Fidelity Bank Plc (FIDELITYBK) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Fidelity Bank Half Year 2024 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to hand the conference over to the Group Managing Director and Chief Executive Officer; Nneka Onyeali-Ikpe. Please go ahead, ma'am.

Good day. My name is Nneka Onyeali-Ikpe. I am pleased to welcome you to our H1 2024 earnings call. On this call with me today are the following executives and principal officers of the bank. Kevin Ugwuoke, Executive Director, Chief Risk Officer; Stanley Amuchie, Executive Director, Chief Operations and Information Officer; Abolore Solebo, Executive Director in charge of our Corporate Banking Directorate; Pamela Shodipo, Executive Director, South Directorate; Victor Abejegah, Chief Financial Officer; Akintoye Babalola, the Treasurer; Adetunji Mustapha, the Divisional Head in charge of Strategy, Innovation and Business Transformation; and Samuel Obioha who heads our Investor Relations. We have uploaded the IR presentation on our website. So I will focus mainly on the facts behind the figures. The prognosis for the Nigerian economy is favorable even though there are still a few headwinds. The perennial issue of FX, nonavailability has continued to drive off the exchange rate. The removal of subsidies of petroleum products has reduced disposable income. The high inflation being witnessed has led to increased prices of consumer goods. The insecurity issues have not yet been fully addressed. However, on a positive note, inflation is slowing down, the restrictive regime of the monetary authorities seem to have started to pay dividends as the data provided by the National Bureau of Statistics, showed that the inflation rate has started to slow down. GDP growth in quarter 2, 2024 was 3.1% which is in line with the 3.3% forecast of the IMF for the year. Our objectives for this year's financial year are to: one, expand our earning assets base by driving efficiency at all levels of our business; improve the NIM by ensuring appropriate pricing of our assets and liability products, increase our noninterest revenue by raising activities around our network. Keep CRR below 50%, despite the rise in inflation and the challenging business environment, drive activity levels by optimizing uptime across all our functional electronic banking platforms. I will now speak specifically to how the strategic priorities I referred to earlier, influence our balance sheet and performance during the review period. Firstly, we improved our NIM by achieving optimal risk asset pricing and moderated growth in our interest expense, which is evidenced by a 34% increase in our total deposits from NGN 4 trillion in December 2023 to NGN 5.4 trillion in the reporting period. A breakdown of the deposit numbers showed that our current account deposits increased by NGN 954 billion, our savings by NGN 142 billion, our time deposits by NGN 286 billion (sic) [ 268 billion ]. It is worthy to note that low-cost funds accounted for 93% of our total deposits. Restrictive policy regime of the Monetary Policy Committee and the sudden increase in both the monetary policy rate and the cash reserve ratio our cost of funds rose by only 60 basis points from 4.4% in December 2023 to 5% in the review period. We achieved an optimal pricing of our earning assets, which led to an increase in our yield on earning assets from 13.5% in December 2023 to 19.4% in the review period. Overall, our NIM improved from 8.1% in December 2023 to 13.4% in the review period. Secondly, we improved our noninterest revenue by driving fee-based income and increasing the level of customer transactions. As you can see from Slide 15 of the IR presentation, our net income and net fee income increased by 31% year-on-year because of the reduction in the FX valuation income. However, a further analysis of our fee income shows that significant growth on most of the lines, namely account maintenance charges increased by 74%, trade income doubled and credit-related fees grew by 16%. Thirdly, we kept our CRR within acceptable limits. As you can see also on Slide 17 of the IR presentation, although our cost increased by NGN 5 billion, our cost-to-income ratio reduced to 40.3% from 50.4% within the review period because of the strong growth on the revenue side. Three major cost drivers led to the 58% growth in the OpEx, namely our technology expenses, which was 26%. Our AMCON cost, which was 19% and our staff cost, which is 13%. Finally, we optimized our balance sheet by increasing the ratio of our earning assets compared to our non-earning assets. As you can see on Slide 18, our total assets increased by NGN 1.7 trillion in the review period, of which 86% of the growth is the balance sheet size was invested in earnings assets. Also, our treasury assets, which include bank placements, treasury bills and bonds increased by NGN 794 billion, while loan growth increased by NGN 659 billion. The pass-through effect of the naira devaluation in our books influenced our risk assessment numbers. In absolute terms, our loan book reduced during the review period. In conclusion, we wish to assure our esteemed stakeholders that we'll sustain the strong growth trajectory in the coming months. We will innovate and disrupt using technology as a catalyst for growth. We will also sustain our cost of increasing shareholders' value by paying dividends in the bank investment yearly. This year, we paid an interim dividend of NGN 0.85. We thank you for your support, and I will now take your questions. Thank you.

[Operator Instructions] Our first question comes from Josh [indiscernible] of Stanbic Pensions.

Congratulations on the results. And I've got to start off with, the first one is on other interest and similar income, which I sort of noticed was a key driver of the performance for H1 printing about NGN 109 billion for half year 2024. Could you just talk us through sort of what drove the significant increase in H1, given that -- or in Q2, given that in Q1 2021, it was only about NGN 8 billion. So if we could just get some context on the drivers of that line item for Q2 2024 that would be very helpful. That's the first question. The second question is on the loan book. I was looking at -- so just comparing the breakdown in terms of sector relative to the NPLs and I just sort of zoned in on agriculture. And I realized that there wasn't any NPL sort of contribution on agriculture in the presentation. So if you could you just one, speak to sort of the contribution of agriculture to NPL, one. And two, just give us some sort of context on how much of these agricultural loans are linked to the previous interventional loans to the sector from the CBN, that will be helpful. Sorry, can I confirm that my question was captured, seems to be deafening silence.

Josh, your question was heard. Please remain online.

Yes, the significant growth you have seen in other interest and similar income is because of the increase in our NIM, our net interest margin from 8.1% to 13.4%, and this were achieved by optimizing our asset yields while keeping our funding costs very low. We achieved this by increasing the volume of our low-cost deposits by 20% to NGN 5 trillion. 34% increase in total deposits from NGN 4.4 trillion in December to NGN 5.4 trillion in the reporting period. The breakdown of our deposit numbers showed that our foreign account deposits increased by NGN 954 billion. Our savings by NGN 142 billion and our time deposit by NGN 268 billion. And more importantly, I mean, as a summation, our low-cost funds accounted for 93% of our total deposits. So the significant movement in our NIM accounts for the major movement and this very high interest income and similar income. And then I would like the CRO to speak to that a little more.

Sure, MD. I will speak to the question on the NPLs for the agri sector. Indeed, you're absolutely right. NPLs are very insignificant. We actually just have one major exposure in that sector, which is -- we've practically taken full impairment on that exposure. But of course, we are pursuing recovery and we're optimistic we'll get the money back. Now you asked whether there's any relationship to the intervention loans from CBN, we did not participate in those intervention loans based on our risk acceptance criteria, we -- so I think -- I hope that answers your question on that.

Josh, does that conclude the questions.

Yes, it does. I mean the question on the agri sector loan exposure, yes, it does. But I'm still a bit unclear. So if you don't mind me just pushing that a bit more on the interest. So the other interest income I looked at the note it speaks to interest on fair value, fair value instruments or fair value assets. And again, when I look at the quarterly breakdown, it goes from NGN 8 billion in Q1 to about NGN 101 billion in Q2, which is just a very, very significant increase. So I don't know if you have any other sort of clarity on that, that you could perhaps give just to understand what exactly happened quarter-on-quarter and not even year-on-year, quarter-on-quarter.

Okay. Basically, I spoke to the improved yields on the earning assets and the increase in the assets -- and increase in our earning base. But I'll have my treasurer, no my CFO speak to the fair value.

Thank you so much, MD. Fundamentally, in addition to what the MD has just said, a basic driver of that income line are in 2 parts. Number one, in 2 years, on our earnings assets, and again expansion of our earnings assets by 35%, that is quite huge that contributed to it immensely. And the fair value gain on the swap also was kept in that area. If you combine these 3 factors, that will give you more color to the reasons why you have such a sharp jump in those 2 lines. But basically, our earnings assets the base improved so much, 35% is quite huge. And when you talk about the improvements on our yield on any assets, that was also from 12.7% to 19.4%. If you combine these factors, it justifies what we have said.

Okay. Just one on that. Can we just get a size of the swap book, if you can share? That will be nice to have.

As I do now our asset value stood at $600 million.

The next question comes from Stephen Chima of CardinalStone.

Congratulations on fantastic results. So my first question is, of course, regarding the bank's first phase of the capital raise exercise. I'd love to get a sense of how much exactly -- what's the market raise. When can we expect to see the impact of the inflows reflect on the bank's financial statements. And I'm also what specific plans does the bank have for the remaining, I think, circa NGN 50 billion, ahead of -- for 2025, what specific plans you have to raise the amount? Also with the asset quality -- the assets yield rather of 19.4% in half year 2024, which, of course, was the highest in the industry. What specific strategies or what unique strategies the bank have implemented in order to maximize the benefits of the high-yield environment related to its competitors. And lastly, given the upward revision of the cash reserve ratio to 50% at last MPC meeting, how is the bank managing its liquidity needs and what impact does this have on the bank's funding requirements?

Thank you very much for those questions. Our capital raise exercise closed on the 12th of August, 2024 and was very successful with a 2.1x of subscription. Currently undergoing capital verification by the Central Bank, which we hope they will complete in 6 weeks and they list the shares within a few days after that to obtain the -- the rest of the -- after actually the rest of the regulatory approvals. We raised NGN 265 billion, of which we are hoping that -- well, we will still have a gap of NGN 160 billion to NGN 195 billion depending on how much the SEC allows us to absorb. And because we had a 3-step approach and going by the success of the first one, it looks to be that we're only going to have the second leg, which is the private placement for the balance. So depending on how much SEC allows us to retain we will be out by between NGN 160 billion to NGN 195 billion. But we have considered this exercise as concluded in our minds because of the massive success we had in first one. I will have Stanley speak a little bit more to this.

Okay. You've asked about when it will reflect. Okay. And then we said, Central Bank is doing the verification exercise. And until that is concluded that's when we'll then submit to SEC to get the approval. So it's the process of that verification that will determine when that reflects in our book as part of our capital. And you also asked about specific things that we believe this will help us to do. Obviously, the risk or the funds from this will help us in a lot of ways towards regional expansion. We mentioned regional expansion. We also mentioned technology refresh and also to help us in our normal working capital. So there are a lot of ways we intend to deploy this, and we are very focused on doing that to make sure we optimize the use of the funds for the benefit of our stakeholders. And the question on how to maximize the yield environment, of course, we know this is a very good play for us. And we mentioned when we did the initial introduction, what we've done in our push for low-cost funds. So what we're doing basically is to continue to push in that area and most of the funds we get, we are also deploying today into the money market, we're able to get a lot of yield out of it. So we're taking the maximum advantage you can take using our deposit mobilization to push through that. And that also answers the next question you asked about CRR. Yes, we have often times referred that the CRR limit is currently 50% and therefore the only way you can manage your liquidity in this kind of scenario, if you're getting deposits at low cost. Of course, it's more painful if you taking purchase funds at a very high cost and you're leaving 50% of that. So if you get low cost funds, of course, you know that reduces your costs. So that's our target, and we'll continue to push that to be able to manage this particular year.

Stephen, does that conclude your questions?

Yes. I would like to add another question, if you allow me. Can I go ahead? So speaking to your asset quality, what strategies is the bank putting in place to improve the bank's loans to the power sector, right? Are there any concerns about further deterioration in the asset quality, any chance that there would be a reclassification from Stage 2 to Stage 1 anytime soon. And of course, speaking to Fidelity U.K., what can you say about their performance as of H1, 2024 and for the rest of the year. Has it started contributing to the overall bank's performance already. Did you get my question?

I did get your question, I was just trying to get the mic working very well. Now the -- our story on the power loans, the beautiful story. We have seen several situations that have improved the outlook in that particular sector. But I'll have my CRO speak to that specifically. We have been majorly since after the restructuring. We have seen major increase in the growth in that sector, in the cash flow in that sector. It has moved by at least 30% increase in the inflow. So I will have the CRO speak to it.

I'll just speak to this very, very quickly. You will notice that there's been very positive developments in the power sector. And the key -- what you can see as key evidence is the improvement in tariffs. That has led to significant improvements in collections overall. And if you quantify, to quantify it, you find that even the government itself is finding themselves being free from previous subsidies that we're bringing into that sector. So overall, it's a positive story, and it's also reflected in our loan book. Now you will see that for us, in the last quarter, year-to-date, we've seen significant paydowns in our power sector exposure, and we feel very positive about it, about the future as well. So to your question as to whether there will be any deterioration, absolutely, no, we don't foresee any deterioration. Rather, what we see is the likelihood of moving from Stage 2 where they are now to Stage 1 sometime in 2025. So that's the outlook we see for the power sector.

So that was a question on the power sector. So the next question will be on the U.K. Yes, U.K. is also another very good story. Yes, U.K. London was a loss making bank before Fidelity acquired it in late 2023. But what we are seeing is a significant reduction in the losses and possible return to profitability over the next 3 months, all things being equal. Our next phase will be to ensure that we return to the path of sustainability, the growth and then the long-term profitability will be our focus. And this would be underpinned by the effective risk management practices and strong corporate governance we have already put in place. On the short to medium term, like you asked, we are targeting at least 2% to 5% contribution to the group profit. While in the long term, we expect it to increase to 10% because London is a financial hub, we are seeing a lot of interest and cross-selling to our corporate customers. And all that we believe will take us to the targeted commitment in a very short while. So we believe Fidbank U.K. will deliver the expectations because that's part of the attractiveness of that franchise is a strong robust [ marketing ] license, which they have, which allows them to offer a wide range of services from retail to commercial to corporate customers. And the interplay with our trade customers is a very good one from what we have seen so far. So I think in a very short while, the story will be completely different going by what we've seen already in the trajectory that we are growing in the last 7 to 8 months.

Our next question comes from [indiscernible] of PML Professional Services. Getting no response from [indiscernible] going on to the next question, which comes from [indiscernible] Jennifer of FNBQuest.

Congratulations on your numbers once again. So I have quite a few questions. I would just ask all of them at once so you get the opportunity to answer. My first question is about the capital raise. Congrats again on the successful capital raise. I would like to know what the specific impact on your CRR will be? Like where do you see your CAR post capital raise? That's the first question. My second question is regarding credit loss. So I noticed that provision for credit losses increased by over 40%, and this led to an increase in cost of risk. Can you provide insights on the factors or the drivers of the increase in the cost of risk and what are the sectors that are responsible for most of the impairment? My third question is regarding your NPLs. Noticed that there's significant exposure to the oil and gas as well as the consumer goods sectors. So how is the bank managing the credit risk in these areas? Last but not least, I have a question on technology costs. Noticed that there's an increase of about 580% in your technology cost. Can you provide drivers to the spike in this cost? That will be all for now.

Thank you very much, I will take the first question. like you said, like you noted, our capital raise exercise was very successful, and we are 2.1x oversubscribed. And with the conclusion of the exercise, it will improve our capitalize adequacy which will in turn enhance our lending capacity, our regional acquisition plans, our technology refresh and our overall improvement in our working capital. And specific to your question, the impact on our CAR will be about 600 basis points to be a good one. And the second question will be that the second question was, do you expect that -- okay, provision of credit losses increased by -- so the increase in the impairment was not due to poor asset quality, but it was more or less like prudent on our side. But I will have our CRO speak to that.

Okay. Thank you very much, MD. Yes, as the MD said, the increase in the costs, the impairment cost wasn't from poor asset quality. As you can see, our NPL ratio closed at 3.5%, which is the same thing as it was last year. It was more from us being prudential, I'll put it that way, because we basically saw the environment, the volatility in exchange rates and so on. And therefore, prudentially, we took an increase in our impairment costs. By way of outlook, we don't foresee that there will be a material change from the guidance we gave at the beginning of the year as far as cost of risk. We gave a guidance of about 2%, and we expect to close around that also by the end of the year. I'll go on to take your other question about NPLs on oil and gas sector as well as consumer sector. The increase you see there for the oil and gas sector wasn't from a deterioration in quality at all. It was more from the impact of devaluation. You can see what happened between June -- between December of last year, the exchange rate was below NGN 1,000 and as at June, it was NGN 1,400 something to a dollar. So that's really what you see there, translation difference. Then on the consumer sector, what you see there is as a result of a technical glitch that we had on a third-party service provider that helped us with settlement of certain repayments that were due from customers that we gave retail loans to. So that glitch is what caused that spike. That glitch has been resolved. The loans have been restructured, and you will see that -- you see that reflect in our NPL ratio -- in the NPL ratio for that sector in subsequent quarters.

Okay. Your next question was on technology costs that increased. Yes, most of our technology expense is indexed to the United States dollars. which was devalued by over 100%, as we all know, in the last 1 year. So in order to enhance and moreover, because we need to continue to enhance our digital play and to ensure our customer satisfaction, we have to continue to improve our technology touch point. And with the value of the dollar against the purchases, that significantly increased our costs. And then we also know there's been a heightened cyber risk and we have to also deploy several different solutions to our platforms. So that explains the extra -- the heightened -- the increase in our technology costs and quite understandable with the level of devaluation of the naira. Every expense that is in dollar was adversely affected. I hope I answered all your questions.

Yes, you did. Please, I just have a final question. Can I go ahead.

Please go ahead.

Okay. And so given the current economic environment, I would like to know your outlook for interest rates, and market yield for the remainder of this year and going into 2025. And how do you think factors that will affect interest rates and yield will impact your lending strategy and your overall financial performance going into 2025 and also for the rest of this year?

Okay. The NPR has been reviewed upwards. Okay. Sorry, the CPI's current monetary policy stance was responsible for the steady rise in the yield. Since January this year, the NPR has been reviewed upward 35x from 18.75% to 27.25%, as we all know. The increase was targeted as stemming the headline inflation and foreign exchange pressure on the naira. We believe the exchange rate and inflationary pressures will be -- will still be prevalent in Q4. However, answering your question specifically about Q4, we do not expect any material change in the market fundamentals this year. Definitely, a lot of effort is being put into moderating the exchange rate and hopefully, will start to yield dividend in Q5, I mean in 2025. But the bank, we will continue to enhance our retail play and do more lending to the SMEs through developmental financial institutions who definitely have more favorable rates because we imagine that -- we know not that we imagine, we know that our SMEs are not able to absorb the commercial rates due to the very high NPR rates and the rates in the marketplace. So we'll continue to -- our current strategy will be to continue to support them through the DFIs who have more favorable rates.

Our next question is a follow-up from [indiscernible] of PML Professional Services.

Congrats on the bank's numbers. I mean it's impressive to see sustained growth trajectory along major income lines and balance sheet items as well. But I have 3 questions to ask. 2 questions because, I mean, somebody has asked one already. The first one is the government passed a bill on 70% windfall tax on FX gains of all the commercial banks in Nigeria for 2023 full financial year, it must be paid this year. What's the update on that? And has there been any impact? Has that been remitted? What's going to be the impact on the bank's figures? And then my second question is -- on Page 14 of the Investor Relations presentation, the net interest income saw a 202% increase from H1 2023 to H1 2024. How was that been achieved basically considering the marginal growth in the bank's net loans and advances? So how was the bank able to witness or record such increase?

Okay. Thank you very much for those questions. Incidentally, we are still expecting the details of the windfall tax. The Finance Act Amendment passed by the National Assembly has not been officially dissected. So banks are unclear about the framework and the specific income line that will be affected. We expect the FRS Federal Revenue Service to release the framework that will provide how the specific provisions of the tax law will be implemented. We don't have the framework yet. So we have not -- we can't really say what the impact will be until we have the framework. Your second question is on the net interest income on Page 14. Yes, the net interest income, like I spoke to, I think it was the first analyst that asked was driven by improved yields on the earning assets and increase in our earning asset fees. In addition, our strategy for low-cost deposits has helped to minimize our interest expense growth. Our low-cost deposits, like I spoke to earlier on, is at 93% of our overall deposit. And with the challenges of the CRR at 50%, we have to continue to play the NIM game, which is to continue to keep our deposit cost low and continue to expand our low-cost deposits, namely savings, current account balances and all of that. That will be our strategy to ensure that we have -- we maintain our NIM, which is the reason for the growth that you are seeing in our profitability.

Our next question comes from Nidhi Gupta of SG Analytics.

Congratulations on your results and for the successful capital raising. So I have a question regarding the capital requirement only. So like after raising money from the rights issue, what is your plan to raise the remaining capital to meet the requirement by first quarter 2026. If you can give more light on that.

I do get your questions. Like I said before to the earlier analyst question, we are likely to have a gap, depending on the sectors, we are going to have a gap between NGN 165 billion and NGN 195 billion. And that we plan to close through private placement. And we have seen a lot of requests already and a lot of interest. And so we're going to close that through the private placement is our second strategy.

Okay. So do you have any time line for that like any estimated time line?

The only delays will be coming from the verification exercise and the SEC, not SEC really the verification exercise is the one that's the big one. So we think we're going to be able to close out before -- on or before Q3 2025.

Our next question comes from James Ola-Adisa of Chapel Hill Denham.

Congratulations on your results. I have 2 questions. The first is around your dividend policy to pay out 25% to 40% of profits. So should we be expecting that to be maintained this year? And then the second question is around your regional expansion. So what countries or regions are you looking to expand to over the next few years?

Thank you for that question. Our dividend guidance remains between 25% and 40% of our PAT. For us in Fidelity Bank, dividend payout contribution is an integral part of our capital management process. And our growth aspiration, the current guidance will ensure adequate accretion to our capital. And in all of this, we also want to make sure that our stakeholders or the shareholders are very happy with us. And as you well know, our payoff line is that we will keep our word. So we have to continue to pay dividend and to make sure that we delight our shareholders. On the second question. That would be -- we intend to select African countries in the medium to long term. Our aspiration is 2 to 5 African countries in the next 3 years to 5 years. However, we are cautious considering the current exchange rate movements and the recapitalization exercise. So our approach will be to be value-driven at every opportunity that we have and any acquisition will be the opportunity most tick all the boxes. But as the guidance, we prefer to do brownfield and greenfield. So we're actively looking out for opportunities that fits into our model.

The next question comes from Ngozi Odum of CardinalStone.

Congrats again on your results. I know you already spoke to your dividend policy, it's been around 25%. I just wanted to ask, do you believe there's a world where if we should, in fact, see the implementation of the windfall taxes that this can affect or may affect your dividend policy being around your policy range of 25%. I just want to know that if we do see, in fact, some clarity before the end of the year or maybe even in 2026, should we expect or is there a likelihood that this can impact your dividend policy within the year that is being applied? And then my last question would be on your management of your funding pressures. I don't know if this question was asked. How are you navigating the 50% CRR debits? What are the trends in terms of your business operation that this will...

We have shown that our NIM, we did mention it again is growing. So yes, the windfall is an added profit, but it is not the core of our earnings. So I'll have Stanley speak more to it. So we will be able to sustain our promise to our customers. Fidelity will keep our word.

So just on the back of that, I would say that the process to determining this range commences from the Board comes down. So basically, there's nothing we change it, especially this windfall tax. We've also looked at it initially and this came up, we looked at the impact and build on our own evaluation of whatever the impact on that initial release that was made earlier. We saw that it wasn't going to be so impactful to affect even our dividend payout. So we've been very consistent with this, and we'll continue to do that. I don't think this will not, in any way, affect our promise to stakeholders.

Does that answer all your questions?

Yes, the last one I just wanted to find out was how you're managing the implementation of CRR. How is that -- what strategies? And do you perceive it as any threat for your operations?

There's no -- I mean, 50% is an issue. But how do we manage it like we said earlier on, we make sure that we stay on the low-cost deposit drive. I mean our focus is on it. And the good thing is that our focus has been on it on the low-cost deposit drive in the last 2 to 3 years. So -- and that's what is affecting our being able to weather the storm, okay? Because we are very low on tenor funds, we are able to continue to sustain our trajectory, our profit numbers. And our tech is helping us to drive deposits through our platforms and collections and the value chain and all -- a lot of strategies have gone in here. We have strengthened our value chain collections. We have strengthened -- now most of these are going through our platforms. And then, of course, that has helped it whole lot. Like we said, our low-cost deposit is 93% of our deposits. So that's the only reason why we are able to -- I mean, that's the biggest reason why we're able to survive the 50% CRR regime without affecting our income lines.

The next question comes from [indiscernible] of Bank Trust.

Congrats for the numbers. Apologies if my questions were asked earlier, but I have one question on asset quality, particularly on the oil and gas and power exposure, there's quite a sizable amount of those exposures in stage 2. If you could discuss a little bit what's going on in both the power and oil and gas exposures, how it's been managed and maybe the level of provisioning you expect to take in the future. My other question is around Eurobond. Are there any thoughts or planning towards the maturity yet. Would you be looking to refinance with another issuance or completely redeem?

Yes, on the oil and gas and our power team, we have done a very good job over the years, and we do not expect any deterioration in this sector. And I'll have the CRO speak to it.

Thank you very much, MD. So thank you for that question. On the oil and gas and power, which you see quite a sizable sum in Stage 2, there are 2 factors. Number one is the impact of exchange rate has certainly ballooned that sector. So that's one. And then as to the outlook, I just want to say that it's positive because if you look at the oil and gas sector, there is one significant player there that accounts for what we have in Stage 2. And the story for that player is very, very positive. It's a player that we have a syndicate of banks involved in, and they're generating -- they're producing right now. Also, there's cash flow coming from it. Payments are coming in. So outlook is that we will have that loan move from Stage 2 to Stage 1 [indiscernible] realization of tariffs. And because of that, there's been very, very strong collections on the power sector exposure that we have. And we've seen significant paydowns year-to-date. So again, our expectation for that sector is also positive, and we expect to move from Stage 2 back to Stage 1, all of this sometime in 2025. That's our expectation. So we don't foresee an increase in impairment or provisioning on those. Right now, we're at about 15% thereabout provision on that, but we see that reversing sometime in 2025.

Okay. Your second question is on the Eurobond and our financing plans. Our model is different. We always provide a sinking fund for repayment of our Eurobonds, and that's ongoing as we speak. And we have no doubt about the repayment that's going to fall due 2028 because it's working according to our plan. However, just as a support, we have swaps of -- as at Q2 half year, we have swaps of $600 million with the Central Bank. We also have -- right now, as we speak, we have swaps of $450 million in place. So that's like a fallback. In any case, on your question about whether we're looking at anything new, we are watching the market to see if and when it comes conducive to approach the market given the drop in the yield in the global markets. So we're watching the market as well, but not for the purpose of refinancing, but for purpose of taking advantage of the dynamics in the global space.

If you don't mind me asking a follow-up question just on the swaps. How has the position -- the book position changed maybe year-to-date? Has dividend increase in the position or decrease with the Central Bank.

For $600 million, remember, I just mentioned that were $600 million before the H1, but now we're $450 million because Central Bank repaid on some bonds -- on some swaps. We paid $150 million on the swap on one of the tranches of the swap.

[Operator Instructions] We have a follow-up question from Josh [indiscernible] of Stanbic Pensions.

I just want to say fantastic in terms of dividend that was paid. Just to confirm, the NGN 0.85 interim dividend because of -- when I look at the presentation, it speaks to a portion being the final dividend. So I just want to confirm that the NGN 0.85 is interim dividend, one. Second thing is that some sort of guidance on sort of final dividend would be pleasing. Should we expect as a tongue in cheek to get something similar to what we received last year's final dividend.

Okay. Yes NGN 0.85 is definitely the interim dividend. As per the full year dividend, I cannot speak to that, not allowed to. But I think you can extrapolate from our dividend policy. We know what it's going to be. But I think our shareholders will be very proud of us.

Our next question comes from Sodiq Safiriyu of SBG Securities.

Congratulations on the results. Just to clarify regarding the -- your response to the CBN swaps. So I know earlier you mentioned the figure as at June 2024 it's $600 million. And then another $450 million as what it stands now. So I'm trying to confirm that the $150 million that was repeat was done between the end of H1 2024 and now? That's the first question. Second question would be regarding if what your exposure to Ghana Eurobond is and if it is likely that we're going to be seeing any further impairments to be taken on that considering recent developments on that front? And lastly, would be what is size of your forbearance with CBN is looking like? And just how it sees the structure, maybe when we are likely to see the time line, when it's likely to wind down? And if that is likely to significantly affect the CRR or even further impairments going forward?

Can you hear me?

Yes, I can hear you.

Okay. Our H1 Eurobond -- not Eurobond, the swap with Central Bank was $600 million but like I said to you earlier on, there has been a repayment of $150 million last -- earlier on this month. So our figure stands at $450 million as we speak. But I'll have the treasurer take the rest of the questions on the Ghana Eurobond. And I'll have the CRO take the question on the forbearance with [ Ghana ].

Fantastic. So on Ghana, like you know that they came to the market to inform the market on the basis for reallocating the bond. That has been done as of last week, and we're just getting the information as regards the details of the swap that has been done. So we are currently reviewing, and we should be able to ascertain this immediately we get the full details of the allocation. This at least we are aware. But for us, what we have been talking about, our own exposure there in the bond is about 6.6 in total, and we have to marking it to market too many times. So the impact on our book is almost nil if not completely off. So I think we are good and we have a very positive outlook by the time that will see in terms of the allocation. We opted for the second option, which is the discount option. I hope that answers your question?

Yes it does.

Your next question is on forbearance. I will my CRO speak to it.

Okay. Thank you. Yes, indeed, we have some forbearance from the CBN, principally around single obligor limits excesses. Fortunately, for us, we are taking steps to address them. There are 2 factors driving how we address them. The first one is, of course, capital retention. The fact that we have profits that we make and then we retain the profit, that's one. The second one is the capital raise that we are on now. And as you heard, our first outing was fantastic, and there's great interest as far as the second round is considered that we plan for next year. So we project, therefore, that by Q3 max next year, we should have raised the entire sum that the CBN asked us to raise. And that, of course, bolsters capital position and removes most of the SOL issues that we have. Of course, we're engaging the Central Bank as well, carrying them along as far as the 2 things are concerned vis-a-vis our capital raise exercise as well as the SOLs that we have right now. So we are pretty optimistic that we'll come out of this strong and resolve also by the time we're through with the capital raise exercise. Some will fall off certainly before the end of this year, a good number will fall -- we foresee about 70% falling off before the end of this year. And then the rest will take over into next year.

Okay. So basically, the 2 big ones, there is -- I mean, we're engaging the Central Bank to say that those dollar devaluation affected them significantly. So that it's only reasonable that we -- the forbearance should be taken off only when the banks are recapitalized because the 2 ones that will remain by close of -- by end of the year would be the -- will be syndicated loans that affect the local bank and those numbers are huge. So we believe that the fee that we have made for the forbearance to be extended to align with the capital raise exercise will be granted because those loans were ballooned by the devaluation.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now hand back over to the MD for closing remarks.

I want to thank you all for attending this call. We are committed to delivering superior financial performance through the implementation of our best-in-class processes that leverage on innovation and technology. The ongoing capital raise effort allows us to improve our earnings base by expanding our business locally and internationally. We can assure you that regardless of the headwinds in the domestic economy, we will deliver on the promises that we have made to you, our dear stakeholders. We in Fidelity, always keep our words. Thank you. Thank you.

Thank you, ma'am. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.