Fidelity Bank Plc ($FIDELITYBK)

Good day, ladies and gentlemen, and welcome to the Fidelity Bank 2025 Full Year Earnings Call. [Operator Instructions] Please note that this event is being recorded. I now hand you over to Nneka Onyeali-Ikpe. 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 full year 2025 earnings call. On this call today with me are the following executives and principal officers of our bank, Kevin Ugwuoke, Executive Director, Risk; Ken Opara, Executive Director, Lagos and Southwest; Stanley Amuchie, Executive Director, Chief Operations 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, Innovation and Business Transformation; Samuel Obioha, Investor Relations. We have uploaded the Investor Relations presentation on our website for your review. In this session, we will provide a high level overview of the macroeconomic environment and stick to the facts behind the figures. In 2025, the domestic economy recorded notable improvements driven by fiscal, monetary and such structural reforms implemented by the federal government and the Central Bank of Nigeria. Banking sector with next significant regulatory reform, namely the bank recapitalization program, enhanced prudential and corporate governance standards with regulatory forbearance, improved anti-money laundering and cyber security frameworks. Collectively, these reforms allowed central bank [Technical Difficulty] of building a stronger and more resilient banking sector, capable of supporting Nigeria's ambitions to become a $1 trillion economy. Despite prevailing headwinds, the Nigerian economy demonstrated resilience during the year, driven by stronger non-oil sector performance, increased oil production, improved fiscal revenues and the impact of ongoing reforms. Consequently, real GDP growth increased to 3.87% in 2025 from 3.4% in 2024, reflecting an economic recovery and improving macroeconomic fundamentals. Our in the current financial year are to optimize our balance sheet by expanding our earnings base the net interest margin, increasing noninterest revenue, reducing cost to serve and keeping the cost-to-income ratio within acceptable thresholds. Despite the end of the CBN forbearance regime, our financial results highlighted the resilience and adaptability of our business model. . I will now speak specifically to the financial numbers. Our gross earnings grew by 45.6% to [Audio Gap] 6.6% growth in interest income [Audio Gap] revenue related income, trade income, fixed income and credit-related fees [Audio Gap]. model. [Technical Difficulty] year-on-year rise in our net interest income to NGN 831.4 billion. These results reflect our disciplined asset liability management. Note that the on this movement of the is on Slide 20 of the IR presentation. Our operating expenses rose by 33.7% to NGN 443.3 million is primarily driven by uncontracted [Audio Gap] insurance charges, communications, legal services and depreciation. This accounted for 71.2% of the absolute increase. [Technical Difficulty] our cost-to-income ratio remained at [Audio Gap] which in line with our 2025 guidance. This disciplined cost management has caused our commitment to overall efficiency and sustainable profitability despite the challenging cost environment. The movement in our [indiscernible] on Slide 21 of reports. [Audio Gap] we've successfully completed [Technical Difficulty] that raised NGN 227 million, elevating our regulatory capital well above the NGN 500 billion minimum threshold required to retain our international banking license. This achievement has cemented our status amongst Nigeria's elite Tier 1 banks and strengthened our foundation for future growth. I want to thank you for your support [Audio Gap]. Thank you very much.

[Operator Instructions] Our first question comes from of Duet Capital. Apologies. The question comes from Stephen of Securities Limited.

I have 2 questions I'd like to get answered.

Sorry, I interrupt you there [Audio Gap].

Yes. Apologies. I believe that is resolved now. Can you hear me clearly?

Yes, we can. Please go ahead.

Right. I have 2 questions. The first 1 is to results that was released there was NGN 194 million realized [Audio Gap] I would like -- I would appreciate the management to provide more color to the nature of the underlying assets. what type of asset class [Audio Gap] approximately. My second question is around the non-distributable [Technical Difficulty] It grew from NGN 155 billion to NGN 299 billion, almost doubling. And the IFRS expense on the books in the POL was [indiscernible]. So let me get clarity exactly what drove this additional between the guidelines [Audio Gap] and the IFRS [Audio Gap].

Okay. The first question was basically because of the [Technical Difficulty] CFO to speak to that.

Thank you so much. Like we said, the underlying assets that led to was it has to do of Nigeria was changed last year, April, which the losses we saw the was due to mark-to-market losses due to the revision of the and that it was not unique along to the bank. We saw it play out with similar underlying assets. we do not expect to rollout because it has matured and closed. [Audio Gap] for swaps. [Audio Gap] was the outcome of the forebrains exercise that CBN carried out during this period and which has normalized now we're taking them in, and we are very happy to say that despite all that, we did not write off any of the loans that were affected, and we are comfortable that these have been cleaned up. Thank you.

Our next question comes from of Capital.

Okay. I would like to know what the bank intends to do in terms of expansion. I know that you've been able to raise fresh capital of over NGN 200 billion. I would like to know what those funds would be used for?

Thank you very much for the question. At the moment, we have only 1 subsidiary and our investment one subsidiary, and we intend to do 2 more in Africa, 2 to 3 in the next 2 years in Africa between 2 and 5 in Africa and basis because they're brownfield. So we have to first of all get what and then that's what And then we take it from there. So we're looking at 3 to 5 capital expansion in the next 2 years [Audio Gap] because we're not doing greenfield, we're doing brownfield. So it's on the technical basis as to what is available.

The next question comes from of Stanbic IBTC.

So my first question is, was the current size and structure of the residual book and what level do you think would trigger a further [Audio Gap] Secondly, what was responsive volume reduction in net loans despite the guidance of around for 2025.

First question was not clear.

First question was on the how was the structure like and what level of [indiscernible] in 2026?

Your question to get it right because the line is not very clear. You asked what is the current size of our derivative book, and what size would you the loss in 2026?

Yes.

Okay. Thank you very much, and thanks for the question. SO in terms of [Technical Difficulty] So it's not anything to be worried about. So in terms of the [Technical Difficulty].

And the second question about the loans. I'll have the our CIO speak to that. Thank you.

Okay. Thank you for the question on the reduction in the net loans for 2025. 2025 was a year where almost all banks are were focused on raising adequate capital. So it was in time to focus on being adequately capitalized. And so yes, we plan to grow the loan book, and that plan was a gross of 15%. Now if you marry the conservative approach to protect capital to read the strengthening of from 2024 year-end where it closed at around 1.5 to 2024, 2025 where it closed at around 1.4 you find that, that also helped to compress our loan book. Over 50% of our loan is in foreign currency. So that naturally, those 2 things combined to result in the next growth of just about 2% in the loan book for 2025. Thank you.

The next question comes from of ASA Asset Managers.

Congratulations on the results. I just wanted to ask OpEx levels. As you mentioned, there is increasing the level in the cost-to-income ratio this year. So I just wanted some clarity maybe on some lines or these one-offs? Or do you expect this to normalize in the coming months and the coming quarters? One line -- some lines in particular in terms of consulting and outsourcing or even marketing and communication. So just a bit of clarity and guidance on that would be nice.

Thank you very much for those questions. But as you well know, there are some expenses that we have to make as a matter of, of course, and those are the as well as the insurance changes for an NDIC. So the 33.7% growth that you've seen in that is basically because of the insurance. That was like I said and all of that. And this accounted for 71% of the And then these are charges that we have to make particularly. So that's -- and then of course, has also to the cost of living and then the stock price starts and salary increases as well as the OpEx, regular OpEx so that's basically what -- this disciplined cost of management on the commitment to our efficiency and sustained profitability yes. I'm the Head of take the question for that. .

Okay. you wanted to ask about if the EBIT levels are sustainable, it is going to be sustained. Now what has happened that some of the cost has to do with As I mentioned, there was a contract for we're growing our balance sheet of costs to increase. And then our deposit liability grow also increase the NDIC premium as well. So as we experience those kind of costs will grow actually is also to ensure that our income is growing at the same time so that effectively our cost income ratio or monitoring the cost to income ratio next time it comes within limits.

The next question comes from of Bloomberg.

Okay. I want to ask a question on your PBT projection. You are projecting like for the 44% increase to NGN 500 billion by the end of this year. I want to ask how you intend to make that money because I see loan growth is just about 10%. That's my first question. The second question is Central Bank Limited Nigerian Bank's offshore expansion to of shareholders funds. So how do you see that go? And how will it affect your account expansion?

Of course, for the -- yes, the first question was how do we intend to grow our income if we're not going to go along aggressively. As a deliberate strategy, we have decided to moderate our loan growth and I'll have the speak to it a little bit one on one. And that we have tried to focus on e-banking income. So that we propose to make a lot of top line revenue from noninterest bearing activities. Like all the loans and then all the loans and all the rest of them. So we don't want to work our capital so much. And then a lot of increase our loan book we think we are going to significantly adverse. I want to it going forward. I can see the from last year but we actually go absolutely. And we're still able to meet the numbers. So we are deliberately working very hard to income from our NIM as well as the lines, which include the e-banking and e-banking and facilities. So basically, got to be from the NIM of the existing loan book by making sure that we also reduce our cost of funds by raising our local deposits. So that what [Technical Difficulty] and then we'll also try to get trade related income as well as e-banking Income, as I explained. So most of this is noninterest income. That's why we hope to do the. We have demonstrated that we have the capacity to do that because in 2025, as you can see, our loan book grew by only 2%, and there was to sustain our revenue, top line revenue. Thank you. On the expansion, I'll have speak to it. Basically, we know that the implication of the -- 2020 will stifle the growth, but we have a strategy around that. Thank you. Stanley will speak to it.

Okay. So [Technical Difficulty] only subsidiary currency value subsidiary and that accounts for less than 7%, about 6.3% of our [Technical Difficulty] So based on our own calculation will have $200 million to $105 million available for us to do expansion and therefore, as [Technical Difficulty] and the restriction it doesn't affect us strictly because we still have room to do that. Thank you.

[Operator Instructions] Our next question is the follow-up from of Capital.

I initially had like 2 questions to ask. But I believe that the MD must have addressed the NIM because I wanted to ask why or how the bank was able to achieve one of the highest NIM among all peers in the industry, given the macroeconomic pressures that we had in 2025 but I think you should address a bit of that. Also, I would like to know what the contribution of the U.K. subsidiary was to the group? And what's like the long term, short-term fee for the U.K. subsidiary as well.

Thank you very much. Well, U.K. subsidiary was a loss-making institution before we acquired it in late July 2023. But over the past 2 years, we have focused on spending the losses and building the businesses for sustainable growth and long-term profitability. This was of course very well enhanced risk management practices and of course, strong corporate governance in U.K. So [Technical Difficulty] we have to maintain the very high standards of corporate government, which as the parent as well. So we're pleased to share that these efforts have yielded results. And for the first time since the acquisition, Bank recorded an operating profit of $923,000 in 2025. So they've actually come out from the bank. And then the current position, very small and negligible that in the short term, we project that we should be able to contribute about between 2% to 5% in group profit by but over long term, we expect that the contribution to increase to about 10%. We have seen a lot of growth in the balance sheet and the businesses and the result is very strong, and we have built a very solid management. in the U.K. subsidiary. So we're very confident that in a very short while we would consider at least 10% of our bottom line. Thank you.

The next question comes from of Cardinal Stone Securities.

So my first question will be around your loan book. I think in 2025, we saw an increase in stage 2 loans, particularly in the oil and gas sector. If you could just provide more color on the reason for that increase in Stage 2 loans, which also drove incremental stage 2 loans on the income statement. And then also based on your guidance, now that we have lost money of Stage 2 loans. Your guidance for is about 1% to 2%. Given those -- the increase in Stage 2 loans, do you think you can still achieve within that 1% to 2% band? And then also I have 1 question on dividends. On dividends for 2025, no dividend was declared. So it is due to capital adequacy ratio, which moderated to about 16%. I don't like in the passing around 2024 the capital adequacy was still around 16% while dividend was still declared. So just to give more clarity on the dividend from those 2 for now, I'll come on with other questions.

Thank you very much for that question. Let me start with a question on the closure of dividend. The bank was unable to declare dividends due to regulatory requirements mandating the conservation of capital as expected by the treatment of significant forbearance impact. So basically, to go to the second part of the question that you asked about the because of the not at all. of 2025 with 16% the NGN 227 billion, deposits of shares has not been calculated into that because the was post end of year. So as we speak now, if you add back 22.7 billion shares that we verified, at anywhere on the 24%, 23.5%. So NGN 2 billion to NGN 7 billion added back to our capital right will take us to [Technical Difficulty] so well on the regulatory threshold and we're happy to know that we're now on this [Technical Difficulty] and so it's not issue, just the regulatory requirements to convert capital and in the fallout of the treatment of the forbearance loans. The second question was on what we bought for Stage 2 loans Yes, The increase in our oil and gas stage 2 loan was caused by a few obligors to Stage 2. And the major accounts is an oil producer whose the repayments were delayed due to an incident in the facility. There was a fire incident in the facility. But the good news is that the repairs have been done, and this particular is back in production. We expect this particular assets to -- I mean loan move back to Stage 1 because and then the customer is yet to resume exportation any means from now on to have substance volume and then we expect the back to stage 1. Thank you. We have the last question on cost of risk. Yes.

Yes. Okay. Thank you. Thanks for that question. It was about guidance we gave for cost of risk by 3% and then balancing it again, the growth in the stage 2 loans that you've observed. Just like has explained, the stage 2 loan migration, we expect that to reverse within the year. And the guidance we've given has factored in a total understanding of our loan book. So basically, that guidance will apply. And it's kind of speaks to all we expect as far as the loan book is concerned for 2026. I hope that answers your question. Thank you.

The next question comes from Ngozi Odum of CardinalStone.

So I really wanted to...

Sorry, Ngozi, could you please -- your background noise is impacting, unfortunately. It seems like Ngozi could not sort her background noise. Our next question goes to of Leadway.

Most of my questions have been addressed, but just so positive have been addressed and a couple of questions. So stage 2 loan and the measures they are taking, so kind of addressed. But I would to also ask what happens, I mean we know that oil and gas is in a good position now what the bank you had to keep risk low if oil and gas performance actually the maybe subsequently. That was my first question. Then the second question would be on those management expecting maybe additional capital or [Technical Difficulty] expansion plans. And then lastly, we may say that means still looking at -- and also will actually ask a question about EBITDA clarification like you mentioned. So looking at what banks, I mean like so we saw how the payment charges was high. But then when looking at Fidelity, so it was kind of low. So should investors actually expect [Technical Difficulty] going forward? Or is this quarter going to be in short term or medium term?

Yes, let me start on the question of [Technical Difficulty].

[Technical Difficulty] go back to 2024 as well. that we give [Technical Difficulty] level of impairments compared to [Technical Difficulty] Some of those fees in 2025, that's [Technical Difficulty] in terms of migrations, [Technical Difficulty]. [Technical Difficulty] oil and gas sector, which is good for our business there. On the flip side, it is reverse, we are [Technical Difficulty] So the benchmark price exposures and we book the current ones [Technical Difficulty] as far as those exposures are concerned. So we're not really that worried. Yes, [Technical Difficulty] also ready for some time if it comes, [Technical Difficulty] Thank you.

Okay. That was another question on from the capitalization exercise. So we figured thing to do is to first of all, focus on ensuring that our term investments that to promise our shareholders. We're currently at So the first thing to do is ensure that we take it higher than that. and then utilize the current capital that we have. So we think about [Technical Difficulty] but as the business grows, of course, we have very strong brands and we're reliable [Technical Difficulty] we have reason to increase [Technical Difficulty] on the put options we did. So the confidence is there, So we have no reason to worry about it. If at any time our business goes weaker than what we've have now and we do need external capital, we will do that. But for now, we'll focus on working on the one that we have and ensuring that we move our ROE from which we commit and we did capitalization is much higher now. Thank you.

The next question comes from Habib of WSTC Financial Services.

So I does have a few questions. So one is what is the outlook on the impairment? How we see specific trajectory going forward? Then about what was the update on [Technical Difficulty]? I understand the significance [Technical Difficulty] That is related to the case. [Technical Difficulty].

Okay. Our outlook for our impairment is maximum 2% and then -- but I'll have the CRO speak a little bit about it because I think we try to explain it earlier and we cut a bit. Thank you.

Thanks, Yes, I have spoken quite a bit to it, which is that we foresee a market cost of risk of 2% for 2026, which has we looked at all of the dynamics that [Technical Difficulty] loan book across all the different kinds of migrations that we can see. And so that's the outlook that we have and it is in line with our guidance. it is much longer of 2% cost of risk for 2026. Thank you.

Okay. One of the questions you asked for is the for 2026. We plan to create dividend in 2026 our aim to sustain our dividend guidance of 40% of the PAT of the year. Of course, this is also in will permit our shareholders because of the investment. So we will -- we should dividend -- and then our sales guidance between 25% and 40% of PAT for the year.

Okay. about I think you raised concern about, I think the matter is probably in the court now that has been decided by the Supreme Court and the Supreme Court ruling which is relevant [Technical Difficulty] much lower. And we are very happy [Technical Difficulty]. Okay. So basically the news was around NGN 250 billion loss, but it came down to about 13.6, the calculated impact which was in 2025 fully provided final books. Thank you very much.

We have a further follow-up from of Capital.

So I would like to know what exchange rate was used for the 2025 financial year results and also what the outlook for the exchange rate would be? I don't know what the bank is projecting? And what do you think that the impact will be on the bottom line and profits for the bank? .

Thank you very much. We used 1,400 to $1 in translating our balance sheet for 2025 and then on our outlook for in 2026 remains very positive. This is largely due to the reforms by the Central Bank and the improved transparency in the FX market. Like you well know the reforms around exchange rates liberation, improve the management and the stronger reserve buffers as well as the narrowing gap between the official the gap has narrowed significantly between the official and the peer markets. And all of this put together to stabilize the. So we do not anticipate that there will be any surprises anymore. So going into the year, we expect that remained relatively stable with the potential of mild acquisition rather So we're expecting positive shop around and the most analyst projections, please exchange rate anywhere between 1,300 and 1,450 range. depending on the oil prices, of course and then of course, the FX inflows and the policy consistency, has been very consistent on this FX and the Central Bank has done a fantastic job on the. And then we don't think we have a adjustments. We don't think surprises before the end of the year. Thank you.

Next is a follow-up question from of CardinalStone Securities.

Just a few follow-up questions. So I mentioned a potential contribution from Bank about -- contributed about 2% in the next, 2026. What factors that are going to drive that strong performance which is going to enable the 2% contribution? And then also from the slide, we saw a jump in your POS, the transactions, what led to that? Should we expect this level of transactions on POS going forward from 2026? And then also in your deposit growth, you have a very impressive CASA ratio of about 91%. We see our low-cost deposits growing by about 14% last year. What would you say are the factors that enables this strong ability to retain under low-cost deposits from the market? So that's it from me now.

To the low cost deposits -- I would speak to the low cost deposit growth of 14.4% to NGN 6.3 trillion. Local deposit has made a strategy that the bank has deployed in a couple of years back now, which we call and the total idea is to minimize the cost of funding and maximize yield on earning assets. So some of the initiatives that you asked that we deploy the optimization of our sales channels, we consistently drive our value chain and collection and we're not very high-volume areas like and several other businesses. And then with been very, very, very big clear in the SME markets. We have also looked at that has helped us to say these companies have actually come back to full blown trade after the challenges of the evaluation and we've seen all of that in our collection with the SMEs with the big industry that were major player and our value chain with our company, the manufacturing companies within actually and showed that our corporate lines worked very well and then the collections are going on very well. So I think that as was a good loss in the local deposit driving the collections and the value chain optimization and then on the issue of the -- and of course, we also optimize I most forgot that. Our direct sales agents increased significantly progress [Technical Difficulty] You also did questions about the number of agents and merchants and all that is, this has helped us to sustain our growth. This strong performance is because we've actually signed on a lot of POS agents and merchants and also the stability of our platform, which is a direct benefit from our platforms. as they help us a whole lot to increase our collections. And this has a strong performance on that side. So this new level of transaction will be sustained as this aligns with our retail strategy for 2026 and beyond. So as a first the question. be the first question.

The first question was the one around and we are projecting that you could see contribution from to entire group I'm thinking that is PAT coming from this 2025 way was still, I think it was a loss at PBT level. What's going to drive that strong earnings growth that you are expecting? What specific factors will enable that achievements?

Okay. Definitely, our subsidiaries very good one. We have seen very strong pipelines from them. [Technical Difficulty] business showing up in a very short while. So we're very confident [Technical Difficulty] London branch, London subsidiary. And I think on all the -- what we call the committee, especially the Board committee, I see the amount of traction that [Technical Difficulty] achieve that. What we continue to increase our capital base, and we're working on all of that. So the of course, the profits for 2025 and then what you would see from there was the goodwill. So let's explain that for that.

All right. Thank you very much, Let me also say this. The there are some assumptions when we got into the U.K., one we bought a subsidiary. And one of the is the support that the given to all the banks. They enjoyed that before, before the acquisition, but the lost it when they went and that is coming back now. [Technical Difficulty] which is the result management with [Technical Difficulty] we believe lot of income lines for them and that contributed 2%. So we've seen a lot of, as MD mentioned, the kind of traction [Technical Difficulty] get also improved coming together to fit into the strong pipeline. So that is 1 important thing. I believe that I will help start to make that contribution of at least 2% in the short term and we expect them [Technical Difficulty].

[Technical Difficulty] of [indiscernible].

Again, just to clarify for you mentioned, [Technical Difficulty] why aren't you expecting future dividends this year?

You're not clear. Can you please repeat the question?

My question is on the that you said [Technical Difficulty] so I'm asking completely. And if they have, why is expectation for dividend for 2026?

[Technical Difficulty] Okay. Let me repeat that. As I said, we said we confirmed that we were going to pay dividend in 2026 financial year. And [Technical Difficulty] 40% of PAT for the year, all this [Technical Difficulty].

[Technical Difficulty] our dividend payment is based on [Technical Difficulty] able to pay dividends, but that we're not constrained by any forbearance [Technical Difficulty].

We do have another question in the queue from Lotpool Limited. Unfortunately, not getting any response from [Technical Difficulty] I will hand back for closing remarks.

Okay. I want to thank you all for participating in the call. [Technical Difficulty] balance sheet by including different economic [Technical Difficulty] good governance practices [Technical Difficulty] our share value. So that we're very confident. I'll show you [Technical Difficulty] Thank you.

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