Good day, ladies and gentlemen, and welcome to the Fidelity Bank Half Year 2024 Earnings Conference Call. All attendees will be in listen-only mode. There will be an opportunity to ask questions when prompted. If you should need assistance during the call, please signal an operator by pressing star and then zero. Please note that this event is being recorded. I would now like to hand the conference over to the Group Managing Director and Chief Executive Officer, Nneka Onyeali-Ikpe. Please go ahead, ma'am.
Good day. My name is Nneka Onyeali-Ikpe. I am pleased to welcome you to our H1 2024 earnings call. On this call with me today are the following executives and principal officers of the bank: Kevin Ugwuoke, Executive Director, Chief Risk Officer; Stanley Amuchie, Executive Director, Chief Operations and Information Officer; Abolore Solebo, Executive Director in charge of our Corporate Banking Directorate; Pamela Shodipo, Executive Director, South Directorate; Victor Abejegah, Chief Financial Officer; Akintoye Babalola, the Treasurer; Adetunji Mustafa, the Divisional Head in charge of Strategy, Innovation, and Business Transformation; and Samuel Obioha, who heads our Investor Relations. We have uploaded the IR presentation on our website, so I will focus mainly on the facts behind the figures. The prognosis for the Nigerian economy is favorable, even though there are still a few headwinds. The perennial issue of FX non-availability has continued to drive up the exchange rate.
The removal of subsidies on petroleum products has reduced disposable income. The high inflation being witnessed has led to increased prices of consumer goods. The insecurity issues have not yet been fully addressed. However, on a positive note, inflation is slowing down. The restrictive regime of the monetary authorities seem to have started to pay dividend, as the data provided by the National Bureau of Statistics showed that the inflation rate has started to slow down. GDP growth in quarter two, 2024 was 3.1%, which is in line with the 3.3 forecast of the IMF for the year. Our objectives for this year's financial year are to, one, expand our earning assets base by driving efficiency at all levels of our business. Improve the NIM by ensuring appropriate pricing of our assets and liability products.
Increase our non-interest revenue by raising activities around our network. Keep CRR below 50%, despite the rising inflation and the challenging business environment. Drive activity levels by optimizing uptime across all our functional electronic banking platforms. I will now speak specifically to how the strategic imperatives I referred to earlier influenced our balance sheet and performance during the review period. Firstly, we improved our NIM by achieving optimal risk asset pricing and moderated growth in our interest expense, which is evidenced by 34% increase in our total deposits from NGN 4 trillion in December 2023 to NGN 5.4 trillion in the reporting period. A breakdown of the deposit numbers showed that our current account deposits increased by NGN 954 billion, our savings by NGN 142 billion, our time deposits by NGN 286 billion.
It is worthy to note that low cost funds accounted for 93% of our total deposits. Despite the policy regime of the Monetary Policy Committee and the attendant increase in both the monetary policy rate and the cash reserve ratio, our cost of funds rose by only 60 basis points, from 4.4% in December 2023 to 5% in the review period. We achieved an optimal pricing of our earning assets, which led to an increase in our yield on earning assets from 13.5% in December 2023 to 19.4% in the review period. Overall, our NIM improved from 8.1% in December 2023 to 13.4% in the review period.
Secondly, we improved our non-interest revenue by driving fee-based income and increasing the level of customer transactions. As you can see from Slide 15 of the IR presentation, our net income, net fee income increased by 31% year-on-year because of the reduction in the FX valuation income. However, a further analysis of our fee income shows that significant growth on most of the lines, namely, account maintenance charges increased by 74%, trade income doubles, and credit-related fees grew by 16%. Thirdly, we kept our CRL within acceptable limits. As you can see also on Slide 17 of the IR presentation, although our cost increased by NGN 7.5 billion, our cost-to-income ratio reduced to 40.3% from 50.4% within the review period because of the strong growth on the revenue side.
Three major cost drivers led to the 58% growth in the OpEx. Namely, our technology expenses, which was 26%, our AMCON cost, which was 19%, and our staff cost, which is 13%. Finally, we optimized our balance sheet by increasing the ratio of our earning assets compared to our non-earning assets. As you can see on Slide 18, our total assets increased by 1.7 trillion in the review period, of which 86% of the growth is the balance sheet size was invested in earning assets. Also, our treasury assets, which include bank placement, treasury bills, and bonds, increased by 794 billion, while loan growth increased by 659 billion. The pass-through effect of the naira devaluation in our books influenced our risk asset numbers.
In absolute terms, our loan book reduced during the review period. In conclusion, we wish to assure our esteemed stakeholders that we will sustain this strong growth trajectory in the coming months. We will innovate and disrupt using technology as a catalyst for growth. We will also sustain our culture of increasing shareholders' value by paying dividends in their bank investment yearly. This year, we paid an interim dividend of 85%, NGN 0.85 . We thank you for your support, and I will now take your questions. Thank you.
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star and then one on your telephone keypad or the keypad on your screen. A confirmation tone will indicate that your line is in the question queue. You may press star and then two to exit the question queue. Just a reminder, if you'd like to ask a question, you're welcome to press star and then one. We'll pause a moment while we wait for the question queue to build. Our first question comes from Josh Arowolo of Stanbic IBTC Pension Managers. Please go ahead.
... Can you confirm that you can hear me?
Josh-
Hello?
We can hear you. Please go ahead.
All right, fantastic. Congratulations on the results, and thank you for taking my questions. I've got two to start off with. The first one is on other interest and similar income, which I sort of noticed was a key driver of the performance for H1, you know, printing about NGN 109 billion for half year 2024. Could you just talk us through sort of what drove the significant increase in H1, given that... Or in Q2, given that in Q1 2021, it was only about NGN 8 billion? So if we could just get some context on the drivers of that line item for Q2 2024, that would be very helpful. That's the first question. The second question is on the, sort of, loan book.
I was looking at, so just comparing the breakdown in terms of sector relative to the NPLs, and I just sort of zoomed in on agriculture, and I realized that there wasn't any NPL sort of contribution on agriculture in the presentation. So if you could just one, speak to sort of the contribution of agriculture to NPL one, and two, just give us some sort of context on how much of these agricultural loans are linked to the previous intervention loans to the sector from the CBN? That would be helpful. Thank you.
Yes. The reason the significant growth you have seen in other interests and similar income is because of the increase in our NIM, our net interest margin, from 8.1% to 13.4%. And this we achieved by optimizing our asset yields while keeping our funding costs very low. We achieved this by increasing the volume of our low-cost deposits by 20% to NGN 5 trillion. Percent increase in total deposits from NGN 4.4 trillion in December to NGN 5.4 trillion in the reporting period. The breakdown of our deposit numbers show that our current account deposits increased by NGN 954 billion, our savings by 142 billion, and our time deposit by 268 billion.
And, more importantly, I mean, as a summation, our low cost funds accounted for 93% of our total deposits. So this significant movement in our NIM accounts for the major movement, and the very high interest income and similar income you have seen. Thank you. And then I would like the CRO to speak to that a little more.
... [GMV]. I will speak to the question on the NPLs for the agric sector.
... Indeed, you're absolutely right. Our NPLs are very insignificant there. We actually just have one major exposure in that sector, which is, we've practically taken full impairment on that exposure, but of course, we are pursuing recovery, and we're optimistic we'll get the money back. Now, you asked whether there's any relationship to the intervention loans from CBN. We did not participate in those intervention loans. Based on our risk acceptance criteria, so I think, I hope that answers your question on that.
Thank you.
Josh, does that conclude your questions?
Yes, it does. I mean, the question on the agric sector loan exposure, yes, it does. But I'm still a bit unclear, so if you don't mind me just pushing that a bit more on the interest. So the other interesting point I looked at the note is, speaks to interest on fair value fair value instruments or fair value assets. And again, when I look at a quarterly breakdown, it goes from NGN 8 billion in Q1 to about NGN 101 billion in Q2, which is just very, very significant increase. So, I don't know if there's any other sort of clarity on that you could perhaps give, just to understand what exactly happened quarter-on-quarter, and not even year-on-year, quarter-on-quarter.
Okay. Basically, I talked to the improved yields on the earning assets and the increase in the asset, an increase in our earning base. But I'll have my treasurer, no, my, CFO speak to the fair value.
Thank you. Thank you so much. Fundamentally, in addition to what the MD has just said, the basic driver of that income line are in two parts. Number one, improved yields on our earning assets, and again, expansion of our earning assets by 35%. That is quite huge. That contributed to it immensely, and the fair value gain on the swap also was kept in that area. If you combine these three factors, that will give you more color to the reasons why you have such a sharp jump in those two lines, but basically, our earning assets, the base improved so much. 35% is quite huge, and when you talk of improvement on our yield on earning assets, that was also great, from 12.7% to 19.5% to 19.4%.
If you combine these factors, it justifies what happened. Yes, in addition to that, valuation improved on our commercial-
Okay, thank you. Thank you very much for the context. Just one more on that. Can we just get the size of the swap book, if you can share? That would be nice to have. Thank you.
As at June, our swap value stood at $600 million.
Thank you very much.
Thank you. The next question comes from Stephen Chima of CardinalStone. Please go ahead.
Good afternoon. Congratulations on fantastic results, and I thank for the opportunity to ask questions. So my first question is of course regarding the bank's first phase of the capital raise exercise. I'd like to get a sense of, you know, how much exactly was the bank able to raise? When can we expect to see the impact of the inflows reflect on the bank's financial statement? And also, you know, what specific plans does the bank have for, you know, the remaining, I think, close to NGN 50 billion ahead of for 2025? You know, what specific plans do they have to raise the amount?
Also, with the asset quality, the asset yield rather, of 19.4% in half year 2024, which of course was the highest in the industry, what specific strategies or what unique strategies did the bank implement to, you know, maximize the benefits of high yield, of the high yield environment related to its competitors? And lastly, given the upward revision of the cash reserve ratio to 50% at the last MPC meeting, how is the bank managing its liquidity needs, and what impact does this have on the bank's funding requirements? Thank you very much.
Thank you very much for those questions. Our capital raise exercise closed on the 12th of August, 2021, was very successful, with a 2.1 x oversubscription. And we're currently undergoing capital verification by the Central Bank, which we hope they will conclude in four to six weeks, and list the shares within a few days after that to obtain the rest of the regulatory approvals. We raised NGN 265 billion, of which we are hoping that, well, we still have a gap of NGN 160 billion-NGN 195 billion, depending on how much the SEC allows us to absorb.
Okay, so, because we had a three-step approach, we have this going by the success of the first one. It looks to me like we're only going to have the second leg, which is the public private placement for the balance. So depending on how much SEC allows us to retain, we will be out either between NGN 160 billion- NGN 195 billion. But, we have considered this exercise as concluded in our minds, sort of the massive success we had in the first one. Thank you.
Okay, let me-
I'll have Stanley speak a little bit more to this. Thank you.
Okay. Okay, you've asked about when it will reflect. Okay, and then we said Central Bank is doing the verification exercise, and until that is concluded, that's when we'll then submit to SEC to get the approval. So it's the process of that verification that will determine when that reflects in our book as part of our capital.
Mm.
And you also asked about specific things that we believe this will help us to do. Obviously, the release or the funds from this will help us in a lot of ways, both regional expansion, we mentioned regional expansion, we also mentioned technology refresh, and also to help us in our normal working capital. So there are a lot of ways we intend to deploy this, and we are very focused on doing that to make sure we optimize the use of the funds for the benefits of our stakeholders. The question on how to maximize the yield environment, of course, we know this is a very good play for us. MD mentioned when she did her initial introduction, what we've done in our push for low-cost funds.
So what we're doing basically is continuing to push in that area, and most of the funds we get, we're also deploying into the money market to be able to get a lot of yield out of. So we're taking the maximum advantage we can take using our deposit mobilization to push through that. And that also answers the next question you asked about CRR. Yes, we have come to terms with the fact that the CRR rate is currently 50%, and therefore, the only way you can manage your liquidity in this kind of scenario is if you're getting deposits at a low cost. Of course, it's more painful if you're taking purchase funds at a very high cost, and then you're leaving 50% of that.
So if you get low cost funds, of course, you know that reduces your cost. So that's our target, and we'll continue to push that to be able to manage this particular scenario. Thank you very much.
Stephen, does that conclude your questions?
Yes, but I would like to add another question, right, if you allow me?
Please go ahead.
Okay, yeah. So speaking to your asset quality, what strategies is the bank putting in place to improve the bank's loans to the power sector, right? Are there any concerns about, you know, further deterioration in the asset quality? You know, any chance that there will be a reclassification from Stage 2 to Stage 1 anytime soon? And of course, speaking to Fidelity UK, what can you say about their performance as of H1 2024 and for the rest of the year? Has it started, you know, contributing to the overall bank's performance already? And that's all. Hey, did you get my question?
I did get your question. I was just trying to get the mic working very well. Okay, now our story on the power loans, the beautiful story. We have seen several situations that have improved the outlook in that particular sector. But I'll have my CRO speak to that specifically. We have seen majorly, since after the restructuring, we have seen major increase in the flow in that sector, in the cash flow in that sector. It has moved by at least 30% increase in the inflow. So I'll have the CRO speak to it.
Okay. Thank you, MD. I'll just speak to this very, very quickly. You will notice that there's been very positive developments in the power sector, and the key, what you can see as key evidence, is the improvement in tariffs. That has led to significant improvement in collections overall, and in fact, if you quantify it, you find that even the government itself is finding themselves being free from previous subsidies they were bringing into that sector, so overall, it's a positive story, and it's also reflected in our loan book. Now, you will see that for us, in the last quarter, in fact, year to date, we've seen significant paydowns in our power sector exposure, and we feel very positive about it, about the future as well.
So to your question as to whether there will be any deterioration, absolutely no, we don't foresee any deterioration. Rather, what we see is the likelihood of moving from Stage 2, where they are now, to Stage 1 sometime in 2025. So that's the outlook we see for the power sector. Thank you.
That was the question on the power sector. The next question will be on U.K. Yes, our U.K. outing is also another very good story. Yes, U.K., London, was a loss-making bank, branch bank before, Fidelity acquired it in late 2023. But what we're seeing is a significant reduction in their losses and possible return to profitability over the next three months, all things being equal. Our next phase will be to ensure that the returns, the path of, sustainability, the growth, and then the long-term profitability will be our focus. And this will be on the theme by the effective, risk management practices and strong corporate governance we have already put in place.
On the short to medium term, as you asked, we are targeting at least 2-5% contribution to the group profit, while in the long term, we expect it to increase to 10%. Because London is a financial hub, we're seeing a lot of interest and cross-selling to our corporate customers, and that all that we believe will take us to the targeted end in a very short while. We believe Fidelity Bank UK will deliver the expectations, because as part of the attractiveness of that franchise is the strong, robust banking license which they have, which allows them to offer a wide range of services, from retail to commercial to corporate customers.
And the interplay with our trade customers is a very good one from what we're seeing so far. So I think it's in a very short while, the story will become completely different. Going by what we're seeing already, the trajectory we are growing in the last seven-to-eight months. Thank you.
Thank you. Our next question comes from Jennifer Audi of FBNQuest. Please go ahead.
Hello, good afternoon. Please confirm that you can hear me?
Yes, we can hear you very well.
Okay. Congratulations on your numbers once again. So I have quite a few questions. I would just ask all of them at once, so you get the opportunity to answer. My first question is about the capital raise. Congrats again on the successful capital raise. I would like to know what the specific impact on your CRL will be? Like, where do you see your CAR post capital raise? That's the first question. My second question is regarding credit loss. So I noticed that provision for credit losses increased by over 40%, and this led to an increase in cost of risk. Can you provide insight on the factors or the drivers of the increase in the cost of risk? What are the sectors that are responsible for most of the impairment? My third question is regarding your NPLs.
Noticed that a significant exposure is to the oil and gas, as well as the consumer goods sectors. So how is the bank managing the credit risk in these areas? Last but not least, I have a question on technology cost. Noticed that there's an increase of about 580% in your technology cost. Can you provide drivers to the spike in this cost? That will be all for now.
Thank you very much. I'll take the first question. Like you said, like you noted, our capital raise exercise was very successful, and we are two times, 2.1x oversubscribed. And with the conclusion of the exercise, it will improve our capital adequacy, which will in turn enhance our lending, our lending capacity, our regional acquisition plans, our technology refresh, and our overall improvement in our working capital. And to be specific to your question, the impact on our CAR will be about 600 basis points. So, it's to be a good one. And your second question will be that... Your second question was three sectors? Okay, the provision of credit losses increased by...
So the increase in the impairment was not due to poor asset quality, but it was more or less like prudence on our side. But I will have our CRO speak to that. Kevin?
Okay, thank you very, thank you very much, MD. Yes, as MD has, as MD said, the increase in the costs, the impairment costs, wasn't from a poor asset quality. As you can see, our NPL ratio closed at 3.5%, which is the same thing as it was last year. It was more from us being prudential, I'll put it that way, because we basically saw the environment, the volatility in exchange rates and so on, and therefore, prudentially, we took an increase in our impairment costs. By way of outlook, we don't foresee that there'll be a material change from the guidance we gave at the beginning of the year, as far as cost of risk.
We gave a guidance of about 2%, and we expect to close around that also by the end of the year. I'll go on to take your other question about NPLs on oil and gas sector, as well as consumer sector. The increase you see there for the oil and gas sector was, wasn't from a deterioration in quality at all. It was more from the impact of devaluation. You can see what happened between June, between December of last year. The exchange rate was below a 1,000, and as at June, it was 1,400 and something to a dollar. So that's really what you see there, a translation difference.
Then on the consumer sector, what you see there is as a result of a technical glitch that we had on a third party service provider that's helped us with settlement of certain repayments that were due from customers that we gave retail loans to. So that glitch is what caused that spike. That glitch has been resolved, the loans have been restructured, and you will see that reflect in our NPL ratio, in the NPL ratio for that sector in subsequent quarters. Thank you.
Okay, your next question was on technology costs that increased. Yes, most of our technology expense is indexed to the United States dollar, which was devalued by over 100%, as we all know, in the last one year. So in order to enhance, and moreover, because we need to continue to enhance our digital play and to ensure our customer satisfaction, we have to continue to improve our technology touchpoint. And with the value of the dollar against purchases, that significantly increased our costs. And then we also know that being the heightened cyber risk, and we have to also deploy several different solutions to our platforms.
So that explains the extra item, the decrease in our technology costs, and quite understandable with the level of devaluation of the naira. Every expense that is in dollar was adversely affected. Thank you. I hope I answered all your questions.
Yes, you did. Please, I just have a final question. Can I go ahead?
Please go ahead.
Okay. So, given the current economic environment, I would like to know your outlook for interest rates and market yield for the remainder of this year and going into 2025. And how do you think factors that will affect interest rates and yield will impact your lending strategy and your overall financial performance going into 2025, and also for the rest of this year?
Okay. The MPR has been reviewed upwards. Okay, sorry. The CBN's current monetary policy stance was responsible for the steady rise in the yields. Since January this year, the MPR has been reviewed upwards 3x to 5x , from 18.75 to 27.25, as we all know. The increase was targeted as stemming the headline inflation and foreign exchange pressure on the naira. We believe the exchange rate and inflationary pressures will still be prevalent in 2024 in Q2. However, as we have questioned specifically about Q4, we do not expect any material change in the market fundamentals this year.
Definitely, a lot of effort is being put into moderating the exchange rate and all, and will hopefully, it will start to yield, dividend in, the eight, in Q5, I mean, in, 2025. But as a bank, for the bank, we will continue to enhance our retail play and do more lending to the SMEs through developmental financial institutions, who definitely have more favorable rates. Because we imagine that we... We know, not that we imagine, we know that our SMEs are not able to absorb the commercial rates due to the very high MPR rates and the rates in the marketplace. So we'll continue to, our current strategy will be to continue to support them through the DFIs, who have more favorable rates. Thank you.
Thank you. Our next question from Debbie Mosala-Adeyemo of PML Professional Services. Please go ahead.
Okay. Thank you very much. Good afternoon. I hope you can hear me now.
Yes, we can. Please go ahead.
Okay, perfect. Congrats on the bank's numbers. I mean, it's impressive to see sustained growth trajectory along major income lines and, you know, balance sheet items as well. But I have three questions to ask. Two questions, 'cause, I mean, somebody has asked one already. The first one is, the government passed a bill on 70% windfall tax on FX gains of all the commercial banks in Nigeria for 2023 full financial year. It was to be paid this year. What's the update on that? And has there been any impact? Has that been, you know, remitted? What's it going to be the impact on the bank's figures?
Then my second question is, on page 14 of the investor relations presentation, the net interest income saw a 102% increase from H1 2023 to H1 2024. How was that being achieved, basically, considering the marginal growth in the bank's net loans and advances? So how was the bank able to, you know, witness or record such increase?
Okay, thank you very much, for those questions. Incidentally, we are still expecting the details of the tax, windfall tax. The Finance Act Amendment passed by the National Assembly has not been officially gazetted, so banks are unclear about the framework and the specific income lines, that will be affected. We expect the federal FIRS, that's Federal Inland Revenue Service, to release this framework that will provide, how the specific provisions of the tax law will be implemented. We don't have the framework yet, so we have not, we can't really say what the impact will be until we have the framework. Yeah. Your second question is, on the net interest income on Page 14. Yes, the net interest income, like I spoke to, I think it was the first time-...
The first analyst that asked was driven by improved yields on the earning assets and increase in our earning asset base. In addition, our strategy for low-cost deposit has helped to minimize our interest expense growth. Our low-cost deposit, like I spoke to you earlier on, is at 9.93% of our overall deposit, and with the challenges of the CRR at 50%, we have to continue to play the NIM game, which is to continue to keep our deposit cost low, and continue to expand our local deposits, namely savings, current account balances, and all of that. That will be our strategy to ensure that we maintain our NIM, which is the reason for the growth that you're seeing in our profitability. Thank you.
That'll be all. Thank you.
Our next question comes from Nidhi Gupta of SG Analytics. Please go ahead.
Yeah. Hi, good afternoon. Congratulations on your results and for the successful capital raising, so I have a question regarding the capital requirement only, so like after raising money from the rights issue, what is your plan to raise the remaining capital, like to meet the requirement by first quarter 2026? If you can give more light on that. Am I audible?
Yeah, I did get your question. Like I said before, to the earlier analyst question, we are likely to have a gap. Depending on what the SEC does, we are going to have a gap of between 165 and 195, and that we plan to close through private placements. And we have seen a lot of requests already, and a lot of interest. And so we're going to close that through the private placement, which is our second strategy. Yeah. Thank you.
Okay. So, do you have any, like timeline for that? Like any estimated timeline?
Sure. Well, the only delays will be coming from the re-verification exercise and the SEC. Not SEC, really, the verification exercise is the one that's the big one. So we think we're going to be able to close out before, on or before Q3 2025. Thank you.
Okay, thanks.
Our next question comes from James Ola-Adisa of Chapel Hill Denham. Please go ahead.
Good afternoon, everyone, and congratulations on your results. I have two questions. The first is around your dividend policy to pay out 25%-40% of profits. So should we be expecting that to be maintained this year? And then the second question is around your regional expansion. So what countries or regions are you looking to expand to over the next few years?
Thank you for that question. Our dividend guidance remains 25%, between 25% and 40% of our PAT. For us in Fidelity Bank, the dividend payout consideration is an integral part of our capital management process, and our growth aspiration, the current guidance will ensure adequate accretion to our capital. And in all of this, we also want to make sure that our stakeholders, who are the shareholders, are very happy with us, and as you well know, our payoff line is that we keep our word, so we have to continue to pay dividend and to make sure that we delight our shareholders. Thank you.
There's a second question.
The second question, yes.
That will be, we intend to do select African countries in the medium to long term. Our aspiration is two to five African countries in the next three to five years. However, we are cautious considering the current exchange rate movement and the recapitalization exercise. So, our approach will be to be value driven at every opportunity that we have, and any opportunity will be, the opportunity must tick all the boxes. But as guidance, we prefer to do brownfields and greenfields. So we are actively looking out for opportunities that fit into our model. Thank you.
Thank you very much.
The next question comes from Ngozi Odum of CardinalStone. Please go ahead.
Okay. Thank you very much, and congrats again on your results. I know you already spoke to your dividend policy, it being around 25%. I just wanted to ask, do you believe there's a world where if we should in fact see the implementation of the windfall taxes, that, you know, this can affect or may affect your dividend policy being around your policy range of 25%? I just want to know that if we do see, in fact, some clarity before the end of the year or maybe even in 2026, should we expect, or is there a likelihood that, you know, this can impact your dividend policy within the year that it's being applied? And then, my last question would be on your management of your funding pressures. I don't know if this question was asked.
How are you navigating the 50% CRR debit? What are the trades in terms of your business operation that this-
We have made sure that our NIM, net NIM, that which is the gain, is growing out properly. So, yes, the windfall is an added profit, but it is not the core of our earnings. So I'll have Stanley speak more to it. So we'll be able to sustain our promise to our customers, and we definitely will keep our word.
So just on the back of that, I would just say that, there's a process to determining this range, and that is from the board, comes down. So basically, there's nothing will change it, especially this windfall tax. We've also looked at it, the initial time this came up, we looked at the impact. And based on our own evaluation of whatever the impact on that initial relief that was made earlier, we saw that it wasn't going to be so impactful to affect even our dividend payout. So we've been very consistent with this, and we'll continue to do that. I don't think this would not in any way affect our promise to stakeholders. Yeah. Thank you.
We answer all your questions?
Yes, the last one I just wanted to find out was how you're managing the implementation of CRR. How is that... What strategies, and do you perceive it as any threat for your operations?
There's no, I mean, 50% is an issue, but how do we manage it? Like I mentioned earlier on, we make sure that we stay on the local deposit drives consistently. They, I mean, our focus is on it. And the good thing is that our focus has been on it, on the local deposit drive in the last two to three years. So that, and that's what is affecting our being able to weather the storm. Okay? Because we are very short on foreign funds, we are able to continue to sustain our trajectory, our profits numbers. Our and our tech is helping us to drive deposit through our platforms and collections and the value chain and all. A lot of strategies have gone in here.
We have strengthened our value chain, value chain collections. We have strengthened, and now most of these are going through our platforms. And then, of course, that has helped a whole lot. Like we said, our local deposit is 93% of our deposit, so that's the only reason why we're able to- I mean, that's fact, the biggest reason why we're able to survive the 50% CRR regime without affecting our growth, our income lines. Thank you.
Thank you.
The next question comes from Ayodeji Dawodu of BancTrust & Co. Please go ahead.
Hi, good afternoon. Thank you very much for the call, and congrats on the numbers. Apologies if my questions were asked earlier, but I have one question on asset quality, particularly on the oil and gas and power exposure. There's quite a sizable amount of those exposures in Stage 2. If you could discuss a little bit, what's going on in both the power and oil and gas exposures, how it's being managed, and maybe the level of provisioning you expect to take in the future. My other question is around your Eurobond. Are there any thoughts or planning towards the maturity yet? Would you be looking to refinance with another issuance or completely redeem? Thanks so much.
Yes, on the oil and gas and our power outing, we have done a very good job over the years, and we do not expect any deterioration in this sector, and I'll have the CRO speak to it.
Thank you very much, MD. Thank you for that question. On the oil and gas and power, which you see is quite a sizable sum in Stage 2, there are two factors. Number one is, the impact of exchange rate has certainly ballooned that, you know, that sector. That's one. And then as to the outlook, I just want to say that it's positive, because if you look at the oil and gas sector, there is one significant player there that accounts for what we have in Stage 2. And the story for that player is very, very positive. It's a player that we have a syndicate of banks involved in, and they're generating, they're producing right now. Also, there's cash flow coming from it. Payments are coming in.
So outlook is that we will have that loan move from Stage 2 to Stage 1. That... realization of tariffs, and because of that, there's been very, very strong collections on the power sector exposure that we have, and we've seen significant paydowns year to date. So again, our expectation for that sector is also positive, and we expect to move from Stage 2 back to Stage 1, all of this sometime in 2025. That's our expectation. So we don't foresee an increase in impairment or provisioning on those. Right now, we're at about 15%, thereabout, provision on them, but we see that reversing sometime in 2025. Thank you.
Okay. The second question is on the Eurobond and our financing plans. Our model is different. We always provide a sinking fund for repayment of our Eurobonds, and that's ongoing as we speak. We have no doubt about the repayment that is going to fall due in 2023 because it's working according to our plan. However, just as a support, we have swaps of as at Q2 half year, we had swaps of $600 million with the Central Bank. We also have, right now as we speak, we have swaps of $450 million in place, so that's like a fallback.
In any case, on your question about whether we're looking at anything new, we are watching the markets to see if and when it becomes conducive to approach the market, given the drop in the yield in the global markets. So we're watching the market as well for, but not for the purpose of refinancing, but for purpose of taking advantage of the dynamics in the global space. Thank you.
Thank you very much. If you don't mind me asking a follow-up question just on the swaps, how has the position, the book position changed, maybe year to date? Has there been an increase in the position or a decrease with the Central Bank?
So for $600 million, remember I just mentioned that we were at $600 million before the year, from H1, but now we're at $450 million because Central Bank repaid on some bonds, on some swaps. They paid us $150 million less on the swap, on one of the tranches of the swap.
Okay, understood. Thank you very much.
Thank you. Ladies and gentlemen, just a final reminder, if you'd like to ask a question, you're welcome to press star and then one. We have a follow-up question from Josh Arowolo of Stanbic IBTC Pension Managers. Please go ahead.
All right, thank you very much for the opportunity to ask another question. Just want to say fantastic, interim dividend that was paid, and just to confirm the NGN 0.85 interim dividend, because when I look at the presentation, it speaks to the final dividend. So just want to confirm that the NGN 0.85 is interim dividend, one. Second thing is that some sort of guidance on sort of final dividend would be pleasing. Should we expect to get something similar to what we received last year's final dividend?
Okay, yes. The NGN 0.85 is definitely the interim dividend. As per the full year dividend, I did not speak to that. I was allowed to. So but I think you can extrapolate from our dividend policy.
Yeah.
You know, where we're going, what is going to be. But, I think our shareholders will be very proud of us. Thank you.
Thank you very much. Quite pleasing interim dividend.
Thank you. Our next question comes from Sodiq Safiriyu of SBG Securities. Please go ahead.
Good evening. Thank you very much for taking our question on conversations and the results. Just to clarify regarding the, your response to the CBN swaps. So I know earlier you mentioned that, the figure as at June 2024 is $600 million. And then, as in another $450 million as what it stands now. So I'm trying to confirm that the $150 million that was repaid was done between, you know, the end of H1 2024 and now, and that's the first question. Second question would be regarding if, what your, exposure to Ghana Eurobond is, and if it's likely that, we're going to be seeing any further impairments to be taken on that, considering recent developments, on that front.
Lastly, would be what the size of your forbearance with CBN is looking like and, you know, just how it is, the structure, maybe when we are likely to see the timeline, when it's likely to wind down, and if that's likely to significantly affect either the CL or even further impairments going forward? Thank you.
Okay. Our H1 Eurobond, not Eurobond, the swap with Central Bank was $600 million. But like I said to you earlier on, there's been, there has been a repayment of $150 million, last, earlier on this month. So our figure stands at $450 million as we speak. But I'll have the treasurer take the rest of the questions on, Ghana Eurobond, and, I'll have the CRO take the question on the forbearance with Central Bank. Thank you.
Okay, thank you very much. My name is Akitonye Babalola.
Sodiq, can you hear me?
Yes, I can hear you.
Fantastic. So on the Ghana, like you know, that they came to the market to inform the market on the basis for the allocation with the bond. That has been done as at last week, and we're just getting the information as regards the details of the swap. So that has been done. So we're currently reviewing, and we should be able to ascertain this immediately we get the full details of the allocation. This at least where we were. But for us, what we have been talking about, our own exposure there is small, it's about $6.6 million, and we have been matching it to market over the time. So-
... the impact on our book is almost nil, if not completely off. So I think we're good, and we have a very positive by the time we see the details of the allocation. We opted for the second option, which is the discount option.
Thank you.
I hope that answers your question?
Yes, it does. Thank you very much.
Thank you. Your next question is on forbearance. I'll have my, the CRO speak to it. Kevin?
Okay, thank you. Yes, indeed, we have some forbearance from the CBN, principally around single obligor limits excesses. Fortunately for us, we are taking steps to address them. There are two factors driving how we address them. The first one is, of course, capital retention. The fact that we have profits that we make, and then we retain the profit. That's one. The second one is a capital raise that we are on now, and as you heard, our first outing was fantastic, and there's great interest as far as the second round is concerned, that we plan for next year.
We project therefore that by Q3, March next year, we should have raised the entire sum that the CBN allows us to raise, and that of course bolsters our capital position and removes most of the SOL issues that we have. Of course, we're engaging the Central Bank as well, carrying them along as far as the two things are concerned, vis-à-vis our capital raise exercise, as well as the SOLs that we have right now. We're pretty optimistic that we'll come out of this strong and resolved also by the time we're through with the capital raise exercise. Some will fall off certainly before the end of this year, a good number will fall off.
We foresee about 70% falling off before the end of this year, and then the rest will take over into next year.
Okay. So basically, the two big ones, I mean, we're engaging the Central Bank to say that those are dollar devaluation affected them significantly. So it's only reasonable that the forbearance should be taken off only when the banks are recapitalized. Because the true one that will remain by end of the year would be syndicated loans that affect a lot of banks, and those numbers are huge. So we believe that the plea that we have made for the forbearance to be extended to align with the capital raise exercise will be granted, because those loans were ballooned by the devaluation. Thank you.
All right. Thank you very much.
Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I will now hand back over to the MD for closing remarks.
I want to thank you all for attending this call. We are committed to delivering superior financial performance through the implementation of our best-in-class processes, that leverage on innovation and technology. The ongoing capital raise effort allows us to improve our earning base by expanding our business locally and internationally. We can assure you that regardless of the headwinds in the domestic economy, we will deliver on the promises that we have made to you, our dear stakeholders. We in Fidelity always keep our word. Thank you.
Thank you.
Thank you, ma'am. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.