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Fidelity Bank: Huge Growth Potentials With Attractive Share Value



CEO of Fidelity Bank, Mr. Nnamdi Okonkwo

Fidelity Bank Plc has been able to sustain growth trajectory, recording a double-digit growth in key revenue lines and achieving significant traction in her chosen business segments for the half year period ended June 30, 2018.

Following the bank’s half year results which were published recently, financial analysts said that the bank’s performance was impressive and has a huge growth potentials, considering its low share price.

With a share price of N1.80 as at October 9, 2018, analysts foresaw the share price of the bank to grow by over 90 per cent as they recommend a buy signal on the shares on the Nigerian Stock Exchange (NSE).

The bank’s results for period showed that gross earnings improved by a marginal 3.61 per cent to N88.917 billion as against N85.821 billion  over the 2017 half year. Similarly, interest income inched up by 2.50 per cent over the similar period of 2017, while interest expenses for the period was N41.989 billion, 10.05 per cent above what was reported in the 2017 half year.

Fee and commission income stood at N13.703 billion, up from N9.411 billion in 2017, while fee and commission expenses however maintained a close gap at the current N1.759 billion, compared to N1.988 billion.

Profit before tax (PBT) went up by  27.31 per cent to N13.010 billion from N10.219 billion, while net profit for the period compared to the previous stood at N9.036 billion.

Total comprehensive income fell to N8.514 billion, from N10.993 billion, while retained earnings slipped marginally to N31.104 billion, from N32.203 billion.

Total assets grew by 19.78 per cent to N1.567 trillion from N1.308 trillion while total liabilities stood at N1.383 trillion against N1.116 trillion. Customer deposits for the period was estimated at N927.36 billion, compared to the N761.06 billion achieved at the end of 2017 half year, while loans and advances is currently N795.36 billion, 3.50 per cent above that of 2017.

Net assets for the period was N184.16 billion, 4.15 per cent below the N192.33 billion announced last year.

On profitability ratios, Fidelity Bank achieved a PBT margin of 14.63 per cent as against 11.91 per cent last year, this is a 22.88 per cent improvement. Return on Average Equity is now 6.43 per cent compared to the 4.70 per cent returns achieved in the first six months of 2017, while Return on Average Assets differed by 9.42 per cent, moving from 0.69 per cent to 0.76 per cent.

Analysts at CardinalStone Research, said that “overall, we like Fidelity Bank’s H1’2018 performance notably the significant improvement in non-interest revenue during the quarter.

“More so, the bank was able to grow loans in contrast to peers, which consequently led to the increase in credit related fees.”

They however said, “We would like to see this loan growth translate positively for interest income in second half of the year. We are also impressed with the improvement in credit quality, evidenced by the decline in cost of risk and NPL ratios.

“Though cost to income appears relatively stable at 67.7 per cent, we believe that the bank has room to bring this number down through enhanced operational efficiency.

“Based on our last review, our target price for the counter is N3.24 with a buy signal which is a 96.4 per cent upside to last close price of N1.65.”

Also, the chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion stated that “our attempt to place a fair value on Fidelity Bank took us through several valuation methods after which we settled for the constant perpetual dividend growth rate.”

He stated that “we limited our income consideration to the Total Comprehensive Income, since that is the true financial state of the bank, while not forgetting the importance of profit after tax. We also considered the last dividend of 11 kobo by the bank in its financial statement for the year ended December 31, 2017 along other valuations indices.

“Thus we arrived at a fair value of N3.47. This value is twice the current market price and 83.28 per cent below the estimated book value of Fidelity Bank. We have Rated Fidelity share price as Buy.”

Speaking on the results, CEO of Fidelity Bank, Mr. Nnamdi Okonkwo attributed the impressive performance to the disciplined approach in managing the balance sheet growth of the bank, it’s strategic cost containment initiatives; focused attention to chosen business segments and determined execution of its retail and digital banking strategy.

He stated that “gross earnings, net fee and commission income all grew primarily due to the increase in transactional activities. Our digital banking initiative continues to gain traction with almost 40 percent of our customers now enrolled on our mobile/internet banking products and over 80 percent of total transactions now done on our digital platforms.”

He explained that “as shown in recent years, Fidelity Bank’s retail digital banking strategy has continued to positively impact the business.

“This was again evident in the HI 2018 results as savings deposits increased by 10.6 per cent to N197.5 billion.

“The bank is on track to achieving a fifth consecutive year of double-digit savings growth. Low cost deposits now account for 73.8 per cent of total deposits.”

Okonkwo was optimistic that the bank will sustain this sterling performance in the second half of the year.

Fidelity Bank is a full-fledged commercial bank operating in Nigeria with over 4 million customers who are serviced across its 240 business offices and various digital banking channels. The bank which is focused on select niche corporate banking sectors as well as Micro Small and Medium Enterprises (MSMEs), has in recent times won accolades as the Best SME Friendly Bank, Best in Mobile Banking and the Most Improved Corporate/Investment Bank among several industry awards and recognition.




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