Fitch Upgrades Fidelity Bank National Rating to A+ (nga)
Fitch Ratings has affirmed Fidelity Bank Plc.’s credit or Long-Term Issuer Default Rating (IDR) at ‘B’. The bank’s National Long-Term Rating has been upgraded to ‘A+(nga)’ from ‘A(nga)’.
According to Fitch, both the outlooks on the long-term ratings are accorded as stable. The upgrade reflects Fidelity’s strengthening capital buffers as a result of last year’s rights issue and public offer, alongside stronger internal capital generation.
This is underpinned by a sharp improvement in profitability metrics since 2022, as the bank benefits from higher rates due to its heavy reliance on low cost current and savings accounts.
Fidelity’s IDRs are driven by its standalone creditworthiness, as expressed by its Viability Rating (VR) of ‘b’. The VR reflects the concentration of operations in Nigeria, high credit concentrations, large sovereign exposure, and high Stage 2 loans.
It also reflects an expanding franchise, sound profitability metrics, strengthening capital buffers, and good foreign-currency (FC) liquidity coverage. Fidelity’s national ratings are also driven by its standalone creditworthiness.
They balance an expanding franchise and good capital buffers against weaker profitability through the cycles compared with higher-rated peers. Nigeria’s long-term IDRs were recently upgraded to ‘B’, as the exchange rate has stabilised, profitability and FC liquidity within the banking sector have improved, and capital raisings are driving a recovery in banks’ capitalisation.
However, inflation remains high, regulatory intervention is burdensome, and expiring forbearance on oil and gas loans will lead to an increase in impaired loans (Stage 3 loans under IFRS 9) ratios and prudential provisions.
Fidelity is Nigeria’s sixth-largest bank, representing 5% of domestic banking system assets at the end of 2024. Its strong balance sheet expansion in recent years has increased its market share, which Fitch analysts expect to continue, although it remains below that of the five largest banking groups.
The bank has one of the highest shares of low-cost deposits in the sector – at 93% at end-2024, up from 75% in 2021 – underpinning Fidelity’s expanding franchise. Single-borrower credit concentration remains high and above the average of domestic-rated peers.
However, Fitch analysts said they expect concentration to moderate relative to capital due to planned capital raising. Oil and gas exposure is large, at 43% of net loans in 2024. Sovereign exposure through securities and Central Bank of Nigeria (CBN) cash reserves is very high relative to FCC, at over 400% at the end of the first quarter of 2025.
Fidelity’s impaired loans, or Stage 3 loans under IFRS 9, fell to 3.3% at the end of Q1-2025 from 3.6% in 2023 as strong loan growth outpaced the increase in Stage 3 loans. Stage 2 loans versus 21% of gross loans in Q1-2025, which are concentrated in the oil and gas and power sectors and largely US dollar-denominated, remain high and represent a risk to asset quality.
The operating profit strengthened to 13.9% of risk-weighted assets (RWA) in 2024 (2022: 6.6%) due to a substantial widening in net interest margin (NIM) by almost 400 basis points. The NIM was supported by the bank’s heavy reliance on low-cost deposits, large derivative gains from currency devaluation, and smaller credit losses.
“We expect our core profitability metric to remain above 12% in 2025 on high interest rates and slower growth in RWAs”. Fidelity’s FCC ratio improved to 29.9% at the end of 2024 from 23.1% in 2023 due to capital raisings totaling N175 billion, or 6.2% of RWAs, and stronger internal capital generation.
Fitch expects the ratio to strengthen above 30% by end-2025, supported by a N200 billion capital raising and strong internal capital generation. “We expect Fidelity to be compliant with the N500 billion minimum regulatory requirement for banks with an international licence by end-2025”.
Its capital adequacy ratio of 23.5% at end-2024 is considerably above the 15% regulatory minimum. Fidelity’s customer deposit base comprises a high percentage of low-cost current and savings accounts, supporting funding stability.
Single-depositor concentration is moderate. FC liquidity coverage is healthy, with placements with foreign banks representing 11.5% of total assets at end-1Q25. Equities Investors Gain N583bn as NGX Index Hits Historic High
