UPDATE 1-Nigeria's Fidelity Bank may issue local debt to boost lending

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LAGOS, May 2 (Reuters) - Nigeria’s Fidelity Bank is considering issuing local debt to raise funds to boost lending and has increased provisions against indebted telecoms firm 9mobile, a senior executive said on Wednesday.

Domestic bond market conditions are favourable as analysts expect the Nigerian central bank could start to cut interest rates in coming months as inflation falls, while the government is shifting towards borrowing overseas to cut yields at home.

Fidelity’s Chief Operations and Information Officer Gbolahan Joshua said the mid-tier lender could look to the local funding market this year after it raised a $400 million Eurobond in October to refinance existing debt and boost lending.

Joshua said the bank would target the consumer goods sector, manufacturing and retailers, aiming to boost total loans this year by between 7.5 percent and 10 percent, up from 7 percent growth last year.

He said Fidelity had placed indebted telecoms firm 9mobile on a watchlist and increased provisioning on its 17.3 billion naira loan to the company to 50 percent. In October it said it had taken only a 5 percent impairment charge against 9mobile.

Formerly Etisalat Nigeria, 9mobile is Nigeria’s fourth largest telecoms provider. It took out a $1.2 billion syndicated loan from Fidelity and 12 other local banks in 2013 but failed to make repayments last year. It is now up for sale.

Joshua said Fidelity expected 9mobile’s sale to new investors to be concluded by the second half of the year, by which time the exact loss on the loan would be known.

“By H1 2018, the 9mobile sale may have been completed and there would be clarity for all lenders. We’ve made 50 percent (provision) on the exposure to 9mobile, we don’t expect that by the time the sale would be concluded we would see another classification,” he told an analysts’ call.

Joshua said that if the bank took a 100 percent provision on loans to 9mobile it would amount to less than 40 percent of its 2017 annual profits and it would be able to generate sufficient earnings to continue its business.

Nigerian lenders are facing increased supervision after a plunge in oil prices in mid-2014 turned a once lucrative oil and gas loan book sour. The central bank has also tightened loan requirements and increased the charge on non-performing loans, which could erode capital and dampen profits.

Fidelity Bank reported an 84 percent jump in pretax profit for 2017 to 20.3 billion naira, driven by higher interest rates on loans, and it paid out 17 percent of its income as dividend.

Joshua said the mid-tier lender decided to maintain a conservative payout ratio after the regulator introduced a stricter accounting standard which affects capital ratios.

Fidelity ended 2017 with a capital ratio of 16 percent, Joshua said, noting that the bank aimed to compete with local rivals that have international subsidiaries and require higher capital ratios. But he added that Fidelity had no plans to expand outside Nigeria. (Reporting by Chijioke Ohuocha, editing by Louise Heavens and Susan Fenton)