Fidelity Bank Nigeria Plc confirmed that its $113 million (N22.4 billion) loan to Oando Plc is partially bad and has now taken a 5% special provision on the loan. According to the bank MD who told analyst at its investor earnings call, it has placed Oando on its watch list following indicating that parts or all of the loans might go bad.
The CBN it was learnt, had asked commercial banks who lent money to Oando to take adequate provisioning on the loan in anticipation that it might go bad even though banks like Fidelity reported the loans as performing. Banks take provisions on loans if there are indications that it might go bad. A consortium of banks, led by FBN Capital and FCMB lent over $350 million to Oando Plc in 2013 when it wanted to acquire Conoco Phillips assets in Nigeria.
According to the CEO Nnamdi Okonkwo ;
“The central bank is taking a prudent view. It has given a deadline for Oando and the banks to come back with a structure ….. including disposal of assets,”
Fidelity Bank was part of this consortium of banks and have now confirmed that the loans are doubtful. Fidelity Bank also reported that its loans to Oando makes up about 3.7% of its total loans and 15.2% of its Energy Sector loans. The bank broke down its lending to Oando as follows; N14.9 billion to Oando Marketing and N7.5 billion to Oando Energy services Ltd. Fidelity Bank is also very much exposed to the power sector with loans in danger of going bad.
Fidelity Bank reported an earnings per share of 48 kobo in 2015 same as what it posted in 2014. Loan impairment charge taken this year amounted to about N5.7 billion (2014: N4.3 billion). It claimed N1 billion provisioning was taken for Oando alone in 2015. Fidelity Bank share price was up 1.5% to close at N1.34 per share. It has lost 10.6% year to date and lost 29% in the last one year.