New Telegraph

Fitch upgrades Fidelity Bank to ‘B,’ outlook stable

Citing the lender’s “improving business profile and resilient financial metrics,” Fitch Ratings has upgraded Fidelity Bank PLC’s Long- Term Issuer Default Rating (IDR) to ‘B’ from ‘B-‘. Fitch also confirmed Fidelity Bank’s outlook to be stable and upgraded the lender’s National Long- Term Rating to ‘A(nga)’ from ‘BBB+(nga)’, reflecting the financial institution’s increased creditworthiness relative to other issuers in Nigeria.

In a statement released yesterday, Fitch said: “Fidelity’s Long- and Short-Term IDRs are driven by its standalone creditworthiness, as expressed by its Viability Rating (VR) of ‘b’. The VR reflects healthy asset quality, good business profile and reasonable capitalisation and liquidity. “These are balanced against high sensitivity to Nigeria’s challenging operating environment as well as higher credit concentration as a percentage of equity and weaker profitability than larger domestic-rated peers.” The credit rating agency stated that rising global risks will weaken domestic operating conditions, adding that inflation which stood at 17.7% in May 2022, “is expected to remain stubbornly high, posing downside risks to our real GDP growth forecasts of 3.4% in 2022 and 3.1% in 2023.”

It, however, said that downside risks will likely be mitigated by strong oil prices, which should also underpin growth in non-oil sectors and asset quality. According to Fitch, “Fidelity is the sixth-largest bank in Nigeria, representing about 6% of banking system assets at end-2021. “Strong balance sheet growth in recent years has improved market shares, which should rise further but remain below the five largest banks. ”On the lender’s improving asset quality, the rating agency said: “Fidelity’s stage 3 loans ratio (2.8% at end- 1Q22) has been supported by strong lending growth and is below the banking sector average.

“Specific loan loss allowance coverage of impaired loans (72% at end-1Q22) is healthy in view of collateral coverage. We expect the bank’s impaired loans ratio to remain at around 3% in 2022-23, supported by stable operating conditions.” Similarly, on Fidelity Bank’s profitability, Fitch stated: “Operating returns on risk-weighted assets (RWA) have averaged 2.1% over the past four full years. “They improved to 2.5% in 2021 from 2.1% in 2020, supported by a significant reduction in impairment charges. “We expect profitability to continue improving on the back of higher interest rates and stable credit performance.”

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