Tier two lender Fidelity Bank Plc could be considering floating a commercial paper in the domestic debt market this year. The bank’s Chief Operations and Information Officer Gbolahan Joshua disclosed this in an interview with Reuters.
Prior to this
Fidelity Bank in October last year issued a $400 million Eurobond. $256 million was used to repurchase medium-term notes that were due in May 2018. The remaining proceeds were deployed to trade finance for Small and Medium scale Enterprises.
What are commercial papers?
Commercial Papers are short-term debt financing securities (no longer than 270 days in tenor) consisting of unsecured and discounted promissory notes issued by large corporations with good credit ratings, which can be readily traded.
Due to their relatively short maturity period, commercial papers are referred to as low-risk investments, offering competitive returns to investors in compensation for the issuer’s credit risk.
Who stands to gain from this?
Businesses in need of short-term finance would get access to loans at favourable rates. While rates on debt securities have trended lower in tandem with inflation, this has not translated to lower lending rates for most customers
For the bank, it’s an income line, in the absence of high yields prevalent in 2017.
Fidelity Bank closed at ₦2.55 in today’s trading session on the Nigerian Stock Exchange (NSE). Year to date the stock is up 5.69%.
Earlier this week, the bank released its financial statements for the year ended December 2017. Revenue increased by 18% from ₦152 of billion for the year ended December 2016 to ₦180 billion in 2017.
Profit Before Tax increased by 83% from ₦11.1 billion in 2016 to ₦20.3 in 2017. Profit after tax for the year jumped 94% from ₦9.73 billion in 2016 to ₦18.86 billion in 2017.
The bank declared a dividend of ₦0.11 per share.