UPDATE 1-Fidelity Bank cuts profit target as coronavirus hits Nigeria

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By Chijioke Ohuocha
ABUJA, April 1 (Reuters) - Nigeria's Fidelity Bank said on
Wednesday it has cut its profit target for the year, citing the
impact of the coronavirus pandemic, but added it had set aside
money for a Eurobond coupon payment due in two weeks, before the
country begins a lockdown.
Africa's largest city Lagos ground to a halt on Tuesday and
the capital Abuja entered a two-week lockdown to slow the spread
of the virus. Mid-tier Fidelity Bank now expects to see a 15% drop in
profit this year to 25.8 billion naira, compared with its 2019
profit of 30.4 billion naira, Chief Operations and Information
Officer Gbolahan Joshua told Reuters by phone.
"We assume that Q2 is going to be soft after the disruptions
associated with coronavirus," he told Reuters by telephone.
Africa's largest economy has been hit hard by the
coronavirus pandemic. It is struggling for foreign income from
its production of oil, for which prices have slumped due to a
drop in demand from China and a price war between major
producers Saudi Arabia and Russia.
But Joshua said Fidelity had enough cash to honour its
Eurobond coupon payments.
"There's been no mass discussion for loan restructuring.
It's still early days," he said, adding that the sectors of the
economy that could be impacted by the virus had been identified.
He said the bank had transferred $21 million to bond
trustees for the half-yearly coupon payment on its $400 million
2022 Eurobond due on April 13 as part of its contingency plans
for a lockdown.
The bank transferred the funds to Citibank, the trustees, on
Monday, Joshua said.
He said the bond issue was now yielding 16% interest,
compared with 5% in January, due to investors shedding emerging
market assets.
Around 60% of the bank's 3,000 staff were working from home
before the lockdown began, and the bank has looked at several
scenarios to keep operations running, Joshua said.
Joshua said the bank had reduced its exposure to upstream
oil and gas production to $365 million from $500 million in 2015
shortly before Nigeria entered a recession.
Fidelity has also increased its cost of risk guidance for
2020 to a six-year high of 1.5%, he said, up from 1% last year,
on its loan book worth around 1.1 trillion naira.
The higher cost of risk would hurt the bank's profits, he
said.