Fidelity Bank Plc posted a sharp increase in impairment charges on financial assets in the first quarter (Q1) of 2026, as rising macroeconomic pressures and higher provisions for other assets weakened profitability despite strong growth in earnings and foreign exchange gains.
An analysis of the bank’s financial results released on Monday shows that impairment charges soared by 364.7 per cent to ₦29.21 billion in Q1 2026 from ₦6.29 billion in the corresponding period of 2025.
The increase was largely driven by a ₦24.25 billion credit loss expense on other assets. Within the category, sundry receivables rose significantly from ₦114.02 billion at the beginning of the year to ₦323.31 billion by March 31, 2026.
As a result, the allowance for impairment on other assets increased sharply from ₦1.34 billion to ₦25.57 billion during the three months.
The bank said the rise in impairment charges reflected uncertainties caused by volatility in macroeconomic variables, which forced management to update the assumptions used in determining expected credit losses.
An impairment charge is the amount a bank sets aside as a provision for loans or assets that may not be fully recovered due to increased risk of default or loss in value. It is recorded as an expense in the financial statements and reduces profit, helping the bank prepare for possible future losses from customers or assets that are performing poorly.
Fidelity Bank also cited global and regional pressures, including the Russian-Ukrainian war and the United States’ global political stance, as factors contributing to economic uncertainty and heightened credit risk.
It noted that the deterioration in economic conditions led to increased credit risk across its portfolios, including the movement of some financial instruments into weaker credit stages as borrowers’ profiles deteriorated.
Meanwhile, the bank’s overall profitability declined during the quarter as rising funding costs and higher credit loss provisions offset strong growth in gross earnings.
Profit after tax fell by 18.2 per cent to ₦74.47 billion from ₦91.10 billion, while profit before tax dropped by 12.6 per cent from ₦105.77 billion to ₦92.48 billion.
However, the bank recorded strong growth in gross earnings, which rose by 37.9 per cent to ₦434.95 billion from ₦315.42 billion recorded in the same period of 2025.
Interest income increased by 22.8 per cent to ₦314.48 billion, supported mainly by income from loans and advances to customers as well as treasury bills.
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Foreign currency revaluation gains also emerged as a major contributor to earnings, rising by 388 per cent from ₦9.84 billion in Q1 2025 to ₦47.99 billion in Q1 2026 as the bank benefited from currency volatility.
Net fee and commission income grew by 38.9 per cent to ₦29.39 billion, driven by higher income from ATM charges and commissions on letters of credit.
Despite these gains, rising interest expenses significantly pressured earnings, as interest and similar expenses surged by 90.3 per cent from ₦90.65 billion to ₦172.53 billion during the period.
The increase was mainly linked to higher costs on debts issued and other borrowed funds, which rose from ₦30.6 billion to ₦92.5 billion.
On asset quality, the bank reported gross loans to customers of ₦4.87 trillion, while net loans stood at ₦4.66 trillion after accounting for impairment allowances of ₦218.9 billion.
The bank identified ₦196.8 billion in Stage 3 credit-impaired loans for corporate organisations and ₦23.2 billion for individuals, reflecting increasing pressure on borrowers.
Fidelity Bank also maintained significant collateral coverage on its loan portfolio, with ₦1.41 trillion secured by oil wells and vessels and ₦136.3 billion secured by real estate.
Meanwhile, the bank continued to expand its balance sheet during the quarter, as total assets grew by 8.5 per cent from ₦10.46 trillion in December 2025 to ₦11.35 trillion by March 2026.
Customer deposits increased to ₦7.38 trillion from ₦6.89 trillion at the start of the year, while total equity rose to ₦1.39 trillion, supported by ₦227.05 billion proceeds from the issue of shares during the period.
Although Fidelity Bank acknowledged that the Russian-Ukrainian war contributed to global economic uncertainty and influenced its risk assessment models and collateral valuations, the bank said it does not expect the conflict to have a material adverse effect on its financial condition or liquidity position.
Pinnacle Daily earlier reported that Fidelity Bank’s 2025 full-year profit declined due to a ₦223.79 billion derivative loss, rising costs, regulatory capital pressures, tax charges, and a legacy court case.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X