Posted: January 30th, 2022

A Case Study of Fidelity Bank Plc

Abstract
This proposal seeks to conducts a essential analysis of the hazard administration framework in Nigerian banking enterprise. A case analysis technique has been chosen for the proposed dissertation. Whereas analyzing the overall banking sector, the analysis will commit specific focus to Fidelity monetary establishment in Nigeria as a case analysis. A analysis of literature on hazard administration throughout the banking environment goes to be carried out with a view to current the required background information for this analysis. The researcher moreover intends to combine every qualitative and quantitative methods of knowledge assortment with a view to acquire triangulation. The data obtained will then be analyzed using simple percentages. In addition to, chi – sq. (x2), a non-parametric statistic is likely to be used to test the two hypothesis generated throughout the analysis.
Introduction

Throughout the newest events, hazard administration has develop into a necessity. That’s notably the case in banking which is a extreme hazard enterprise. The newest worldwide financial catastrophe introduced on by the so known as ‘dwelling bubble’ throughout the US had hostile impacts on financial markets and institutions the world over (Awojobi et al. 2011). It triggered a capital administration catastrophe all through quite a few industrial banks. Financial institutions suffered a excessive shock of their capital and liquidity standing and some wanted to close down their operations.
On account of the catastrophe, Nigerian banking sector has suffered an historic retrogressive sample, every in capitalization and profitability (Abdullahi 2013). Additional currently in 2010, solely three out of 24 banks in Nigeria reported having made earnings. eight banks have been found to be in grave situation, adversely affected by liquidity and capitalization points (Onaolapo 2012). The capital market has declined and banks have wanted to recapitalize with a view to fulfill the regulatory directive (CBN 2010). The drama that has hit Nigeria’s banking sector has eroded public confidence with depositor funds experiencing a sharp decline of 41% in between 2007 and 2009.
On a lighter bear in mind, nonetheless, the Central Monetary establishment of Nigeria (CBN) moved in to rescue the situation which was quickly escalating, triggered by worldwide events. The CBN wanted to inject N620bn of liquidity with a view to stabilize the system and return confidence to the stock market which had already collapsed by 70% (CBN 2010). Extra, the apex monetary establishment wanted to substitute administration throughout the eight banks which had been adversely affected.
Draw back assertion
The core function of enterprise banks is to deal with risks and enhance their returns to shareholders. The worldwide meltdown has uncovered the failure of banks to handle their core enterprise options (CBK 2010). Had banks been attending to hazard administration, then there wouldn’t have been the flood on the US market of low price short-term fee of curiosity mortgages which resulted in mortgage catastrophe and subsequent downturn (Onyeka 2013). Although the CBN intervened in Nigeria to keep away from losing quite a few industrial banks that had been adversely hit and whereas there seems to be an enchancment, hazard administration in most banks continues to be primarily no fully completely different instantly than it was earlier to the credit score rating crunch and recession (Onyeka 2013)
Credit score rating risks keep an issue of good concern in Nigerian banking sector. Lots of the industrial banks in Nigeria nonetheless should not have a framework for efficiently managing risks. No matter some few notable enhancements, following CBN interventions and subsequent reform measures; hazard administration practices nonetheless keep at a rudimentary stage (Garuba 2010). In view of these issues, this proposal seeks to conducts a essential analysis of the hazard administration framework in one amongst Nigerian industrial banks. Whereas analyzing the overall banking sector, the analysis will commit specific focus to Fidelity monetary establishment in Nigeria as a case analysis.
Overview of Fidelity Monetary establishment
Fidelity Monetary establishment Plc is one amongst Nigeria’s largest industrial monetary establishment based on market capitalization of 2nd July 2013 (N86.34 billion). This industrial monetary establishment offers a wide range of companies and merchandise along with shopper and industrial loans, mortgages, commerce finance, enterprise finance, money market and treasury suppliers, and financial advisory suppliers amongst completely different suppliers. With a workforce of spherical 4,000 workers, the monetary establishment operates a group of higher than 170 branches in Nigeria.
Fidelity first started working as a service supplier monetary establishment throughout the late 1980s nevertheless was remodeled to a industrial monetary establishment in 1999 and to a typical monetary establishment later in 2001 (Annual report 2011). In May 2005, Fidelity monetary establishment joined the report of enterprise banks throughout the Nigerian Stock Change and in December, it merged with FSB worldwide Monetary establishment and Manny Monetary establishment to sort the presently enlarged Fidelity Monetary establishment.
Significance of the analysis
Whatever the challenges which have hit the fragile banking enterprise, financial effectivity of Fidelity Monetary establishment displays excellent improvement. Nonetheless, with the current monetary enlargement in Nigeria, Fidelity monetary establishment is extra prone to be confronted with an rising demand for loans. And given the rapidity of mortgage defaults thus far, it is worthwhile to have a look at the hazard administration framework and to critically contemplate its effectiveness.
The findings that is likely to be obtained from the proposed dissertation are anticipated to help Fidelity Monetary establishment Plc to strengthen their hazard administration strategies and enlighten the administration and staff in regards to the significance of getting in place an environment friendly hazard administration framework. Extra, this evaluation will contribute to the physique of knowledge on hazard administration and inform development of insurance coverage insurance policies and best practices throughout the banking enterprise
Evaluation goals
The proposed dissertation seeks to deal with the subsequent evaluation goals:
To have a look at the usefulness of hazard administration throughout the banking enterprise
To analysis the character of hazard inherent in Fidelity Monetary establishment and highlight present methods of administration.
To analysis the hazard administration framework at Fidelity Monetary establishment PLC and contemplate its effectiveness.
To look out out whether or not or not profitability of Fidelity Monetary establishment has improved due to its hazard administration approach.
To ascertain the extent to which Fidelity Monetary establishment has been able to revive depositor confidence, throughout the wake of the financial meltdown.
To counsel options that will enhance the options of hazard administration at Fidelity Monetary establishment
Literature analysis
A analysis of literature on hazard administration throughout the banking environment goes to be carried out with a view to current the required background information for this analysis. The literature analysis half will begin with an exposition of hazard administration adopted by analysis of the various risks inherent throughout the banking enterprise.
As urged by Athanasoglou et al. (2005), hazard refers to a situation occasioned by internal and exterior parts which create obstacles to reaching goals in an entity. Hazard administration might be outlined as a scientific strategy of determining, evaluating, monitoring and controlling risks going by means of an entity or group (Raja 1998). The banking enterprise by its very nature is a extreme hazard enterprise (Owojori et al. 2011). That’s specific the case on account of the banking enterprise is the one enterprise whereby the proportion of borrowed funds far exceeds that of house owners’ equity. As recognized by Ferguson (2003) and Umoh (2002), just some banks can withstand a persistent run. As depositors withdraw their funds, banks hemorrhages and if the monetary establishment would not acquire liquidity assist, it’d collapse (Owojori et al. 2011).
The hazards that industrial banks may face can each be endogenous or exogenous. Endogenous throughout the sense that it is associated to the character of the banking enterprise itself, and exogenous throughout the sense that it is found open air the financial system and banks have no administration over (Owojori et al. 2011). Endogenous risks may embody liquidity hazard, credit score rating hazard, operational hazard, licensed hazard, reputational hazard, information know-how hazard, administration hazard and purchaser satisfaction hazard. Whereas risks that are exogenous to the monetary establishment embody enterprise hazard, regulatory hazard, market hazard, sovereign hazard and authorities insurance coverage insurance policies hazard. Umoh (2002) added completely different important risks which embody the human helpful useful resource hazard, rivals hazard and fraud hazard.
Monetary establishment operational actions usually give rise quite a few these risks along with market and know-how hazard, liquidity hazard, focus hazard, reputational hazard and completely different risks with credit score rating hazard publicity occupying the centre stage (Onaolapo 2012).
Fig.1 Conceptual framework exhibiting the generic linkages between quite a few monetary establishment risks
These risks pose a critical menace to their success and survival. Credit score rating risks are specific of good concern. A modern analysis by CBN (2010) confirmed that unhealthy loans and advances contributed most to the distress of enterprise banks, indicating that credit score rating hazard was the very best menace. Two excellent analysis, Onyiriuba (2004) and Fatemi & Fooladi (2006), useful 5 C’s for managing credit score rating: borrower’s character, functionality, capital, collateral and conditions. When making credit score rating selections, most banks make use of the 5 C’s of credit score rating. Nonetheless, this hazard administration technique is matter to certain constraints. The 5 C’s are carried out by human beings who might be inconsistent and subjective of their assessments (Onaolapo 2012). As such, it is usually robust to conduct purpose analysis with the 5 C’s. There are, nonetheless, a wide range of completely different credit score rating analysis devices which embody rating methods and credit score rating scoring fashions.
Lending is probably going one of many core options of enterprise banks and is taken under consideration certainly one of many highest earnings producing belongings. Whereas lending of finance to the deficit monetary sector is supposed at maximizing shareholder’s wealth; such lending is normally on the expense of a hazard – return commerce – off. Consideration thus should be paid to hazard administration. The reality is, hazard administration is a necessity throughout the banking sector.
Additional currently, there was an emphasis on built-in hazard administration, a hazard administration approach that features the identification of collective risks and implementation of a firm-wide approach to managing the acknowledged risks. On this regard, Meulbroek (2002) argues that inbuilt hazard administration has solely currently develop into a wise threat owing to the developments in IT and development of refined and globally-tested licensed and accounting infrastructure which has enabled for utilizing contractual agreements on large scale and at a low value.
Evaluation questions
The primary purpose of this analysis is to conduct essential analysis of the hazard administration framework at Fidelity Monetary establishment Plc. That’s going to be addressed by the subsequent evaluation questions:
What risks are inherent in Fidelity Monetary establishment
How environment friendly is the Monetary establishment’s hazard administration framework
Has the resultant hazard administration framework translated to monetary constructive elements
To what extent has Fidelity Monetary establishment been able to revive depositor confidence notably considering the have an effect on of the newest worldwide downturn
What can Fidelity Monetary establishment Plc do to spice up the options of hazard administration
Hypotheses
The analysis moreover intends to test the subsequent two hypotheses:
Fidelity Monetary establishment Plc formally takes hazard analysis into consideration of their funding selections.
The hazard administration framework employed by Fidelity Monetary establishment Plc has enhanced the monetary establishment’s profitability and funding effectivity
Evaluation methodology
Evaluation design
As recognized by Babbie & Mouton (2004), evaluation design focuses on the highest product. The aim of departure for this analysis is likely to be to determine the evaluation draw back and evaluation goals. From the goals, will most likely be important to conduct a literature analysis that might provide the required background information for the analysis. A suitable evaluation technique will then be employed to deal with the evaluation questions adequately.
Evaluation philosophy
The purpose of this analysis is to critically assess the hazard administration framework of Fidelity Monetary establishment in Nigeria. The conceptual framework identifies hazard paying homage to liquidity hazard, credit score rating hazard, reputational hazard, operational hazard, administration hazard and enterprise hazard amongst others. The success of Fidelity monetary establishment Plc in managing these risks is also hypothesized. Nonetheless since it is the influence of Fidelity’s hazard administration framework that is to be investigated, a realist technique is likely to be further acceptable to this analysis than a positivist.
With positivist evaluation paradigm, an assumption is made that the reality is mounted, knowable and straight measurable. Alternatively, realism combines every positivist and interpretivist positions. Realists take the view that points should act in a certain method and that certain parts may affordable their actions (Saunders et al. 2007). Realist paradigm is thus further concerned with understanding and rationalization versus prediction. Primarily based totally on these, a realist evaluation paradigm is further acceptable for this analysis.
Evaluation approach/technique
Addressing the goals of this evaluation would require gaining an in-depth understanding of the tutorial enquiry at hand. Consequently, this necessitates a methodological technique that will facilitate in-depth understanding and permit the evaluation to critically uncover on the evaluation matter. On this view, a case analysis technique has been chosen for the proposed dissertation. A case analysis approach has been chosen as a result of it permits the researcher to present consideration to a particular context and permits for in-depth investigation into the tutorial enquiry at hand.
Info assortment
The researcher intends to combine every qualitative and quantitative methods of knowledge assortment with a view to acquire triangulation. The primary information will thus be obtained by semi-structured interviewing and administration of questionnaires to the chosen sample of respondents. As recognized by Saunders et al (2007), semi structured interviews is important throughout the assortment of knowledge as a result of it facilitates increased understanding between the interviewer and interviewee. Semi-structured interviews allow the people to answer freely and categorical their views of their very personal phrases. Extra, the interviewer is able to probe into questions that may need further readability, thereby allowing for in-depth evaluation. Nonetheless, the effectiveness of interviews is dependent upon the communication experience of the interviewer along with the facility to listen to attentively, clearly development questions and probe appropriately along with encourage the interviewee to answer freely.
Equally, questionnaires have their very personal advantages and drawbacks as successfully. Advantages embody the low value of knowledge assortment and being free from the bias of the interviewer. Disadvantages embody the low response costs and incapability to probe responses. Clearly, each methodology of knowledge assortment has its private strengths and weak spot. As such, the researcher has chosen to make use of every methods with a view to acquire triangulation, whereby the inherent weak spot of 1 methodology is likely to be strengthened by the strengths throughout the completely different methodology (Saunders et al 2007).
Purposive sampling
Purposive sampling methodology is likely to be utilized in deciding on respondents for the interviews. One of these non-probability sampling technique is normally used synonymously with qualitative evaluation. In purposive sampling, the selection to pick folks to be included throughout the sample depends upon numerous requirements such as a result of the specialist data on the evaluation matter. Contributors chosen to participate throughout the analysis will embody division managers, enterprise hazard managers, enterprise managers and operation managers. These people have been purposely chosen given their data and experience in managing risks. 5 Fidelity monetary establishment branches from Lagos Nigeria is likely to be chosen randomly and purposive sampling technique used to pick the interviewees.
Info analysis
The data obtained will then be analyzed using simple percentages. In addition to, chi – sq. (x2), a non-parametric statistic is likely to be used to test the two hypothesis using information obtained from responses throughout the questionnaires. The chi – sq. system is as follows:
X2 = ? (O-E)2 /E
The place O = Seen frequency
E = Anticipated frequency
? = Sign of summation
The value obtained is likely to be in distinction with the Chi – Sq. desk price using the chosen ranges of significance. If the computed price is found to be decrease than the desk price, it’s going to point out that the null hypothesis holds and is thus accepted (Ayodele 2012). However when the computed price is found to higher than the desk price, then the implication is that the null hypothesis is rejected.
Limitations of the evaluation analysis
Whereas optimistic that the goals of this analysis are going to be achieved; the researcher acknowledges that the analysis is also matter to the subsequent constraints.
Contributors might be not ready to reveal certain important information on account of delicate nature of such information and the have an effect on that it might need on them.
Situation in retrieving information on account of monetary establishment’s obvious tendency to classify most of their information
Time constraints and financial impediments that may hinder the success of this dissertation. Fidelity Monetary establishment operates a big group of over 170 branches in Nigeria. Given the time and funds constraints, it isn’t going to be doable to conduct a hazard analysis on each division.
To surmount the reluctance of respondents, the researcher goes to ensure them of their anonymity. That is, the respondents shouldn’t going to be straight acknowledged throughout the analysis. In addition to, the researcher intends to conduct a follow-up on the responses. Extra, the researcher will make the easiest efforts to optimize on the obtainable sources with out allowing these limitations to impact the depth and prime quality of research. Whereas these limitations are essential, the researcher will endeavor to ensure that the constraints talked about do not impinge on the validity of the work.
Conclusion
Most banks are nonetheless further concerned with returns and pay little consideration to risks, even when the latter accompanies the earlier. Whether or not or not Fidelity Monetary establishment Plc maintains a robust and environment friendly hazard administration framework is matter to investigation.
Reference
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