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Fidelity Bank to raise N15.5bn bond

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By CHINEDU IBEABUCHI with Agency Report

Fidelity Bank Plc said it is raising N15.57 billion two year loans from the international debt market to help increase its foreign currency lending capacity.

To achieve this, the bank had appointed Citigroup Incorporate as its issuing house.

Head of Strategy of the Bank, Francis Ikenga, said Citigroup was in the debt market to secure the loan through a book building process and that yield on the paper will be determined at the end of the transaction.

Ikenga said Fidelity Bank had seen an increase in demand for foreign currency loans from all sectors of Nigeria’s economy especially within the oil and gas and telecom sectors.

The Bank traded in the top ten most traded stocks last week, accounting for 18.8 per cent of the total market volume, with a turnover of 71.81 million shares valued at N240.35 million in 910 deals.

The Bank gained N0.09 or 2.73 per cent on the NSE on Friday to close at N3.39 per share from N3.30 per share at which it opened.

Recently, Fitch Rating published Fidelity Bank Plc’s  Long-term Issuer Default Rating (IDR) of ‘B’, Viability Rating (VR) of ‘b-’, Support Rating of ‘4’ and Support Rating Floor of ‘B’. The agency also assigned Fidelity a Short-term IDR of ‘B’ and affirmed its National Long-term Rating at ‘BBB+(nga)’ and Short-term Rating at ‘F2(nga)’. The Outlook on the bank’s Long-term IDR is Stable.

Fitch Rating said  Fidelity’s IDRs, National and Support Ratings were driven by the limited  probability of support that Fitch believed would be forthcoming from the  Nigerian authorities given the bank’s perceived relative systemic importance.

While Fitch considered that the authorities’ willingness to support the bank would be high, this may be limited in light of Nigeria’s ‘BB-’ rating.

Fidelity’s VR reflects a challenging operating environment, weak earnings  through Nigeria’s financial crisis and asset quality that was vulnerable to  market conditions. The VR also took into account the acceptable Fitch core  capital (FCC) and a cleaner balance sheet with healthy liquidity following the  sale of problem loans to the Asset Management Corporation of Nigeria (AMCON).

The sale of significant non-performing loans (NPLS) to AMCON during 2011  resulted in improved asset quality, with an NPL ratio of 6.3 percent at end-9M12  (end-2010: 28.2 per cent). Fitch considered loan loss reserve coverage was low at 70.3 per cent but noted that uncovered NPLs only represented about 4 per cent of equity at end-9M12.

Fitch considered that the slower 8 per cent credit growth during 9M12 (2011 underlying:

66 per cent) lowers the risk of a relapse in NPLs. In line with its peers, Fidelity’s  loan book is concentrated, with the 20-largest loans accounting for 36 percent of gross loans at end-H112. Credit concentration is a feature in Nigeria, which adds volatility to earnings and asset quality and necessitates higher levels of FCC.

Fitch Rating said Fidelity’s liquidity was sound, with 30 per cent of assets invested in government securities at end-2011. At end-September 2012, Fidelity reported a loans/customer deposits ratio of 54.7 per cent.

To achieve this, the bank had appointed Citigroup Incorporate as its issuing house.

Head of Strategy of the Bank, Francis Ikenga, said Citigroup was in the debt market to secure the loan through a book building process and that yield on the paper will be determined at the end of the transaction.

Ikenga said Fidelity Bank had seen an increase in demand for foreign currency loans from all sectors of Nigeria’s economy especially within the oil and gas and telecom sectors.

The Bank traded in the top ten most traded stocks last week, accounting for 18.8 per cent of the total market volume, with a turnover of 71.81 million shares valued at N240.35 million in 910 deals.

The Bank gained N0.09 or 2.73 per cent on the NSE on Friday to close at N3.39 per share from N3.30 per share at which it opened.

Recently, Fitch Rating published Fidelity Bank Plc’s  Long-term Issuer Default Rating (IDR) of ‘B’, Viability Rating (VR) of ‘b-’, Support Rating of ‘4’ and Support Rating Floor of ‘B’. The agency also assigned Fidelity a Short-term IDR of ‘B’ and affirmed its National Long-term Rating at ‘BBB+(nga)’ and Short-term Rating at ‘F2(nga)’. The Outlook on the bank’s Long-term IDR is Stable.

Fitch Rating said  Fidelity’s IDRs, National and Support Ratings were driven by the limited  probability of support that Fitch believed would be forthcoming from the  Nigerian authorities given the bank’s perceived relative systemic importance.

While Fitch considered that the authorities’ willingness to support the bank would be high, this may be limited in light of Nigeria’s ‘BB-’ rating.

Fidelity’s VR reflects a challenging operating environment, weak earnings  through Nigeria’s financial crisis and asset quality that was vulnerable to  market conditions. The VR also took into account the acceptable Fitch core  capital (FCC) and a cleaner balance sheet with healthy liquidity following the  sale of problem loans to the Asset Management Corporation of Nigeria (AMCON).

The sale of significant non-performing loans (NPLS) to AMCON during 2011  resulted in improved asset quality, with an NPL ratio of 6.3 percent at end-9M12  (end-2010: 28.2 per cent). Fitch considered loan loss reserve coverage was low at 70.3 per cent but noted that uncovered NPLs only represented about 4 per cent of equity at end-9M12.

Fitch considered that the slower 8 per cent credit growth during 9M12 (2011 underlying:

66 per cent) lowers the risk of a relapse in NPLs. In line with its peers, Fidelity’s  loan book is concentrated, with the 20-largest loans accounting for 36 percent of gross loans at end-H112. Credit concentration is a feature in Nigeria, which adds volatility to earnings and asset quality and necessitates higher levels of FCC.

Fitch Rating said Fidelity’s liquidity was sound, with 30 per cent of assets invested in government securities at end-2011. At end-September 2012, Fidelity reported a loans/customer deposits ratio of 54.7 per cent.

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