#1Fidelity Fidelity Bank Investor Presentation Audited Financial Results for the 12 months ended December 31, 2016 www.fidelitybank.ng#2Outline 1. Overview of Fidelity Bank 2. The Operating Environment 3. Financial Highlights 4. Financial Review 5. 2016FY Review Vs 2017FY Guidance www.fidelitybank.ng 2#31. Overview of Fidelity Bank Banking That Suits Your Fidelity 1a Rifestyle Download the new and upgraded Fidelity Online App for a pleasurable banking experience. Finger print authentication AdamaJosh Hi Swee Accoun CREDIT to log-in Accounts Transfer ІКНАОВО Use a profile picture & username Airtime Bill Payment SAVING of your choice Logout Settings OGORCH CURRE ІКНАОВО Download Now! Available on the App Store Google play Allows you to set your transaction limits Token free* for transactions up to N200,000 New look | Better Experience | Token Free* We Are Fidelity, We Keep Our Word.#4Overview of Fidelity Bank Background ➤ A full service bank with International Authorisation established in 1987 and licensed by the Central Bank of Nigeria Key Highlight Total Assets N1,298.1 billion ► The Bank currently has over 400,000 shareholders with the majority being Nigerian citizens and corporations. Total Equity N185.4 billion ▸ A Well capitalised bank with a CAR of 17.2% ▸ Our branch network is strategically located in key business centres across all the 36 states of the federation (including FCT Abuja). ► Strategic focus is on the SME, niche corporate banking and retail banking driven by electronic banking services and products. Distribution Network Business Offices Business Offices 239 No of Accounts Professional Staff 3.6 million 3,420 Electronic Banking Consumer Sales Agents 741 Lagos 82 ATMs South West 13 POS 757 3,734 South South 44 Debit Cards 1,701,083 South East 44 Instant Banking Ratings 635,603 B-/B- (S&P)/Fitch North West 15 Online Banking 183,966 North East 8 Auditors North Central 13 Ernst & Young / PKF FCT Abuja 20 www.fidelitybank.ng#52. The Operating Environment Entrepreneurs Get Paid With Pay By link Share the link with your customers on social media, email and Whatsapp to receive payment instantly fo in Fidelity 3 merchant.fidelitybank.ng Pay By Link#6The Operating Environment General Business Environment Banking Industry Specifics Nigeria's annual output growth contracted by 1.5% following a consecutive quarterly negative growth; this marks the first annual contraction since 1987 However, International Monetary Fund (IMF) and others predicts Nigeria will be out of recession in 2017 with an estimated annual economic growth of 0.8% Headline inflation rate was high at 18.5% in December; averaging 15.7% in 2016 financial year Nigeria's external reserves improves to $30.3bn as at Mar 31st, 2017 from $25.8bn as at Dec 31, 2016 Nigeria has continued to ramp up crude oil production as security improves in the oil rich Niger Delta Region; price has remained above $50 per barrel lately Expectation for improved economy in 2017 remains high ☐ The Monetary Policy Committee (MPC) kept all policy rates unchanged in its Mar 2017 meeting. □ It also retained the asymmetric corridor at +200 and -500 basis points around the MPR. The Debt Management Office (DMO) raises minimum subscription for Treasury Bills and FGN Bonds to N50million following the launch of FGN Savings Bonds targeted at the retail market ☐ Minimum subscription for the Savings Bond is N5,000 with maximum subscription capped at N50 million CBN increased FX rate for invisibles such as PTA, BTA, medical bills, school fees etc. to N360/$ as it continues to intervene to ease FX pressures on selected sectors of the economy www.fidelitybank.ng#73. Financial Highlights You Don't Need A Token Wom! Who Needs A Token? Fidelity For Transactions Up To N200,000. Just Dial *770# To Get Started. It's That Easy! You also don't need data to use this service Transfer Money Pay Bills Buy Airtime Dial4Cash & Lots More#8Performance Highlights Revenue and Efficiency Ratio Total Interest Income up by 1.6% to N123.2 billion in 2016 FY (2015 FY: N121.2 billion) ☐ Net Fee Income up by 9.6% to N25.6 billion in 2016 FY (2015 FY: N23.4 billion) ☐ Net Interest Margin declined to 6.4% in 2016 FY from 6.9% in 2015 FY. PBT down by 21.1% to N11.1 billion in 2016 FY (PAT came in at N9.7 billion) Asset Quality □ Cost of Risk increased to 1.2% in 2016 FY, compared to 1.0% in 2015 FY NPL Ratio increased to 6.6% in 2016 FY from 4.4% in 2015 FY □ Coverage Ratio improved to 83.5% in 2016 FY from 79.5% in 2015 FY □ FCY Loans accounts for 44.4% of Total Loan Book from 40.4% in 2015 FY Capital Adequacy and Liquidity Capital Adequacy Ratio of 17.2%, based on Basel II computation ☐ Liquidity Ratio of 33.2% compared to regulatory minimum of 30.0% □ Net Loans to Customer Deposits Ratio stood at 78.0% from 66.5% (2015 FY) Total Equity at N185.4 billion compared to N183.5 billion in 2015 FY www.fidelitybank.ng#9Financial Highlights ☐ Gross earnings increased by 3.5% to N152.0bn primarily due to 9.3% increase in interest income on loans and 41.3% increase in e-banking income as the bank deepens its business recruitment strategy in the retail and e-banking space. ☐ PBT declined by 21.1% due to a N4.8bn increase in Gratuity/Retirement costs in the 2016FY as the bank discontinued its legacy Gratuity and Retirement schemes. Excluding this one-off charge, PBT for the year would have been N15.8bn. □ Interest expense on customer deposits declined by 13.1% despite a 3.0% growth in total deposits, which reflects our improved deposit mix; low cost deposits now represent 78.7% of total deposits. However, total interest expense (deposits and debt) grew by 1.5% due to the impact of naira devaluation on interest expense on foreign currency borrowings. ☐ Operating income increased by 3.9% while total operating expenses increased by 4.7% driven by increased advert cost, depreciation charge, and energy cost etc. (though cost growth is still significantly below the rate of inflation). Though average funding cost dropped from 6.2% to 5.8% on account of improved deposit mix, NIM declined to 6.4% in 2016FY from 6.9% in 2015FY due to a drop in average yield on earning assets which outpaced the decline in average funding cost. 9 www.fidelitybank.ng#10Financial Highlights ☐ Risk assets grew by 24.2% (N139.9bn) from Dec 2015 with the devaluation of the naira accounting for 19.2% (N110.9bn) of our loan growth. The organic loan growth of 5.0% which reflects our conscious approach to increased lending activities. □ Cost of risk increased to 1.2% in 2016FY due to a 50.4% increase in impairment charge as we took a very prudent view of the impact of the currency devaluation, tougher operating environment, and declining business activities in selected sectors of our loan portfolio. ☐ Savings deposits grew by 30.1% to N155.0bn from N119.1bn in Dec 2015 as we continued to push our retail banking strategy which is being driven by our electronic products and channels. Though our non-performing loans (NPL) ratio increased to 6.6% largely due to a combination of naira devaluation and our conservative approach in appraising our risk assets portfolio, our other regulatory ratios (Liquidity Ratio / CAR) remained well above the set regulatory thresholds. We have crossed half a million customer base on subscribers to our flagship Instant Banking product:*770# (Mobile Phone USSD Technology) and we have launched a payment service in partnership with NIBSS for merchants using our Instant Banking product (*770#) called mCash. 10 www.fidelitybank.ng#11Pressure Point on 2016FY Profit - Staff Legacy Benefits ☐ Fidelity Bank operated two defined benefit schemes that existed prior to the introduction of the national Contributory Pension Scheme in 2004 as amended under the Pension Reform Act 2014. ☐ All employees who have spent a minimum of 5 years unbroken service are eligible for the Gratuity Scheme while all employees who have spent a minimum of 15 years unbroken service or attained the bank's retirement age are eligible for the Retirement Scheme. ☐ Despite the introduction of the national Contributory Pension Scheme in 2004 and having complied fully with the provisions of the law, the Bank continued with its two legacy schemes making it 3 separate staff schemes maintained by the Bank. With the maturation of the Contributory Pension Scheme, the bank discontinued the two legacy schemes which resulted in a significant increase of N4.8bn in our retirement and gratuity cost for the 2016FY (please see Note 30 of the 2016FY Audited Accounts). Under the provisions of the Pension Reform Act of 2004 as amended in 2014, the Bank contributes 10% of basic salary, rent and transport allowances, with the employee contributing a further 8%. The Bank has no further payment obligations once the contributions have been paid. Fidelity bank continues to fully comply with the provisions of the Contributory Pension Scheme www.fidelitybank.ng#12Financial Highlights Summary of Income Statement: 2015 FY VS 2016 FY N'million 2015 FY 2016 FY VAR % VAR Gross Earnings 146,948 152,021 5,073 3.5% Interest Income Loans 84,833 92,715 7,882 9.3% Interest Income Liquid Assets 36,325 30,438 (5,887) -16.2% Total Interest Income 121,158 123,153 1,995 1.6% Interest Expense Customer Deposits (52,325) (45,475) 6,850 -13.1% Interest Expense Borrowings (7,969) (15,750) (7,781) 97.6% Total Interest Expense (60,294) (61,225) (931) 1.5% Net Interest Income FX Income E-banking Income Other Fee Income (Net) Net Fee Income Operating Income 60,864 61,928 1,064 1.7% 7,578 9,434 1,856 24.5% 7,566 10,690 3,124 41.3% 8,235 5,506 (2,729) -33.1% 23,379 25,630 2,251 9.6% 84,243 87,558 3,315 3.9% Total Expenses (64,164) (67,201) (3,037) 4.7% Net gains/(losses) from Fin. Inst (291) (625) (334) 114.8% Net Impairment Losses (5,764) (8,671) (2,907) 50.4% Profit Before Tax 14,024 11,061 (2,963) -21.1% Please note: Gross earnings was calculated based on total fees & commission income www.fidelitybank.ng 12#13Financial Highlights Summary of Income Statement: QoQ Change N'million Q1 2016 Q2 2016 Q3 2016 Q4 2016 VAR % VAR Gross Earnings 34,356 36,059 39,931 41,675 1,743 4.4% Interest Income Loans 20,798 20,923 26,281 24,713 (1,568) -6.0% Interest Income Liquid Assets 8,406 7,036 7,984 7,012 (971) -12.2% Total Interest Income 29,204 27,959 34,264 31,725 (2,539) -7.4% Interest Expense Customer (10,063) (9,366) (10,288) (15,758) (5,470) 53.2% Deposits Interest Expense Borrowings (3,037) (3,069) (5,085) (4,559) 526 -10.3% Total Interest Expense (13,100) (12,435) (15,373) (20,317) (4,944) 32.2% Net Interest Income 16,104 15,524 18,892 11,408 (7,483) -39.6% FX Income 546 1,181 2,073 5,635 3,562 171.9% E-banking Income 2,616 4,849 1,503 1,722 220 14.6% Other Fee Income (Net) 1,495 1,244 1,281 1,486 205 16.0% Net Fee Income 4,656 7,274 4,857 8,843 3,987 82.1% Operating Income 20,761 22,798 23,748 20,252 (3,497) -14.7% Total Expenses (16,031) (15,669) (17,040) (18,460) (1,420) 8.3% Net gains/(losses) from Fin. Inst 35 (811) 5 146 Net Impairment Losses (739) (4,059) (3,162) (711) 142 2,451 3021.3% -77.5% Profit Before Tax 4,025 2,258 3,551 1,226 (2,324) -65.5% Please note: Gross earnings was calculated based on total fees & commission income 13 www.fidelitybank.ng#14Financial Highlights Statement of Financial Position: 2015 FY Vs 2016 FY N'million 2015 FY 2016 FY VAR % VAR Total Assets Earning Assets 1,231,722 1,298,141 66,419 5.4% 876,023 969,925 93,902 10.7% Bank Placements 7,482 13,011 5,529 73.9% Treasury Bills Bonds Customer Loans (Naira) Customer Loans (FCY) 167,231 126,823 (40,408) -24.2% 123,107 111,978 (11,129) -9.0% 344,426 399,106 54,680 15.9% 233,778 319,007 85,229 36.5% Non-Earning Assets 355,698 328,216 (27,482) -7.7% Cash 20,335 34,861 14,526 71.4% Cash Reserve 164,997 172,200 7,203 4.4% Bal. with other Banks/Settlement Acct 72,460 36,189 (36,271) -50.1% Fixed Assets 39,985 40,356 371 All Other Assets 57,922 44,610 (13,312) 0.9% -23.0% Interest Bearing Liabilities 977,875 1,051,997 74,122 7.6% Demand 328,549 469,353 140,804 42.9% Savings 119,140 155,019 35,879 30.1% Time Deposits 321,947 168,599 (153,348) -47.6% Other Borrowings 51,854 37,219 (14,635) -28.2% On-lending Facilities 66,264 99,991 33,727 50.9% Debt Securities 90,121 121,816 31,695 35.2% All Other Liabilities 70,331 60,742 (9,589) -13.6% Equity 183,516 185,402 1,886 1.0% 14 www.fidelitybank.ng#15Financial Highlights Statement of Financial Position: QoQ Change N'million Total Assets Earning Assets Q1 2016 Q2 2016 Q3 2016 Q4 2016 VAR % VAR 1,281,240 1,397,867 1,396,055 1,298,141 887,688 971,521 969,396 969,925 (97,914) 529 -7.0% 0.1% Bank Placements 0 0 2,000 13,011 11,011 550.6% Treasury Bills 178,693 143,771 129,798 126,823 (2,975) -2.3% Bonds 118,862 116,611 108,574 111,978 3,404 3.1% Customer Loans (Naira) 365,561 400,245 398,843 399,106 263 0.1% Customer Loans (FCY) 224,572 310,894 330,181 319,007 (11,174) -3.4% Non-Earning Assets 393,552 426,346 426,659 328,216 (98,443) -23.1% Cash 26,411 22,150 21,952 34,861 12,909 58.8% Cash Reserve 214,537 231,462 193,646 172,200 (21,446) -11.1% Bal. with other Banks/Settlement 53,173 63,285 101,876 36,189 (65,687) -64.5% Fixed Assets 40,544 42,823 41,278 40,356 (922) -2.2% All Other Assets 58,888 66,625 67,907 44,610 (23,297) -34.3% Interest Bearing Liabilities 1,021,833 1,116,848 1,096,539 1,051,997 (44,542) -4.1% Demand 376,054 455,915 480,276 469,353 (10,923) -2.3% Savings 135,078 138,104 143,385 155,019 11,634 8.1% Time Deposits 273,416 235,908 171,931 168,599 (3,332) -1.9% Other Borrowings 51,854 71,943 76,901 37,219 (39,682) -51.6% On-lending Facilities 97,161 102,393 102,393 99,991 (2,402) -2.3% Debt Securities 88,269 112,584 121,652 121,816 164 0.1% All Other Liabilities 75,378 97,554 114,532 60,742 (53,790) -47.0% Equity 184,029 183,464 184,984 185,402 418 0.2% www.fidelitybank.ng 15#164. Financial Review - SCI Enjoy A Simpler Life With Fidelity Digital Banking Solutions *770# Instant Banking Online Banking ATM m CASH MCash FLE Cards POS Pay By Link VISA#17Gross Earnings Analysis Key Highlights (N'm) 2015 FY 2016 FY Total Earnings 146,948 152,021 Interest Income Loans 84,833 Int. Income Liquid Assets 36,325 FX Income 7,578 E-banking Income 7,566 % VAR 5,073 3.5% 92,715 7,882 9.3% 30,438 (5,887) -16.2% 9,434 1,856 24.5% 10,690 3,124 41.3% VAR Total Earnings: 2015 FY Total Earnings: 2016 FY E-banking, 5% Maint. Fee/COT, 1% Others, 6% E-banking, 7% Maint. Fee/COT, 1% Others, 5% FX Income, 5% FX Income 6% Maintenance fee/COT 2,143 Other Income 8,503 1,737 (406) -18.9% 7,007 (1,496) -17.6% Int. Inc. Liquid Assets, 25% Int. Income Loans, 58% Int. Inc. Liquid Assets, 20% Int. Income Loans, 61% Key Highlights (N'm) Total Earnings Interest Income Loans Int. Income Liquid Assets FX Income E-banking Income Maintenance fee/COT Other Income 1,577 1,181 2,073 4,849 1,503 442 346 1,628 1,745 Q1 2016 Q2 2016 Q3 2016 Q4 2016 34,356 36,059 39,931 41,675 E-banking, 4% 20,798 20,923 26,281 24,713 8,406 7,036 7,984 7,012 546 5,635 2,616 1,722 414 535 2,057 Total Earnings: Q3 2016 Total Earnings: Q4 2016 Maint. Fee/COT, 1% Others, 4% E-banking, 4% Maint. Fee/COT, 1% Others, 5% FX Income 5% FX Income, 14% Int. Inc. Liquid Assets, 20% Int. Income Loans, 66% Int. Inc. Liquid Assets, 17% Int. Income Loans, 59% Gross earnings was up by 3.5% YoY to N152.0bn, largely on account of 41.3% (N3.1bn), 24.5% (N1.9bn) and 9.3% (N7.9bn) growth in e-banking income, FX income and interest income on loans respectively. Growth in interest income on loans in Q3 was a combination of increased lending rate and a larger loan book driven by the currency devaluation. 17 www.fidelitybank.ng#18Change in Key Revenue Lines (YoY / QoQ) Key Revenue Lines in 2016 FY: YoY Actual Increase / (Decrease) N'billion 7.88 3.12 1.86 0.32 (0.41) (0.47) (1.33) (5.89) (0.03) Int. Income Loans E-Banking FX Income Trade Income Maintenance Fee/COT Remittance Dividend Income Int. Inc. Liquid Assets Other Income N'billion 3.56 Key Revenue Lines in Q4 2016: QoQ Actual Increase / (Decrease) 0.89 0.22 0.19 (0.02) (0.21) FX Income E-Banking Maintenance Dividend Income Trade Income Fee/COT (0.35) Remittance (0.97) (1.57) Int. Inc. Liquid Assets Int. Income Loans Other Income Interest income on loans has been the key revenue growth line, however it dropped in Q4 due to a 1.9% decline in our total loan book. FX income in Q4 was boosted by higher transaction volumes and recognition of revaluation gains 18 www.fidelitybank.ng#19Net Interest Margin Analysis ▸ NIM declined to 6.4% in 2016FY from 6.9% in 2015FY as the decline in our average yield on earning assets outpaced the decline in average funding cost. ▸ The yield on earning assets declined by 1.1% YoY though we saw an upward trajectory from H1 2016. ▸ Average funding costs dropped by 0.4% YoY, on account of improved deposit mix; low cost deposit ratio is now 78.7% from 58.2% in 2015 FY. ▸ Funding costs increased in Q4 as the increased yields on government securities spiked deposit rates upwards Yield on Earning Assets NIM Trend 7.3% 6.9% 7.0% 6.5% 6.4% 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY Funding Cost 6.2% 13.8% 5.8% 13.2% 12.6% 12.7% 11.8% 5.2% 5.0% 4.6% 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY 19 www.fidelitybank.ng#20E-Banking Income Analysis ▸ E-banking income was up by 41.3% YoY largely driven by increased international card transaction fees in H1 2016. ► However, the restriction on international card usage in Jun 2016 resulted in a 69.0% drop in Q3. ▸ Despite the restriction, e-banking income increased by 14.6% (NO.22bn) in Q4 as more customers adopt our flagship products and ATM reliability increased our fees. ▸ We still see significant scope for improving e-banking revenues from our flagship and traditional products e.g. *770# Instant Banking, Online Banking and ATMs. Net Earnings to Total Revenue E-Banking Profit Margin N'billion 3.08 N'billion 83.0% 78.8% 81.1% Quarterly Revenue Trend 2.62 4.85 1.72 1.50 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 2.24 Quarterly Revenue Growth 2.23 -0.46 -3.35 0.22 46.1% 35.8% Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 20 20 www.fidelitybank.ng#21Total Expense Analysis Key Highlights (N'm) 2015 FY 2016 FY VAR % VAR Total Expenses: 2015 FY Total Expenses: 2016 FY Total Expenses 64,164 67,201 3,037 4.7% Others Exp., Staff Cost 27,125 27,231 106 0.4% 33% Staff Cost, 42% Others Exp., 35% Staff Cost, 41% Depreciation 3,985 4,308 323 8.1% Regulatory Cost 9,267 9,379 112 1.2% Technology Cost 1,627 1,565 -62 -3.8% Energy 2% Energy Cost 1,015 1,252 237 23.3% Energy, 2% Security 1,295 1,345 50 3.9% Depreciation, 6% Branding & Advert 5,845 9,579 3,734 63.9% Technology Cost, 3% Regulatory, 14% Depreciation, 6% Technology Cost, 2% Regulatory, 14% Other Expenses 14,005 12,542 -1,463 -10.4% Key Highlights (N'm) Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total Expenses: Q3 2016 Total Expenses 16,031 15,669 17,040 18,460 Staff Cost 6,116 6,152 6,139 8,824 Others Exp., 37% Total Expenses: Q4 2016 Staff Cost, 36% Others Exp., 37% Staff Cost, 48% Depreciation 1,038 1,069 1,134 1,067 Regulatory Cost 2,689 2,220 2,243 2,227 Technology Cost 697 830 893 -855 Energy, Energy Cost 265 327 296 364 2% Depreciation, 7% Energy, 2% Security 317 378 301 349 Depreciation, 6% Branding & Advert Technology Regulatory, 2,065 1,673 3,038 2,803 Cost, 5% 13% Other Expenses 2,843 3,021 2,997 Technology Cost, -5% Regulatory, 3,681 12% Total operating expenses grew by 4.7% YoY on the back of increased advert cost, energy cost (electricity and diesel) and depreciation charge etc. Excluding the one-off charge of N4.8bn, costs actually declined in the 2016FY 21 www.fidelitybank.ng#22Operating Expenses & Staff Cost N'billion % Share 75 67.2 50% 64.2 62.44 60 45% 45 40% 42.3% 30 40.5% 36.0% 35% 0 2015 FY 2016 FY Operating Expenses 30% 2016FY Adjusted % Share of Staff Cost Cost Dynamics ► Total operating expenses increased by 4.7% YoY (8.3% QoQ, with advert cost, electricity & diesel, deprecation etc. being the key cost drivers. ► However, excluding the one-off charge of N4.8bn, total operating expenses would have dropped by 2.8% which is in line with our 2016 cost - reduction guidance of 2.5%. ► We made significant progress with our cost optimisation initiatives and we were able to drive down costs on over 45% of our expense lines YOY in the 2016 FY as shown on the next slide. Staff Cost Breakdown 15 N'billion 27.1 1.1 0.7 0.3 25.1 27.2 1.5 5.0 0.6 76.4% 20.1 2015 FY ■Wages & Salaries ■Penshion Contribution 2016 FY Staff Gratuity Plan ■Staff Retirement Benefit 22 22 Cost - Income Ratio (YoY) 77.3% 71.8% 2015 FY 2016 FY 2016FY Adjusted www.fidelitybank.ng#23Cost Dynamics - Reduction On 45% Of Expense Lines Breakdown of Operating Expenses: 2015FY Vs 2016FY N'million 2015 FY 2016 FY Branding & Advert 5,845 9,579 VAR 3,734 % VAR 63.9% Depreciation 3,985 4,308 323 8.1% Energy Cost (Electricity & Diesel) 1,015 1,252 237 23.3% Consultancy expenses 407 577 170 41.8% Regulatory Cost 9,267 9,379 112 1.2% Staff Cost 27,125 27,231 106 0.4% Repairs & maintenance 2,457 2,563 106 4.3% Travelling & accommodation 531 621 90 16.9% Telephone expenses 251 307 56 22.3% Security expenses 1,295 1,345 50 3.9% Stationery expenses 218 256 38 17.4% Insurance expenses 319 348 29 9.1% Cash movement expenses 591 601 10 1.7% Auditors' remuneration 150 150 0.0% Office expenses 395 382 (13) -3.3% Postage & courier expenses 111 97 (14) -12.6% Rent and rates 315 285 (30) -9.5% Computer expenses 1,627 1,565 (62) -3.8% Directors' emoluments 346 249 (97) -28.0% Contractor compensation 3,533 3,428 (105) -3.0% Bank charges 434 308 (126) -29.0% Legal expenses 432 253 (179) -41.4% Corporate finance expenses 606 402 (204) -33.7% Training expenses 650 407 (243) -37.4% Litigations and claims 545 (545) -100.0% Other expenses 1,714 1,308 (406) -23.7% 64,164 67,201 3,037 4.7% www.fidelitybank.ng 23#24Cost Optimization Impact in Q4 2016 N'billion 3.73 Key Cost Drivers in 2016FY: YoY Actual Cost Increase 0.32 0.24 0.17 0.11 0.11 0.11 0.09 0.06 0.05 Branding & Depreciation Advert Energy Cost Consultancy Regulatory Cost Staff Cost (Electricity & expenses Diesel) Repairs and Travelling and maintenance accomodation Telephone expenses Security expenses N'billion Cost Optimization Impact in Q4 2016 : QoQ Actual Cost Increase / (Decrease) 2.68 0.09 0.08 0.07 0.07 0.05 0.05 0.04 0.02 0.01 Staff Cost Training expenses Repairs & Maint. Consultancy expenses Energy (Electricity & Diesel) Travelling and Security accomodation expenses Directors' emoluments Cash movement expenses Insurance expenses Branding and advert cost increased by 63.9% YoY (N3.7bn), however, it dropped by 7.7% QoQ as the bank moderates its spend on the retail and SME markets. We expect this cost line to significantly decline in the 2017FY. 24 www.fidelitybank.ng#254. Financial Review - SFP For MTN subscribers only. MTN Fair usage applies. Say Y'ello... No need for data to transact on Fidelity Online & Mobile App It's not even the Festive Season yet but we just can't hold back all the freebies we have for you. Uvemame & Password Sign in Forgot your password? New to online banking? Sign up king t Banking Web Screen Presentation Sign In to On Anscontos Sign in to Online Banking 00#26Funding Base Analysis Key Highlights (N'm) Demand Deposits 2015 FY 2016 FY VAR % VAR Funding Structure: 2015 FY Funding Structure: 2016 FY 328,549 469,353 140,804 42.9% Debt, 8% Equity, 16% Debt, 10% Equity, 15% Savings Deposits Tenor Deposits Other Borrowings On-Lending 119,140 155,019 35,879 321,947 168,599 (153,348) 51,854 37,219 (14,635) 66,264 99,991 33,727 30.1% -47.6% Demand, 28% Demand, 38% -28.2% On-lending, 6% 50.9% On-lending, 8% Debt Securities Equity Total 90,121 121,816 31,695 183,516 185,402 1,886 1,161,391 1,237,399 76,008 35.2% Savings, 10% 1.0% 6.5% Other Borrowings, 4% Time, 28% Other Borrowings, 3% Savings, 13% Time, 14% Key Highlights (N'm) Demand Deposits Savings Deposits Time Deposits Other Borrowings On-Lending Debt Securities Equity Total Q1 2016 Q2 2016 Q3 2016 Q4 2016 376,054 455,915 480,276 469,353 135,078 138,104 143,385 155,019 273,416 235,908 171,931 168,599 51,854 71,943 76,901 37,219 97,161 102,393 102,393 99,991 88,269 112,584 121,652 121,816 184,029 183,464 184,984 185,402 1,205,862 1,300,312 1,281,523 1,237,399 Funding Structure: Q3 2016 Funding Structure: Q4 2016 Debt, 9% Equity, 14% Debt, 10% Equity, 15% Demand, 37% Demand, 38% On-lending. 8% On-lending, 8% Savings, 11% Savings, 13% Other Time, 13% Borrowings, 6% Other Borrowings, 3% Time, 14% Total deposits now represents 64.1% of total funding base (2015FY: 66.3%) and 75.4% of interest bearing liabilities. Other borrowings reduced by 28.2% as we opted for an early repayment of our $125m syndicated loan 26 26 www.fidelitybank.ng#27Deposits Analysis ➤ Total deposits increased by 3.0% YoY to N793.0 billion due to 42.9% and 30.1% increase in demand and savings deposits respectively. ▸ On a QoQ, deposits dropped marginally by 0.3% due to 7.4% decline FCY deposits; LCY deposits increased by 1.3% QoQ in Q4 on account of 8.1% increase in savings. ➤ Low cost deposits now constitute 78.7% of total deposits from 58.2% in 2015FY, which explains the drop in funding cost from 6.2% in 2015FY to 5.8% in 2016FY. Customer Deposits by Type - 2015 FY Time Deposits 41.8% Savings Desposits 15.5% I Customer Deposits N'billion 829.9 769.6 784.5 795.6 793.0 I 25.6 54.4 70.6 53.6 63.0 96.1 48.2 90.5 I I I 715.2 714.0 741.3 645.9 I 1 654.3 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY L ■LCY Deposits ■FCY Deposits ■Devaluation Impact Customer Deposits by Type - 2016 FY Demand Deposits Time Deposit. 21.3% 42.7% 27 Savings Deposit 19.5% Demand Deposit 59.2% www.fidelitybank.ng#28Retail Banking Analysis (Personal Banking) ▸ Savings deposits grew by 30.1% YoY which contributed significantly to the decline in our funding cost. Savings Deposits Trend N'billion ► The growth was as a result of the disciplined execution of our retail banking strategy and improved cross-selling of our e-banking products. 155.0 143.4 135.1 138.1 119.1 ► Retail low cost deposits grew by 17.8% YoY (5.2% QoQ) ► Consumer loans declined 13.3% YoY as we continued to de-risk the portfolio in view of rising NPL concerns due to lower consumer disposable income. N'billion Retail Low Cost Deposits 237.2 217.2 220.3 225.5 201.3 I 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY Retail Assets Trend N'billion 66.0 58.2 55.4 57.6 57.2 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY 28 www.fidelitybank.ng I I#29Liquid Assets Position Short-term Funds Placements Treasury Bills Bonds 18.7% C 1.0% As a % of Total Assets Liquidity Ratio 9.8% As a % of Total Assets As a % of Total Assets 8.6% As a % of Total Assets % Total Loans to Customer Deposits 37.5% 78.8% 78.0% 36.0% 36.3% 73.3% 34.4% 33.2% 66.5% 62.8% 30.0% 30.0% 30.0% 30.0% 30.0% 2015 FY Q1 2016 H1 2016 Fidelity LR 9M 2016 Regulatory Minimum 2016 FY 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY While our loan book includes self funded public sector on-lending facilities, the corresponding liabilities used to fund these loans were not classified as customer deposits. LDR excluding self-funded public sector on-lending facilities is 78.0% as at end of 2016FY. 29 www.fidelitybank.ng#30Breakdown of Loans & Advances to Customers: 2015FY Vs 2016FY Loan Portfolio Analysis N'million Communication Oil and Gas 2015 FY 2016 FY VAR % VAR 48,298 43,566 (4,732) -9.8% 147,407 188,217 40,810 27.7% Upstream - Downstream Services Power 97,568 136,161 38,594 39.6% 23,430 18,591 (4,840) -20.7% 26,409 33,464 7,056 26.7% 68,483 87,845 19,362 28.3% Manufacturing 58,670 75,006 16,336 27.8% General Commerce 34,521 45,378 10,857 31.4% Transport 54,806 72,830 18,024 32.9% Consumer (Individuals) 65,959 57,214 (8,745) -13.3% Government 60,003 101,007 41,004 68.3% Construction 20,462 22,873 2,411 11.8% Agriculture 11,724 9,740 (1,984) -16.9% Real Estate 17,157 23,000 5,843 34.1% Education 3,358 3,474 116 3.4% Finance and Insurance 552 6,310 5,758 1043.1% Others 7,577 6,661 (917) -12.1% Total 598,977 743,120 144,143 24.1% 30 30 www.fidelitybank.ng#31Loan Portfolio Analysis Breakdown of Loans & Advances to Customers N'million 2015FY Q1 2016 Q2 2016 Q3 2016 Communication 48,298 Oil and Gas Upstream 147,407 2016FY 50,388 52,501 48,729 43,566 147,077 189,896 210,159 188,217 Agriculture, 1.3% Construction,. 3.1% 97,568 94,831 133,077 145,373 136,161 Government, Loan Analysis - 2016FY Real Estate, 3.1% Others, 2.2% Communication, 5.9% Oil and gas, 25.3% - Downstream 23,430 Services Power Manufacturing Gen. Commerce Transport Consumer 24,128 24,289 32,791 26,409 28,118 32,530 31,995 68,483 63,718 77,273 77,056 58,670 55,161 78,971 73,980 34,521 32,254 38,401 36,731 54,806 55,209 69,633 77,631 65,959 55,353 58,223 57,573 18,591 13.6% 33,464 87,845 75,006 Transport, 9.8% 45,378 72,830 Consumer, 7.7% Gen. Commerce, Power, 11.8% Manufacturing, 10.1% 6.1% Loan Analysis - 2015FY 57,214 Government 60,003 Construction 20,462 Agriculture 11,724 91,520 106,173 105,468 20,682 21,938 23,177 11,194 101,007 Agriculture, 2.0% Real Estate, 2.9% Others, 1.9% 22,873 Construction,. Real Estate 17,157 17,133 21,160 9,519 10,263 23,952 9,740 23,000 3.4% Government,. 10.0% Communication, 8.1% Oil and gas, 24.6% Education 3,358 3,408 4,090 3,979 3,474 Power, 11.4% Fin. & Insurance 552 Others 7,577 857 7,695 1,431 1,685 6,310 Consumer, 11.0% 7,506 7,375 6,661 Total 598,978 611,649 736,713 757,760 743,120 Transport, 9.1% Gen. Commerce, 5.8% Manufacturing, 9.8% 31 www.fidelitybank.ng#32Loan Portfolio Analysis QoQ Change in Loans & Advances to Customers N'million Q1 2016 Q2 2016 Q3 2016 Q4 2016 Power (4,765) 13,554 (217) 10,789 General Commerce (2,268) 6,147 (1,670) 8,647 Finance and Insurance 305 574 255 4,625 Oil & Gas Services 1,710 4,412 (535) 1,469 Manufacturing (3,509) 23,811 (4,991) 1,026 Construction 220 1,256 1,239 (304) Consumer (Individuals) (10,606) 2,870 (650) (359) Education 50 682 (110) (506) Agriculture (531) (1,675) 745 (524) Communication Others Real Estate Government Transport Oil & Gas Upstream Oil & Gas Downstream 117 (189) (131) (715) (25) 4,027 2,793 (952) 31,517 14,652 (705) (4,461) 403 14,424 7,997 (4,801) 2,090 2,113 (3,772) (5,163) (2,737) 38,246 12,296 (9,211) 698 161 8,502 (14,200) Total 12,671 125,065 21,047 (14,640) 32 32 www.fidelitybank.ng#33Loan Book Analysis ▸ Net loans and advances increased by 24.2% YoY (down 1.5% QoQ) to N718.1 billion with the devaluation of naira accounting for 19.2% (N110.9bn) of the loan growth. ▸ Excluding devaluation, real loan growth was 5.0%% YoY, while it declined by 0.6% QoQ as we remained cautious due to the weaker operating and macro-economic environment. ▸ FCY loans now constitute about 44.4% of loans from 40.4% in 2015 FY largely on account of naira devaluation. Total Loans by Type - 2015 FY I Net Loans and Advances to Customers N'billion 729.0 I 711.1 718.1 578.2 590.1 89.9 118.2 110.9 221.0 233.8 224.6 212.0 208.1 I 344.4 365.6 400.2 398.8 399.1 I I I 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY ■LCY Loans ■FCY Loans ■Devaluation Impact Total Loans by Type - 2016 FY Lease Finances, 3.8% Other Finances, 0.4% Overdrafts, 13.1% Lease Finances, 3.8% Other Finances, 0.2% Term Loans, 82.7% 33 Term Loans, 87.0% Overdrafts, 9.0% www.fidelitybank.ng#34NPL Review and Impairment Charge Analysis ▸ There was an 89.0% growth in NPLs from N26.1bn in 2015FY to N49.4bn in the 2016FY ► Key sectors responsible for over 90% of the NPL growth were Transport, General Commerce, Manufacturing and Retail Total impairment change for the year grew by 50.4% to N8.7bn from N5.8bn in 2015FY with individual (specific) impairment on loans representing about 67.4% of total impairments 70.8% of the total specific impairment charged in 2016 were in the transport, manufacturing and general commerce sectors which reflects their 71.0% contribution to total non-performing loans in 2016. We also saw a significant spike in NPL volumes on the retail loan book due to delayed salary payments ► We also had write-offs of N3.4bn of fully provisioned loans in the Oil & Gas Downstream, Information & Communication and Construction Sectors Breakdown of Impairment Charge - 2016FY Total Impairment Charge = N8.7bn Individual Impairment, 67.4% Other Assets, 5.4% Others, 1.8% Construction, 2.1% Agriculture, 0.7% Collective Impairment, 27.2% Specific Impairment Charge by Sector - 2016FY General Commerce, 7.7% Government, 1.3% Hospitality, 0.4% Communication, 9.0% Manufacturing, 14.8% Transport, 48.4% Consumer, 1.3% Real Estate, 1.1% Power, 0.1% Oil & Gas Services, Oil & Gas Downstreem, 8.3% 3.1% 34 == www.fidelitybank.ng#35NPL Portfolio Analysis Breakdown of Non-performing Loans: 2015FY Vs 2016FY 2015FY 2016FY VAR % VAR 2015FY 2016FY N'million N'million N'million % % NPL % NPL Communication Oil and gas 1,919 1,492 -427 -22.2% 4.0% 3.4% 2,319 2,184 -135 -5.8% 1.6% 1.2% - Oil & Gas Upstream 0 0 0.0% 0.0% 0.0% - Oil & Gas Downstream 262 345 83 31.5% 1.1% 1.9% - Oil & Gas Services 2,056 1,839 -218 -10.6% 7.8% 5.5% Power 0 158 158 100.0% 0.0% 0.2% Manufacturing 7,805 10,161 2,356 30.2% 13.3% 13.5% General Commerce 3,032 10,043 7,010 231.2% 8.8% 22.1% Transport 4,056 14,868 10,812 266.6% 7.4% 20.4% Consumer (Individuals) 1,173 4,826 3,653 311.4% 1.8% 8.4% Government 310 50 -261 -84.0% 0.5% 0.0% Construction 1,779 629 -1,150 -64.6% 8.7% 2.7% Agriculture 667 926 259 38.8% 5.7% 9.5% Real Estate 1,198 1,509 311 26.0% 7.0% 6.6% Education 352 594 242 68.8% 10.5% 17.1% Finance and Insurance 190 237 46 24.4% 34.5% 3.8% Others 1,338 1,731 393 29.4% 17.7% 26.0% TOTAL 26,138 49,406 23,269 89.0% 4.4% 6.6% 35 55 www.fidelitybank.ng#36NPL Portfolio Analysis Breakdown of Non-performing Loans 2015FY Q1 2016 Q2 2016 Q3 2016 NPL Analysis - 2016FY Real Estate, Others, 5.2% N'million Communication 2016FY 3.1% Communication, 3.0% 1,919 1,944 1,001 1,928 1,492 Agriculture, 1.9% Oil and Gas 2,319 2,350 3,528 4,537 2,184 - Upstream 0 0 0 0 0 Construction,. 1.3% - Downstream 262 266 1,403 1,369 345 Govt., 0.1% Oil and gas, 4.4% Power, 0.3% Manufacturing, 20.6% Services 2,056 2,084 2,124 3,168 1,839 Consumer Power 0 0 4 4 158 9.8% Manufacturing 7,805 7,825 7,624 9,149 10,161 Transport, 30.1% Gen. Commerce, 20.3% Gen. Commerce 3,032 3,123 3,892 5,546 10,043 Transport 4,056 4,106 2,514 4,033 14,868 NPL Analysis - 2015FY Consumer 1,173 1,188 1,404 2,275 4,826 Real Estate, 4.6% Others, 7.2% Government 310 290 275 324 50 Communication, 7.3% Construction 1,779 1,802 1,273 1,672 629 Agriculture, 2.6% Oil and gas, Agriculture 667 667 688 799 926 Construction, 6.8% Real Estate 1,198 1,214 1,093 2,020 1,509 8.9% Power, 0.0% Education 352 357 347 339 594 Govt., 1.2% Fin. & Insurance 190 193 186 186 237 Consumer Manufacturing , 29.9% Others 1,338 1,426 1,281 1,328 1,731 4.5% Total 26,138 26,484 25,110 34,141 49,406 Transport, 15.5% Gen. Commerce, 11.6% 36 36 www.fidelitybank.ng#37NPL Analysis ▸ NPL increased to 6.6% from 4.4% in 2015FY as we adopt a conservative approach to risk assets classification due to the relatively unstable macro environment. ▸ Coverage ratio increased to 83.1% from 79.5% in 2015FY due to increased impairments taken in Q4 2016. ▸ Cost of risk inched up to 1.2% from 1.0% in 2015FY due to 50.4% increase (N2.9bn) in impairment charge. ► Specific pressure points still exist in select sectors (e.g. transport and general commerce etc.), we will focus on increasing collections and recoveries in the 2017FY. NPL Coverage Ratio N'billion Gross Loans and Advances 757.8 736.7 25.1 743.1 34.1 599.0 49.4 26.1 611.6 26.5 711.6 723.6 693.7 572.8 585.2 2016 FY 2015 FY Q1 2016 H1 2016 ■Performing Loans 9M 2016 Non-performing Loans Non-performing Loans N'billion % Ratio 60 101.9% 120% 49.4 79.5% 81.2% 84.2% 40 40 34.1 4.4% 4.3% 26.1 26.5 83.5% 25.1 60% 3.4% 20 4.5% 20 6.6% 0 0% 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY Non-performing Loans Coverage Ratio 37 www.fidelitybank.ng#38Capital Adequacy ► Fidelity CAR declined to 17.2% in 2016FY due to a N19.1bn charge on our Tier 1 capital being the excess charge for exceeding our single obligor limit due to the impact of the devaluation on an FCY Loan The charge naturalized the impact of the N17.2bn NDR adjustment to our Tier 1 capital; excluding the charge, our CAR would have been 18.9% in 2016FY. Capital Adequacy Ratio Computation - Basel II N'million 2015 FY 2016 FY VAR Tier 1 Capital 143.7 166.1 22.4 Regulatory Adjustment Adjusted Tier 1 Capital 0.0 -19.0 -19.0 143.7 147.1 3.4 Tier 2 Capital 47.4 49.0 1.6 ▸ Fidelity CAR still remains above the regulatory minimum requirement of 15.0%. Total Qualified Capital 191.1 196.1 5.0 Credit Risk 779.3 914.8 135.5 Capital Adequacy Ratio Market Risk 89.8 62.5 -27.3 N'billion % Ratio Operational Risk 152.6 160.9 8.4 200 183.5 184.0 183.5 185.0 185.4 30% Risk Weighted Assets 1,021.6 1,138.3 116.7 150 18.7% 19.3% 16.4% 16.8% 17.2% 20% 100 15.0% 15.0% 15.0% 15.0% 15.0% Capital Adequacy Ratio 10% 50 Tier 1 14.1% 14.6% 0 0% Tier 2 4.6% 4.3% 2015 FY Q1 2016 H1 2016 9M 2016 2016 FY Overall CAR 18.7% 17.2% Total Equity - Fidelity CAR Regulatory Minimum 38 88 www.fidelitybank.ng#39Business Segment Analysis Corporate & Investment Banking Business Description ➤ Handles the bank's institutional clients with turnover in excess of N10.0bn. ➤ Key focus sectors include: Oil & gas upstream □ Oil & gas downstream Power & infrastructure □ Lagos & SW Bank FMCG Agriculture Revenue Deposits 13.6% □ Telecommunication Construction & real est. Transport & shipping 44.5% Handles retail, commercial, SME customers, and clients not matching the corporate banking criteria etc. ➤ Drives retail deposits, lending, payroll and e-products etc. Operates at 95 locations Handles retail, commercial, SME Loans 34.3% 21.5% 8.7% customers, and clients not matching the corporate banking criteria etc. 14.3% North Bank 14.8% ➤ Drives retail deposits, lending, payroll and e-products etc. 24.7% Operates at 56 locations including FCT. South Bank ➤ Handles retail, commercial, SME customers, and clients not matching the corporate banking criteria etc. ➤ Drives retail deposits, lending, payroll and e-products etc. Operates at 88 locations 39 19.2% 27.4% 14.7% 62.3% www.fidelitybank.ng#40Business Segment Analysis Corporate Banking Lagos & SW North South Revenue 44.5% 21.3% 14.8% 19.2% Corporate Banking Lagos & SW North South Deposits 13.6% 34.3% 24.7% 27.4% Corporate Banking Lagos & SW North South Loans 62.3% . 8.7% 14.3% 14.7% 40 40 www.fidelitybank.ng#415. 2016FY Review Vs 2017FY Guidance Make Payment Easier And Faster At Your Convenience Make Swift payment from your phone with mCash Dial *770*amount* merchantcode# Confirm merchant name Authenticate transactions using their Instant Banking PIN m CASH www.fidelitybank.ng m CASH Thank you for using this service. Your payment of #1000 with ref. no 12345 was successful OK Fidelity#422016FY Review Vs 2017FY Guidance GROWTH EXPECTATIONS ON KEY INDICATORS S/N Index 2016FY Actual 2016FY Target Comment 2017FY Target 1 Net Interest Margin 6.4% 6.75% -7.0% Not Achieved 6.5% -7.0% 2 Tax Rate 12.0% 15% to 20% Achieved 15% to 20% 3 Loan Growth (YoY) 24.2% 5.0% to 7.5% Achieved 4 Deposit Growth (YoY) 3.0% 5.0% to 7.5% Not Achieved 7.5% 10.0% 5 - Cost Income Ratio 77.3% 70% band Not Achieved 70% Band 6 Proposed Dividends 41.7% 30-50% (of PAT) band Achieved 30-50% (of PAT) band 7 NPL Ratio 6.6% Below 5% Not Achieved Below 5% 8 ROE - Post Tax 5.3% Below 10% Not Achieved 10% 42 www.fidelitybank.ng#43Thank You Fidelity Bank Plc 2 Kofo Abayomi Street, Victoria Island, Lagos, Nigeria +234 (01) 4480853 [email protected] www.fidelitybank.ng