Background
Incorporated in 1987, as a private limited company with a merchant banking licence, Fidelity Bank has since evolved to become a publicly listed financial institution aspiring to be a top tier Nigerian bank through organic and inorganic means.
In line with CBN banking model, the bank currently has an international banking licence and operates a bank only entity, having a widely distributed banking presence with over 213 branches across Nigeria, a balance size of N1.08 trillion and a deposit base of N806.32 billion (as of December 2013).
It has strong public sector relationships and is mainly focused on Small and Medium Enterprises (SMEs) sector with specialised products aimed at deepening SME banking. In May 2013, it concluded a $300 million Eurobond capital raise.
Financial results for 2013
The regulatory headwinds or the tightening policy stance of the Central Bank of Nigeria (CBN) is taking toll on the bottom-line performance of Fidelity Bank as 2013FY profits lessen.
For the year ended December 2013, its gross earnings rose by 5.97 percent year-on-year (yoy) to N126.91 billion compared with N119.13 billion same period of the prior year (FY12).
Despite the good
performance at the top-line levels, the bank was unable to translate it to bottom-line growth as huge interest and similar expense as well as other operating expenses pressured profits.
Profit before tax (PBT) shrank by 57.8 percent to N9 billion in FY13 from N21.35 billion as of FY 2012.
Interest and similar income grew by 9.3 percent to N86.25 percent in 12M13 as against N78.9 billion in 12M12. Net interest income in the review period crashed to N30.81 billion in FY13 as against N36.81 billion as of FY12. The reduction was caused by a 31.43 percent surge in interest expense to N55.44 billion in 2013.
Operating expenses were up by 8.1 percent yoy to N54.81 billion in 2013 compared with N50.70 billion in 2012. Profit after tax (PAT) in the review period shrank by 56.51 percent y/y to N 7.72 billion as against N17.92 billion in 2012. Earnings per share (EPS) slumped by 56.45 percent to 27k from 62k in 2012.
However, there is room for improvement as half of Nigeria’s 170 million populations are unbanked. This means that Fidelity Bank can exploit this opportunities and join the top banks in the country.
Its total assets jumped by 13.8 percent y/y to N1.081 trillion in 12M13, as against N914.30 billion in 12M12.
In the year ended December 2013, deposits to customers climbed by 12.5 percent y/y to N806.32 billion compared with N716.75 billion in the corresponding period of N2012. Total loans and advances to customers for the year ended December 2013 were up by 14.30 percent y/y to N506.94 billion from N443.5 billion in 2012. Loans to deposit ratio remained stable at 62 percent.
Total equity of the bank as of December 2013, increased slightly by 1.2 percent to N163.45 billion in 2013 from N161.45 billion in 2012.
The unimpressive operational performance has hurt returns to owners of the bank as Return on Average Equity (ROAe) slumped to 4.72 percent in 2013 from 11.11 percent in 2012, while Return on Average Assets (ROAe) remained abysmally flat at 0.74 percent.
Based on further analysis by BusinessDay, net margin, a measure of profitability and efficiency fell to 6.08 percent in FY13 from 15.1 percent in FY12.
Share performance and outlook
The bank’s share price closed at N2 on April 14, 2014, on the floor of the Nigerian Stock Exchange, with a market capitalisation of N57.95 billion on the same day, while share outstanding were 28.97 billion ordinary shares.
BALA AUGIE
