Fidelity Bank Plc piled up loan losses to over N32 billion at the end of the third quarter, which lowered quarterly profits from N46.4 billion in the second quarter to less than N30 billion in the third.
Bad loan charges of more than N12 billion rolled in within the third quarter, which is more than seven times the N1.7 billion loan loss expenses in the same period in 2022. The figure for the nine months is roughly six times the closing loan loss charges of N5.4 billion for the entire 2022 financial year.
Fidelity Bank expanded customer lending by N539 billion to N2.6 trillion over the nine months of the year.
The bank’s unaudited financial report for the third quarter that ended September 2023 shows that other rising costs and loss of momentum in revenue growth in the quarter led to the drop in profit from the impressive second-quarter record.
Other rising costs that constrained profit for the third quarter include net foreign exchange losses of over N7 billion recorded within the third quarter in place of net gains of more than N32 billion at the half year.
The foreign exchange loss in the third quarter created another operating loss of N5.5 billion, down from a massive increase in other operating income driven by net foreign exchange gain at half year.
The bank also incurred net losses of over N4 billion from financial assets in the third quarter, reversing an exceptional growth in net gains from financial assets to N23.4 billion at half year.
Further pressure from the side of the cost came from personnel expenses, which grew by 88 percent to N13 billion, representing about 43 percent of the closing personnel cost of about N30 billion at the end of the third quarter.
The constraint on the revenue side is a slowdown in gross earnings at an increase of 31 percent to less than N142 billion for the third quarter. That marks a significant slowdown from an increase of close to 60 percent in gross earnings to N247 billion at the end of the half year.
Notwithstanding the drop in the quarterly profit in the third quarter, the profit figure for the quarter is still an outstanding growth of 154.7 percent over the N11.7 billion profit the bank earned in the same quarter in 2022.
Fidelity Bank’s third quarter closing numbers show that despite the slowdown in the third quarter, it is maintaining a cruising speed in earnings growth for another year after doubling its profit to N46.6 billion in 2022.
Gross earnings went up by 60.7 percent year-on-year to almost N389 billion at the end of the third quarter. Interest income grew by 54.4 percent over the period to about N325 billion, already above the full-year figure of N295.6 billion in 2022.
Interest expenses slowed down relative to interest earnings at an increase of less than 32 percent to about N130 billion over the review period. This is a slowdown from an increase of 35.5 percent in half-year.
Cost saving from cost of funds enabled strong growth of over 74 percent in net interest earnings to about N195 billion, speeding up from a 42.6 percent increase at half year.
The bank’s main challenge is the pressure from bad loan charges that jumped about nine times from N3.7 billion to over N32 billion at the end of the third quarter.
The loan losses encroached on net income – which still grew by more than one-half to close at about N163 billion at the end of September 2023.
Some strength comes from other operating income as well as net gain from financial assets to boost the bottom line.
Led by foreign exchange gains, other operating income multiplied by about 324 percent to N27.5 billion.
Also, net gain from financial assets advanced from a net loss position of N804 million to more than N19 billion over the period.
Fidelity Bank achieved revenue enhancement good enough to absorb rising credit losses and other costs and lift after-tax profit by 162.5 percent to close at about N92 billion at the end of the third quarter.
The bank closed the third quarter operations with earnings per share of N2.87, rising from N1.21 per share in the same period in 2022.
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