April 1, 2020 / 5:42 PM / 2 months ago

UPDATE 1-Fidelity Bank cuts profit target as coronavirus hits Nigeria

(Adds details, quote)

By Chijioke Ohuocha

ABUJA, April 1 (Reuters) - Nigeria’s Fidelity Bank said on Wednesday it has cut its profit target for the year, citing the impact of the coronavirus pandemic, but added it had set aside money for a Eurobond coupon payment due in two weeks, before the country begins a lockdown.

Africa’s largest city Lagos ground to a halt on Tuesday and the capital Abuja entered a two-week lockdown to slow the spread of the virus.

Mid-tier Fidelity Bank now expects to see a 15% drop in profit this year to 25.8 billion naira, compared with its 2019 profit of 30.4 billion naira, Chief Operations and Information Officer Gbolahan Joshua told Reuters by phone.

“We assume that Q2 is going to be soft after the disruptions associated with coronavirus,” he told Reuters by telephone.

Africa’s largest economy has been hit hard by the coronavirus pandemic. It is struggling for foreign income from its production of oil, for which prices have slumped due to a drop in demand from China and a price war between major producers Saudi Arabia and Russia.

But Joshua said Fidelity had enough cash to honour its Eurobond coupon payments.

“There’s been no mass discussion for loan restructuring. It’s still early days,” he said, adding that the sectors of the economy that could be impacted by the virus had been identified.

He said the bank had transferred $21 million to bond trustees for the half-yearly coupon payment on its $400 million 2022 Eurobond due on April 13 as part of its contingency plans for a lockdown.

The bank transferred the funds to Citibank, the trustees, on Monday, Joshua said.

He said the bond issue was now yielding 16% interest, compared with 5% in January, due to investors shedding emerging market assets.

Around 60% of the bank’s 3,000 staff were working from home before the lockdown began, and the bank has looked at several scenarios to keep operations running, Joshua said.

Joshua said the bank had reduced its exposure to upstream oil and gas production to $365 million from $500 million in 2015 shortly before Nigeria entered a recession.

Fidelity has also increased its cost of risk guidance for 2020 to a six-year high of 1.5%, he said, up from 1% last year, on its loan book worth around 1.1 trillion naira.

The higher cost of risk would hurt the bank’s profits, he said. (Reporting by Chijioke Ohuocha; Editing by David Goodman and Hugh Lawson)

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