moderated?

Okay. Yes, it's more like the response is sector specific. The oil and gas sector are better able to handle the rate changes since they, of course, are able to pass on the cost to their customers and their transactional cycles are actually very short in nature, like 4-5 days. But I'll have my EC Corporate Banking speak a little bit more to that. But I also know that we have seen a lot of traction on the infrastructure and construction sector because this -- we have seen increased level of governmental patronage and, of course, it trickles down to the demand. And then that is also showing a lot of activity despite the increase and limited rate environment. We also see some value-added service of the telecom sector that are able to take rate because their billings are in dollars. So we are seeing transactions around that. The transactions around manufacturing is a bit moderated. But I mean people still have to borrow but maybe not at the volume that they normally have. So I'll have Abolore speak a little bit about this, on the oil and gas sector and telecom space. Thank you.

Okay. Thank you so much, M.D. I think the M.D. has covered most of it. But what it is that we are cherrypicking our asset creation sectors now, and we've identified businesses that can pass on this cost. So first, is oil and gas [indiscernible] area where the products are deregulated. So I like to observe in market. The [indiscernible] different prices [indiscernible] can pass [indiscernible] to the end users. We've also seen a similar situation in the construction industry where the government is very bullish on infrastructure growth. So the players in that market work on a gross margin [indiscernible] costs in that regard. So we have seen some credit expansion within that space. We also have the communication space. Like the [indiscernible] the communication industry was on a price benchmarked to dollar. So as the dollar rate changes, because it is import dependent, the pricing also changed and [indiscernible] will in turn bill all of us for data to use our voice use [indiscernible]. So these are the key sectors [indiscernible]. Thank you.

Yes. I just wanted to know in terms of your PBT guidance and your cost savings, I just wanted to know how are you seeing your contribution? Or what sort of contribution are you expecting from non-interest revenue? And then do you see additional scope for FA being similar to what we saw last year?

Okay. Okay. If you look at our numbers for 2023, noninterest revenue contributed about 17% of our total income, if you look at the gross income. If you back out the contribution from valuation income I mean, it comes down to somewhere around 9%, 10%. So what we're looking at this time around those valuation income may not [indiscernible]. Of course, we are not expecting that level of valuation income in 2024 and therefore we are pushing to increase our noninterest income, especially digital income, account maintenance charges, all those, which are income we generate because of increased activity. So we're trying to make our platforms very, very conducive for our customers to do their business in the comfort of their homes. When I'm proving out this platform touch point, we make sure that both of the [indiscernible] able to do their business very convenient. So we expect that growth in that. I mean to [indiscernible] to 10% from 9% which we have in the previous period. And then we have also by digital banking income [indiscernible] actual trend because of what we have seen in the FX market there. Account maintenance charges and [indiscernible] those are the areas we are pushing and believe that that will cover for -- I mean, the area because a lot of you look around things like revaluation income. We don't expect, as I mentioned earlier. So these are the areas which believe we use to measure [indiscernible] that we expect to have [indiscernible]. Thank you.

Thank you very much. Our next question is from Johan De Bruijn of 327 Frontier. Unfortunately, we cannot hear you. Just check that your microphone settings are correct. [Operator Instructions] Our next question is from Stephen Chima of CardinalStone.

So congrats on [indiscernible]. So my question really is, so the bank has [indiscernible] 15% this year. And I'm wondering if the CPA policy on in on the [indiscernible] ratio down 50%, [indiscernible] the mark for loan growth this year. Also a disaggregation of the bank's earnings shows that its U.K. subsidiary recorded a loss in the year. And I would like to -- really appreciate if you can speak a bit on how the bank's U.K. operation is faring and expectations for the year.

The question on U.K. operation of Union Bank London and the fact that we made a loss last year. At the point of the purchase, it was a bank making losses, but since the takeover by Fidelity Bank, we have seen significant improvements in the earning capacity. And as a matter of fact, it has come back to profitability. So we expect that to add some value to us for the year ended 2024. And then the next phase for us is to make sure that we put them on a path of sustainable [indiscernible] profitability, like I said, and then, of course, underpinned by effective risk management practice and very strong corporate governance. On the medium term, we are targeting 2% to 5% contribution to the group profit. On the long term we expect to increase that to about 10%. There is lot of capacity -- the bank has a lot of capacity and has very good and robust products allowed in the license. So we are quite comfortable that it would definitely add to our bottom line. And this caused the synergy -- the similar synergy for our Nigerian businesses. Our business [indiscernible] customers and our [indiscernible] our HNIs. We have a lot of HNIs that do mortgages and all of that. So we definitely know that because we have lot of value-add and the synergy. And before now, we spent so much on opening out this through our -- London branches of Nigerian banks. And [indiscernible] pass that through our London branch. Definitely, we make a lot of profit. Last year we spent about $50 million through our Nigerian banks in London. So now that we have the subsidiary, all that comes to us. And of course, we have the market for new relationships. So London is a good one. It's a very good acquisition for us. Second one was on the guidance for the good for this year and how does that turn out to be 50% [indiscernible]. I will have Kevin take that question, the CRO. Thank you.

Thank you. Thank you very much, M.D. With regards to the CBN's revision of the loan to deposit ratio to 50%, we believe it's more of trying to reconcile the numbers. If you look at a cash reserve ratio of 45% and liquidity ratio of 25% and LDR that was at 65% it was definitely not sustainable. So this is more to reconcile all of the different ratios and make them speak better to each other. So in terms of the impact of that on loan growth, I will say no impact because it's already moderated for a very cautious loan growth for this year, which we've given a guidance of about 10% for this year. So that's just it. It will not affect what we are doing. It's just we think -- we believe it's just to normalize and reconcile all of the different ratios that they had put out there and at the same time make them speak better to each other.

The next question is from Johan De Bruijn of 337 Frontier.

Can you -- you can hear me, right? Sorry about that previously.

Sir, we can hear you.

I appreciate the time and the insights. Can you just please help me understand a few things in terms of your bank, but also your bank relative to the other banks in Nigeria. If you look at just the capital ratios as at the end of December last year, the liquidity ratios, your bank seems pretty healthy. Everything seems to be pretty solid. And there's no obvious need for additional capital raising. And this is similar to a lot of the other banks in Nigeria. Yet CBN is forcing the banks to raise an extraordinary amount of money capital, multiples of market caps, multiples of the current capital that's sitting on the balance sheet. Can you just help me understand what is the Central Bank seeing that we don't see from the audited numbers of all the banks. They're obviously seeing something that is much more dire than what is evident if you just look at the audited year in numbers? And second -- my second question is your capital gap, depending on what currency you use, is around $350 million, again more than your market cap. Where -- who is going to fund these capital raises? Your capital raise but also all the other banks. Where does this money come from? And how confident are you that you can raise this kind of money in the time frame given?

Okay, thank you very much for those questions. And one thing is definite. The government made it very clear that they want to build a $1 trillion economy and they need the banks to support it. So they definitely want the bank to bring in fresh capital and that would assist with funding for the real setup. So as [indiscernible] as it looks, we probably understand where they are coming from. I know the impact of devaluation is another thing that can weaken the capital base of a lot of banks. And they also want the banks, the very strong and very big, to assist with the infrastructural development in the country that it desperately needs, along with [indiscernible] where funding for big transactions are beyond the single obligor of a lot of banks. So if there are consolidations and mergers, there will be bigger banks and stronger banks and all of that. So it is what it says that they are looking at the bigger picture. It's a difficult climb, which is why they gave 2 years for the [indiscernible]. So it's a deliberate attempt of the government to raise the capacity of the banks across the economy. The devaluation is a major one. The devaluation was very steep. So it's expected that there will be impact. We were expecting it. Maybe not as much, but then we were expecting that we have to raise capital. I will have my COIO [indiscernible] to speak to this.

Okay. Regarding the fact how confident we are around raising this capital, I think we are very confident. We started off this journey [indiscernible] based on our own strategy, internal strategy. Last year around August we started by asking our own shareholders to give us approval to raise capital. That was ahead of the regulator's request for this because we have seen growth in our business and we believe that getting additional capital was very helpful for us to take on those business. So we're at a point of coming to the market and will probably be in the market as quickly as possible. We believe that we've made initial marketing plan, and we believe that we'll be able to raise capital to the level that we want through the first half. When we do that and see the gap between what we have and what is required, of course, by the regulator and that regulatory capital with the regulatory have the discretion [indiscernible] you mentioned on the fact that if you look at the numbers, it looks so good. But the regulator can define what is regulatory capital, which was what happened here was that was defined by regulator to mean premium and bit of [indiscernible] for this purpose. So we are working with that. We intend to achieve that and we are very confident of achieving that based on the indications we are getting from the markets and shareholders and even prospective shareholders. So we will start off this year -- I mean the next few weeks ahead and then see where we get to with the first move. After that we can do things like private placement, rights issue and consider any other available approach to making sure we will reach that number. So we're very confident and we don't see a [ problem ] from achieving that. Thank you.

Just one follow-up question. So the year-end capital adequacy ratio was about 16%. There was a devaluation in this last quarter, the first quarter of this year. Where is your capital adequacy ratio today post the latest devaluation?

The Chief Financial Officer. Thank you. We just produced the [indiscernible].

In Q1 2024 our capital adequacy ratio is still 16.29%, and we are quite comfortable with that level compared with where we closed in at the last financial year.

Okay. So this major devaluation didn't actually affect your capital adequacy ratio at all?

So we -- the truth is this. Not that it didn't have an impact. Of course, it will have. But there are risk mitigants in all that we have, which has helped us to be able to have that still around 16.2%. So aside the impact on one side, there are also risk mitigants. There are certain risky assets that we are going to [indiscernible] and then there are some mitigants we have. Some [indiscernible] will require some of these -- our customers to bring in more cash, which is mitigant to make us -- to have cost of money, the impact of the [indiscernible]. So that's the combination of all those to maintain our cap at the level we have been following.

The next question is from [indiscernible] of Proshare.

Congratulations on your results. My first is as regards to regional capital [indiscernible]. So is there any guidance or any plan as to how the funds that is to be raised is going to be allocated? Is there a sector of preference? So I'd like to know about that. And my second question is as regards to banks [indiscernible] is there a portion -- any portion of the bank's retained earnings that was [indiscernible] by the CBA? And how does that affect the shareholders' value. Is there any portion of the bank's retained earnings that was [indiscernible] by the CBN?

No portion of our retained earnings was [indiscernible] by the Central Bank. No, none of it. So I remember you asked a question about additional capital that we're raising, if we have any preferred sector that we're looking at. Yes, naturally we like institutional investors because it's just a little bit more orderly. And then, of course, what we have to raise is a lot. So -- it's not -- we are not specific to any sector, but our preference will be institutional investors for the simple reason that it is easier to manage. And then the use of the funds you did ask as well would be for us to be further our strategy of international expansion will be a focus because [indiscernible] return to sustain a very high ROE. What you must know is that our story is very strong and compelling as a bank. And we do not think that -- our share price is below what we think it should be with low interest cost. So we believe that our story is very compelling. The growth rate of 12% year-on-year CAGR is very compelling. The return on ROE in this business is very compelling. So we are very certain that [indiscernible]. Thank you.

The next question is a follow up from [indiscernible].

So my last question would be on your impairment. I know you've spoken about it. But I just wanted to have context. In terms of the impairment that were charged in full year 2023, also to have an idea as to what extent did the currency movement affect provisioning for full year 2023? And then in terms of your strategy, I know that the recapitalization [indiscernible]. But in terms of of your medium long-term strategy, I wanted to have, if you can, your plans on expansion since you said you retain to hold your international licenses. What geographies are you considering and is still on the book and is [indiscernible]? Are we still considering expansions into other geographies apart from your operations in Nigeria and U.K.? And then lastly on strategy. I just wanted to have an idea of how the bank is thinking. What seems to be the concern? And what the bank [indiscernible] at night? I mean, in terms of looking at how to deliver value to customers and shareholders, are there regulatory concerns operational concerns? If you can just provide color on this, that will be very helpful.

Thank you very much for those questions. What keeps me awake at night? Let's start with the easiest one. Of course, the compliance dynamic regulatory environment. Every day you wake up and there's new change. So that's enough to keep us awake in the night because we want to make sure that you meet the deadlines that are given. And, of course, a couple of trends that are quite [indiscernible] in terms of the information the regulator is asking for on a weekly basis. And the macroeconomic challenges, that's impossible to sleep very well if you know that the customers are going through so much and you too are going through so much trying to meet the challenge, trying to meet their demands. So it's a natural tendency for you to be worried about it. And then on the attrition of the highly skilled, young professional, that's a major issue for any executive because you don't -- nobody likes to lose their very skilled hands and who are very well trained. And personally I have lost 3 of my PAs, 3 of them, back to back, to Canada. So it's a problem really. But it is what it is and you really can't blame them because they're looking for a better place to be and a better place to continue their career. So it's a major loss for a lot of [indiscernible] lot of banks, my inclusive, but we have to manage it. So the other question was on impairment. And I'll have Stanley take that question.

Okay. Well, you mentioned that impairment that we [indiscernible] level of impairment. Now we are operating in an environment that was a high interest environment with devaluation within the same period Actually, in a period of that kind of [indiscernible] it's very prudent for the bank to increase its impairment because we thought that this could affect the business to our customer. And therefore, we decided that, based on prudence, to improve the level of impairment. So if you noticed our guidance in this 2024 we moderated that level of impairment, I mean, as shown by our cost of risk and the way we [indiscernible]. So we know that those things are not [indiscernible] but we don't expect that level of impairment we did in the prior period. So with all that, we will continue to monitor all the loans and ensure that [indiscernible] we make the right impairment and [indiscernible] but the level we did in 2023 was to respond to the impairment and the devaluation which could affect business [indiscernible]. Thank you.

There was another question around our strategy and the regions we want to go to and the increase and all of that. So first of all, our strategy is opportunistic. And we will rather to do a brownfield than a greenfield. But it depends on the country that you go to, okay? So we definitely want 2 to 5 countries in the next 2 to 5 years. The recapitalization has impacted the speed at which we want to do this. However, it's ongoing. And then whether there's a couple of countries that we want to do in Africa, [indiscernible] we go to the UAE or outside. So we want to do West Africa. We want to Southern Africa. We want to do East Africa. So it depends on where we have an opportunity, we're still looking. And then again, it's very important because we have seen the kind of impact that the African branches have on our competition. So it's an opportunity that we want to explore and we want to give those attention as soon as we are stabilized on the recapitalization exercise. However, we need to deploy those learnings that are coming. We want to deploy them because we have to make -- we have to continue to sustain an ROE up to 6% and above. If we don't deploy the funds very quickly and then profitably, we will struggle. So we must continue to push and continue with our expansion plan. Thank you.

And then do you foresee potential write-backs this year?

Write-back, I mean, as I said, we will continue to monitor the situation. If there is still very good and as seen better macro that will [indiscernible] any possibility of write-back. But for now I think we want to be as prudent that we will not [indiscernible] any form of write-back, to keep the numbers the way they are and monitor [indiscernible]. So we are not foreseeing it. We're not [indiscernible] plan for immediate write-back. So we will watch the market and see how [indiscernible].

Thank you very much. Ladies and gentlemen, we have no further questions in the queue. And I'd like to hand the conference back to Nneka Onyeali-Ikpe for closing remarks.

Yes, I want to sincerely thank you for attending this call. Over the years, we have built a resilient and sustainable balance sheet by competing in different economic cycles [indiscernible]. We can assure that regardless of the headwinds in the domestic economy, we will deliver on the guidance we've promised. Moreover, we are Fidelity and we keep our word. Thank you very much. Thank you for attending this call, once again.

Thank you very much. Ladies and gentlemen, that concludes today's event, and you may now disconnect your lines.