Fidelity Bank plans 50 bln naira bond sale in Q4

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ABUJA, Sept 8 – Nigeria’s Fidelity Bank FIDELIT.LG plans to issue up to 50 billion naira ($131.3 million) in local bonds by the fourth quarter to refinance existing debt as yields fall, a senior executive said on Tuesday.

Bond yields have declined on the local debt market after an oil price crash triggered by the novel coronavirus pandemic caused foreign investors to dump naira assets, leaving money markets awash with liquidity.

The new issue will be made to redeem an existing 30 billion naira bond issued at 16.48%, Chief Operations and Information Officer Gbolahan Joshua told an analyst call.

Debt market yields have dropped from a high of 18% three years ago. Yields on the one-year treasury bill are quoted under 5%.

The mid-tier lender has said it expects to see a 15% drop in profit this year compared with 2019, citing the impact of the coronavirus pandemic.

It said profit before tax had increased by 21.9% to 12 billion naira in the half year.

Fidelity said income declined in the second quarter due to a downward review of lending rates on loans backed by development finance institutions and an economic slowdown.

Nigerian lenders need higher capital levels to meet increasing demands from customers whose businesses have been hampered by the triple whammy of the Covid-19 outbreak, a slump in oil prices and the devaluation of the local currency. The central bank expects the industry to restructure as much as 65% of loans this year.

Fidelity Bank is looking to raise funds at a cheaper rate than the 16.5% it paid for a similar issuance in 2015, according to Joshua.

Yields on the West African nation’s debt have dropped since the Central Bank of Nigeria last year barred individuals and non-bank institutions from buying short-term securities in its Open Market Operations. The yield on the government’s benchmark bond due in 2049 dropped to 10% on Tuesday, compared with 14.8% when it was issued in April last year.

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