Fidelity Bank Plc (FIDELITYBK) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Fidelity Bank H1 2025 Earnings Call. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Nneka Onyeali-Ikpe. Please go ahead. Please go ahead.

Good day. My name is Nneka Onyeali-Ikpe, I'm the CEO of Fidelity Bank plc. I am pleased to welcome you to our H1 2025 earnings call. On the call with me today are the following executives and principal officers of our bank: Kevin Ugwuoke, Executive Director, Risk Management; Ken Opara, Executive Director, Lagos and Southwest; Stanley Amuchie, Executive Director, Chief Operations and Information Officer; Pamela Shodipo, Executive Director, South; Abolore Solebo, Executive Director, Corporate Banking; Sufiyanu Garba, Executive Director, North; Victor Abejegah, Chief Financial Officer; Akintoye Babalola, Treasurer; Adetunji Mustafa, Divisional Head Strategy; and Samuel Obioha, Head of Investor Operations. We have uploaded the Investor Relations presentation on our website for your review. In this session, I will provide a high-level overview of the macroeconomic environment and speak to the facts behind the figures. Nigeria's domestic business environment showed strong signs of improvement in 2025. The government's contractionary policies delivered greater macroeconomic stability. The key developments during this period include on inflation, the rate declined from 34.8% in December 2024 to 16.05% in October 2025, maintaining a steady downward trend since April 2025. Analysts forecast further moderation in the coming months. On GDP growth, Nigeria recorded a growth rate of 4.3% in Q2 2025, an increase of 21.6% compared to 3.48% in the same quarter of 2024. With respect to the external reserves and exchange rates, as of November 2025, foreign reserves stood at $46.7 billion, while the exchange rate appreciated to NGN 1,454 per U.S. dollar compared to NGN 1,649 in the corresponding period last year. On oil production, an average daily crude oil production rose to 1.58 million barrels per day in September 2025, reflecting a 19% increase over the same period in 2024. Concerning capital importation, in Q1 2025, capital importation reached $5.6 billion, representing a 67.12% increase compared to the same period in 2024. On financial governance, another milestone was Nigeria's removal from the Financial Action Task Force, FATF gray list, which restored investor confidence and underscored progress in financial governance and regulatory compliance. Finally, on the back of these reforms introduced by the current government, the S&P Global and other rating agencies changed Nigeria's outlook from stable to positive. The rate change is expected to increase foreign inflow, lower borrowing costs and help debt sustainability. Therefore, our prognosis for Nigeria economy is positive in the coming months, and we expect the monetary authority to drive an expansionary policy. Hence, we expect further rate reductions in the coming months. As a bank, our strategic imperatives in the current financial year are to optimize the balance sheet by expanding the earning base, enhancing the net interest margin, increasing noninterest revenue, reducing our cost to serve and keeping the cost-to-income ratio, that's CIR, within acceptable thresholds. Despite the end of CBN forbearance regime, our financial results highlighted the resilience and adaptability of our business model. Permit me to speak specifically to the financial numbers now. The increase in our NIM from 12% in December 2024 to 13% in the review period was due to the elevated interest rates regime in H1 2025, which impacted both the yield in earning assets and the cost of funds. The yield on the earning assets increased by 240 bps from 18.1% in FY 2024 to 20.5% in the review period, while the cost of funds increased by 100 bps from 5.2% to 6.2% in the same period. The rise in average funding costs was moderated by our maintaining a low cost -- a high low-cost deposit profile. The ratio to low-cost funds to our total deposits was 92.9% in H1 2025, up from 92.6% in 2024 -- full year 2024. Our initiative to drive noninterest revenue over the years is finally beginning to bear fruits. In the review period, we grew our noninterest revenue by 134% from NGN 35.6 billion in H1 2024 to NGN 83.4 billion in the reporting period. The drivers of this growth are digital income, trade income, account maintenance charges and credit-related fee income. Slide 21 of the investor presentation showed the movement in expenses. Year-on-year, our OpEx increased by NGN 90.2 billion from NGN 160 billion in H1 2024 to NGN 250 billion in the reporting period. 33% of this increase came from additional provisioning for legal costs. Other cost drivers were staff costs, regulatory charges and marketing as well as communication expenses. The rise in staff cost was due to the increased wages and salaries across all [indiscernible]. Regulatory costs related to NDIC and AMCON charges, while marketing and communication costs related to expenses incurred in our ongoing internal expansion efforts. Overall, our cost-income ratio increased to 56.3%, which is in line with our guidance of less than 60%. As a deliberate strategy, we prioritized capital conservation over dividend payment in H1 2025. We are on track to complete the second phase of our capital raise exercise through a private placement. This exercise will add approximately 900 bps to our CAR. We assure our esteemed stakeholders that the full year dividend payment will be in line with our dividend payout policy. Thank you for your support. I will now take questions.

[Operator Instructions] The first question we have is from Nabila Mohammed of Chapel Hill Denham.

Please confirm you can hear me?

Yes we can hear you.

So I have a couple of questions. I understand you need to prioritize capital conservation because of the level of the CAR that we saw at H1 '25 at 15%. But I just want to understand clearly what that NGN 303 billion [indiscernible] impairment and how that has affected the exchange earnings because as I see it, [indiscernible] negative NGN 74 billion just based of financial statement. I need clarity on that figure, if it's related or not. Just color around it basically? That's my first question. Then my second question is with regards to dividend payments, the final dividend payment. So since we didn't see an interim for H1 '25, what should we expect for final dividend? And when should we expect -- if we do not expect full year, when should we expect dividend payments to resume -- those are my 2 questions for now.

Thank you very much for understanding our capital conservation strategy. Just to speak specifically to your question, your first question specifically, the movement of NGN 303 billion from retained earnings to risk with regulatory reserve was borne out of the bank's exit from the forbearance regime. And to answer your second question, the dividend payout policy of the bank is 25% to 40% and we will pay full dividend, full year along the -- we will continue to abide our dividend policy of [ 25% to 40% ]

Okay, so my first question is with regards to the forbearance. Is the bank fully out of the forbearance? Even the breach in SOL, is that sorted out already?

Yes, we have exited forbearance as required by the Central Bank. We have fully exited forbearance as required by the Central Bank.

The next question we have is from Olumide Sole of Renaissance Capital Africa.

Okay, so starting with for [indiscernible], I see that [indiscernible] was negative as at H1 that's on the balance sheet. Please can you explain the reason for that and also the legal contingency that's what the legal contingency, What's the update on it and has any permissions also been made for the legal contingency in case this goes south? That's all.

Yes. Thank you very much. Like I answered the previous speaker, the movement of NGN 303 billion from -- was the movement from our retained earnings to the risk reserve capital, reserve, through regulatory reserve, and that's gone out of the exit of the forbearance regime. On your second question, yes, we made adequate provisioning for the legal contingencies. It was the movement that caused the negative retained earnings. And in our Q3, that's been adjusted positive back to positive in Q3.

Okay. So for the legal contingency, how much have you provide, please?

We have provided NGN 1 billion for the, so that's our expectation of our liability in that particular issue.

The next question we have is from Habeeb Oladehinde of WSTC Financial Services.

My question is based on the litigation caused from the provision we saw is around NGN 37 billion provision. But according to the last call, it's NGN 22 billion NGN 25 billion. What can you say about that? How do you arrive at your expectation, please?

The truth of the matter is that this matter has gone back to the Supreme Court, and we are unable to make comments on it because it's subjudice. But our expectation by our own calculation, which is what [indiscernible] give us the confidence to go back to the Supreme Court is that our liability is limited to 33 -- NGN 32 billion plus additional things that would have moved since when the case came up. So I'm not allowed to make further comments on this. Thank you.

The next question we have is from Sodiq Safiriyu of SBG Securities.

So I just wanted to confirm for the parents and rights of the [ H1 ], I mean, each one, can be linked to the obligers or the sectors that we have affected. The likelihood that they may be affected in the next term, that's the one. Two would be the plans of the bank to sort of minimize the effect of the mission that is. Yes, it's considering the accommodate and the...

This is the operator, Your line is breaking up, so if you could just speak closer to the mic. Your connection does not seem stable sir. Sodiq, can you please try and dial back again from a different line. In the meantime, we'll take the next question from Tim of WSTC Financial Services.

hank you for sharing with us. Also, thank you for having to be a part in this kind of story. Well done for what you're doing. But very quickly, my question is around recapitalization. Where is Fidelity Bank and how close is she to having achieved the seeding requirements for Q1 2026? Thank you.

Thank you very much. As National Bank, the regulatory capital for us is NGN 500 billion. We are on NGN 305 billion now as we speak. We are on course to -- for our private placement within -- before the end of the month to raise NGN 259 billion. We have all the approvals that we need for that, and we're very much on course to do that. We triggered NGN 259 billion in. We will be at NGN 565 billion. And we are very confident that we'll be able to achieve that for the end of the year because we have -- if you remember, our private placements -- and if you remember, our public offer was oversubscribed by 234%. And the public investor interest is still very much alive and for obvious reasons because the investors that we got in the public offer have made jumbo profits. So everybody wants to be part of our private placement. So we are very confident. Our book yield for now has exceeded what we have what we need, but we're very confident that we'll close out all of this before the end of the year, and this will add back about 900 bps to our CA.

And can you also speak to your FX because you mentioned 40% of the dollar on the sheet is foreign-denominated and it's living in the current time. The naira seems to be appreciating against the dollar. So how does that weigh on your holdings? And what does that look like for -- how did that affect half year? And how does that also look like in Q2?

Thank you very much -- we are aware of the impact of FX gains. So I will get the CFO to speak to that. Thank you.

Thank you so much. And the FX gain recorded was born out of the FX tradings that we did during the period and that gave us these figures we are seeing because of the availability of the FX during the period, we took advantage of it and we brought in so much about it. So the FX transaction that took place complemented the FX translation made in the balance sheet on the LOP. So a combination of those two income lines give us what we have on the FX gaze of 34.5 billion. Thank you.

The next question we have is from Stephen Chima from CardinalStone.

So on your forbearance, I'd like to get a sense of what the exposure was, I mean, like the size of the exposure really. Also what sectors were impacted the most. We also noticed in your half year results, you guys had a windfall tax. Should we be expecting further windfall taxes in Q3 and Q4? And I really appreciate if you could speak a little around FidBank U.K.'s financial performance and expectation into 2026 as well.

Okay. Let me start from the last question. U.K. FidBank U.K. Over the past 2 years, we have focused on rebuilding the business for sustainable growth and long-term profitability, supported by enhanced risk management practices and very strong corporate governance. You know the environment where we are in England, we have to ensure very strong corporate governance. I am pleased to inform you that these efforts over the last 2 years has yielded results as FidBank U.K. is back on track for profit this year. In the short to medium term, we project that FidBank U.K. will contribute about 2% -- 2% to 5% to the Group profits. And in the long term, we expect that its contribution will increase to about 10%. We are confident in this particular -- this outlook given the robust banking license that we have in U.K., which enables the subsidiary to provide a broad suite of services, namely retail, commercial and also for our corporate clients. So we are confident that they will deliver on the short term, like I said, 2% to 5% and on the long term 10%. And the second question that you asked is on the windfall taxes booked in Q3 and Q4. They have been amortized over the past 3 years and the outstanding balance will be completed this year. And there will be no further assessments on the -- and the question you asked for forbearance, we have exited all forbearances. And our forbearance was about NGN 800 billion. And the sectors that were affected was power and oil and gas. So we have exited all forbearances.

The next question we have is from Ngozi [indiscernible] of CardinalStone.

So I have a few questions. First, I don't know if this was mentioned, wanted to speak about the delayed release of the full year results. Was there any reason in particular that resulted in the delay of the H1 results? And then when should we expect to see the 9-months 2025 results? Then based on the Bank's estimates, when do you believe that retained earnings will turn positive? I believe this is going to be also supportive for dividend payments going forward. And then on the private placement, I wanted to know if you, by your estimates, you think that the capital verification process and all of those will be concluded in the current year, or if that will be concluded in 2026? So that we can get a sense of when the inflows would be expected on the bank's book. And then moving on to our expectations for 2026, given that if you look at the mix of the bank's earnings, it's more or less tilted towards interest income. How do you gauge 60 bank's performance for 2026, given that we're moving into a more bullish interest rate cycle. So that will be all from me.

Thank you very much. Just to confirm that our retained earnings has turned positive in the third quarter and the third quarter results will be out within the week. So just to let you know that was turned positive. And the capital verification exercise, we believe will not be anywhere as long as the last one because if you remember, the last one was a public offer and there are many, many, many investors. The private placement has much shorter investors anywhere in the neighborhood of 50. So we believe that to be a very quick exercise. We actually do believe that everything about the verification will be completed before the end of the year. So we expect that we should be able to add on the figures for our full year report. Then the question on the delay and why the 9 months report was delayed, I have my COO IO, who is the one that is getting with the Central Bank to discuss about -- to discuss it. because you know that the fact that we have to do a lot of stuff around the forbearance and the capital raise, that's all part of what's delayed it. So I'll have the CIO speak to you.

Well, it's been a very busy year, busy in the sense that a lot of things happen at the same time. We're one of the few banks that do audit and audit also takes a bit of time. So if you add the audit, then the process of exit of forbearance and all that, that delayed a little bit. But what we do, we try to carry the market along. If you notice as soon as we saw that there were some levels of delay, we published an information to the market to let the market know. But that's behind us now. We're making good progress. And at the end of the day, just after this call, I think within the week, as my [ MD ] mentioned earlier, 9 months will also be published. So it's just a busy year that we've seen, and we feel that going forward, things will come in faster. Thank you very much.

for 2026 performance as we move into a W cycle, given that Fidelity Bank's mix of earnings turns mostly to interest income. How do you intend to manage that?

Our strategy has been hedged on low-cost funds, driving low-cost funds. And if you notice from the report for half year, our noninterest income, the fees and commission has gone up significantly, and we're driving a lot on our digital banking and diversifying our earnings through export efforts on exports, significant efforts in digital loans and all of that. So the idea is to diversify our portfolio away from interest income alone and ensure that we have a broad-based income. And on that, we are sure that we have a winning and we will continue to be along those lines.

[Operator Instructions] It seems that we now have no further questions at this time, and I would like to hand back to Nneka for any closing remarks. Please go ahead, ma'am.

Yes. Thank you for attending this call. And just to say that over the years, we have built a very resilient and sustainable balance sheet, and we believe that we will be able to deliver the numbers this 2026 based on that for the rest of 2025 and going into 2026 despite the headwinds. We will continue to prioritize our strong corporate governance practices, and we'll continue to run a very effective risk management structure as well as try to conserve our capital in the process. We're also very focused on talent and retention. And in all of this, we will promise that we will enhance our shareholders' value, which is our DNA. Thank you very much.

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.