Lagos, 23 January 2019 — Global Credit Ratings has affirmed Fidelity Bank Plc’s N30bn Bond’s national scale long term rating of BBB(NG); with the outlook accorded as Stable. The rating is valid until September 2019.
Global Credit Ratings (“GCR”) has accorded the above credit ratings based on the following key criteria:
Given the direct correlation between the financial performance of the Fidelity Bank Plc (“Fidelity” or “the bank” or “the Issuer”) and its ability to punctually meet its obligations under the Issue (considering the unsecured nature of the debt), cognisance was taken of Fidelity’s competitive strengths, historical and current financial profile and performance. Fidelity is a mid-sized player in the Nigerian banking sector, with a market share of 4.0% by total industry assets at FY17.
Fidelity’s liquidity position appears satisfactory, with the statutory liquidity requirement met by the bank on a monthly basis throughout FY17 and nine month period to 30 September 2018. Furthermore, the ratio of liquid and trading assets to total short-term funding of 29.7% (FY16: 24.3%) compares well with peers’ average at FY17. However, the contractual mismatch of assets and liabilities reflects a cumulative liquidity gap across the short-term maturity buckets (less than 12 months). The liquidity gap in the ‘less than one-month’ maturity bucket stood at N41.3bn, equivalent to 20.3% of shareholders’ funds at FY17.
Fidelity recorded a significant 83.5% growth in pre-tax profit to N20.3bn in FY17, translating to an improved ROaE and ROaA of 9.7% (FY16: 5.3%) and 1.4% (FY16: 0.8%) respectively. Interest income grew by 22.4% to N150.7bn during the year, catalysed by improved yield on investments securities and loan book expansion. However, an outpacing 29.5% growth in interest expense trimmed growth at the net interest income level to 15.4%. Similarly, non-interest income grew by 3.3% to N25.8bn, resulting in total operating income rise by 11.9% to N97.3bn in FY17. Management projects a pre-tax profit of N30bn for FY18, representing a year-on-year 47.8% growth. The bank’s unaudited result for the nine-month period ended 30 September 2018 indicated that performance was relatively in line with budget and management remains optimistic of fully achieving the FY18 budget by year end.
According to the latest Trustees’ report, the Bonds have been performing in line with the covenants set by the Issuer so far.
Given the direct relationship between the performance of the Issuer and its ability to punctually meet its obligations under the Issue, the accorded rating would be sensitive to a positive rating action on the Issuer. Non-compliance with set covenants, and/or a downgrade of the Issuer’s rating, could trigger a negative rating action on the Bonds.
NATIONAL SCALE RATINGS HISTORY
Initial rating (May 2015)
Long term: BBB(NG)
Last rating (December 2017)
Long term: BBB(NG)
Primary Analyst Committee Chairperson
Julius Adekeye Dave King
+23 41 904-9462-3 firstname.lastname@example.org
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for Rating Banks and Other Financial Institutions, updated March 2017
Fidelity Bank Plc rating reports (2018)
Glossary of Terms/ Ratios (February 2016)
RATING LIMITATIONS AND DISCLAIMERS
ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.COM.NG.
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or as indicated by the applicable credit rating document.
The rating was solicited by, or on behalf of, Fidelity Bank Plc, and therefore, GCR has been compensated for the provision of the rating.
Fidelity Bank Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating above was disclosed to Fidelity Bank Plc with no contestation of/changes to the rating.
The information received from Fidelity Bank Plc to accord the credit rating included the Issuer’s 31 December 2017 audited annual financial statements (plus four years of comparative numbers), management accounts for the 9-month period to 30 September 2018, the Trust Deed for the Bond Issuance, the offer prospectus, the Trustees’ performance report, up to 14 May 2018, as well as the Prospectus.