Nigeria’s Fidelity Bank offers to buy back $300m of debt as it plans issue of new notes to extend debt maturities

Nigeria’s Fidelity Bank has announced offers to buy back $300 million worth of debt and intends to issue new notes, with a goal of extending the maturity of its debt profile.

According to a statement by the lender, the $300 million of debt has an interest rate of 6.875 percent, and will be due for maturity in May 9, 2018. The bank said it is offering $1,010 per $1,000 of notes held.

The offer is being made in connection with a concurrent offering of new unsecured and unsubordinated notes, the bank further disclosed.

Citigroup Global Markets Ltd and Renaissance Securities (Nigeria) Ltd are managing the deal. The offer expires on October 10 and the results are to be announced same day.

The bank has seen resurgence in earnings lately going by the results of its half-year ended June 30, 2017. It closed the period with gross earnings of about N86 billion, representing a year-on-year growth of 22 percent. This is after a 30 percent drop in net profit in 2016.

The bank posted an after tax profit of a little over N9 billion at the end of June, 2017, which is a top record growth of about 66 percent year-on-year. That seems to place the bank on the way to remedying a drop of 30% in after tax profit last year. The half-year profit figure is almost at par with the closing figure of N9.73 billion.

Profit margin improved from 7.8 percent in the first half of last year to 10.5 percent at the end of June 2017. It had dropped to 6.4% at the end of 2016 – one of the lowest profit margins the bank has recorded in recent years.

With the gain in profit margin and a renewed growth in revenue, Fidelity Bank is confident of registering the fasted profit growth in several years. After tax profit is expected to approach the 2012 high of over N18 billion at the end of 2017.

Fidelity has been trying to rebuild its profit in the preceding two years after a sharp drop in 2013. A 50 percent rise in loan loss charges undermined profit capacity last year and Fidelity Bank ended 2016 operations with the lowest profit figure in three years. Also revenue slowed down last year to the lowest growth rate in six years.

However, revenue performance has gained momentum in the current year and growth is expected to accelerate further in the second half.

Gross earnings are projected to be in the region of N175 billion for full year 2017, a growth of about 16 percent, which will be the highest revenue growth rate in five years.

Interest income is leading revenue growth in current year at an increase of 28 percent to a little below N73 billion at the end of the first half. This is in spite of a flat growth in loans and advances and a decline in investment securities at the end of the period.