Unlike most of the other lenders, Fidelity Bank Plc.’s (FIDELITY) earnings took a hit from the pandemic-induced storm in 2020FY, with almost all income lines posting negative growth. Contractions in both interest income and non-interest income saw to the 5.42% YoY decline in gross earnings, reported at NGN206.20bn. A combination of factors was responsible for the decline in interest income, despite the 26.50% YoY increase in interest earning assets to NGN2,058.44bn. As expected, the low yield environment adversely impacted income from investment securities. Similarly, the reduction of interest on the Central Bank’s intervention funds had a negative effect on interest income, as c.23% of the bank’s risky assets are funded by intervention funds. Furthermore, the regulatory reduction of transaction charges induced the 21.41% YoY decline in fee related income. Consequently, non-interest income went south by 11.21% YoY. An improvement in the yield environment as well as Management’s indication of the possibility of loan repricing should redirect interest income northward in 2021FY. Also, growth in transaction volumes across the bank’s digital channels should bode well for fee related income. We therefore anticipate a 11.86% YoY rebound in gross earnings to NGN230.67bn for 2021FY.
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