Nigeria: Fidelity Bank Makes 50% Provision on 9Mobile Loan

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Fidelity Bank Plc disclosed that it has increased its provision against indebted telecoms firm, 9mobile to 50 per cent.

This is just as the commercial bank said it is considering issuing local debt to raise funds to boost lending.

Reuters quoted Fidelity’s Chief Operations and Information Officer, Gbolahan Joshua, to have disclosed this wednesday.

He said Fidelity had placed indebted telecoms firm 9mobile on a watchlist and increased provisioning on its N17.3 billion loan to the company to 50 per cent.

In October, it said it had taken only a five per cent impairment charge against 9mobile.
Formerly Etisalat Nigeria, 9mobile is Nigeria’s fourth largest telecoms provider. It took out a $1.2 billion syndicated loan from Fidelity and 12 other local banks in 2013 but failed to make repayments last year. It is now up for sale.

Joshua said Fidelity Bank expected 9mobile’s sale to new investors to be concluded by the second half of the year, by which time the exact loss on the loan would be known.

“By first half of 2018, the 9mobile sale may have been completed and there would be clarity for all lenders.
“We’ve made 50 percent (provision) on the exposure to 9mobile, we don’t expect that by the time the sale would be concluded we would see another classification,” he was quoted to have told an analysts’ call.

Joshua said if the bank took a 100 percent provision on loans to 9mobile it would amount to less than 40 percent of its 2017 annual profits and it would be able to generate sufficient earnings to continue its business.

Domestic bond market conditions are favourable as analysts expectthat the Central Bank of Nigeriacould start to cut interest rates in coming months as inflation falls, while the government is shifting towards borrowing overseas to cut yields at home.

Joshua said the mid-tier lender could look to the local funding market this year after it raised a $400 million Eurobond in October to refinance existing debt and boost lending.

According to him, the bank would target the consumer goods sector, manufacturing and retailers, aiming to boost total loans this year by between 7.5 per cent and 10 percent, up from seven per cent growth last year.

Joshua said the mid-tier lender decided to maintain a conservative payout ratio after the regulator introduced a stricter accounting standard which affects capital ratios.

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