November 9, 2021/Fitch Ratings

Fitch Ratings has assigned Fidelity Bank PLC’s USD 400 million senior unsecured notes maturing October 2026 a Long-Term Rating of ‘B-‘ and a Recovery Rating (RR) of ‘RR4’, reflecting average recovery prospects.

Key Rating Drivers

Senior Unsecured Debt

The notes’ rating is aligned with Fidelity’s Long-Term Issuer Default Rating (IDR) of ‘B-‘, which captures Fitch’s view that the likelihood of default on these senior unsecured obligations reflects the likelihood of default of the bank.

The notes constitute direct, general, unconditional, unsubordinated obligations of Fidelity and will at all times rank pari passu, without preference among themselves, with all other unsecured and unsubordinated obligations. The proceeds will be used for general corporate purposes, including support the bank’s trade finance business.

Fidelity’s IDRs are driven by its standalone creditworthiness, as expressed by its Viability Rating (VR) of ‘b-‘. The VR reflects the concentration of its activities in and sensitivity to Nigeria’s challenging operating environment and is constrained by a moderate franchise, high credit concentrations, an aggressive growth appetite and asset quality pressures. These constraints are balanced against reasonable profitability, capitalisation and liquidity.

Rating Sensitivities

Factors that could, individually or collectively, lead to positive rating action/upgrade:

• The notes’ rating would be upgraded if Fidelity’s Long-Term IDR was upgraded, which would require a strengthening of its franchise.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

• The notes’ rating would be downgraded if Fidelity’s Long-Term IDR was downgraded. This may result from its impaired loans ratio rising above 10% and aggressive growth that results in very thin buffers over regulatory requirements or a sharp decline in its Fitch Core Capital ratio.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from ‘AAA’ to ‘D’. Best- and worst-case scenario credit ratings are based on historical performance.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of ‘3’. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.