Fidelity Bank FY2020 Results: Marginal Fall in Profit Amidst a Pandemic

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Thursday, February 11, 2021, / 05:00 PM / by Adaeze Nwachukwu, Proshare Research / Header Image Credit: Fidelity Bank


The latest unaudited result posted by Fidelity bank for FY2020 shows a marginal decline across most financial indices, this was based on harsh economic outcomes caused by COVID-19-induced disruptions to the business environment. However, total loans and deposits grew leading to a growth in the bank's balance sheet.

 

Key Highlights/Takeaways

  • Gross earnings declined Year-on-Year (Y-o-Y) by -4.79% from N215.52bn in 2019 to N205.18bn in 2020 (fell by -23.30% in US dollar terms to $538.54m in 2020 - using the official CBN rate at the different periods).
  • Profit before tax fell marginally Y-o-Y by -0.48% from N30.35bn in 2019 to N30.21bn in 2020 (declined by -19.82% in US dollar terms to $79.28m in 2020).
  • Earnings per share declined marginally Y-o-Y by +1.02% from 98kobo in 2019 to 97kobo in 2020
  • Total assets significantly increased Y-o-Y by +30.44% from N2.11trn in 2019 to N2.76trn in 2020 (grew by +5.09% in US dollar terms to $7.24bn in 2020)
  • Total equity grew Y-o-Y by +16.62% from N234.03bn in 2019 to N272.93bn in 2020 (fell by -6.04% in US dollar terms to $716.36m in 2020)
  • Return on equity declined to 11.07% in 2020 from 12.97% in 2019
  • Return on assets declined to 1.10% in 2020 from 1.44% in 2019.

 

Share Price/Volume Movement -Playing at The Margin

Fidelity bank's share price for 2020 was less volatile in 2020 when compared to other financial institutions. At the end of 2020, the bank's share price increased by +15.07%. The month of August recorded the lowest share price while December recorded the highest share price when compared on a month-on-month basis (M-o-M). On a year-to-date (YTD), the share price has grown +3.17% as of 8 February 2021.

 

The volume of shares traded had a different trend from the share price, volumes traded was more volatile in 2020. It closed the year negative as it declined by -16.13% at the end of 2020. October 2020 recorded the highest volume traded while April 2020 which was the peak of the C0VID-19 recorded the lowest volume traded in 2020. Looking at the YTD performance of volume traded, it has declined even further by -23.63% as of 8 February 2021 (see chart 1 below).


 

Chart 1: Fidelity Bank's YTD Share Price Movement and Volume of Share Traded Jan - Feb 08, 2021

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*share price and volume of shares traded as of 08 Feb 2021

Source: NSE, Proshare Research

 

Profitability- Dampened Earning Meets Sunny Profit

The gross earnings of the bank have steadily risen over the year, however, for FY2020, gross earnings declined marginally. The gross earnings declined by -4.79%, from N215.51bn in 2019 to N205.18bn in 2020. Gross earnings declined Y-o-Y despite a +25.26% growth in net interest income and a -0.05% Y-o-Y decline in net interest expense.

 

2017 records the highest percentage growth with a +18.57% change while 2020 records the highest percentage decline in gross earnings during the period under review (see chart 2 below).

 

Translating to US dollar terms, gross earnings of the bank fell even further by -23.30% Y-o-Y from $702.11m in 2019 to $538.54m in 2020 which was the result of a devaluation of the domestic currency. (using the official CBN rates during the different periods). 

 

 

Chart 2: Fidelity Bank's Gross Earnings 2015 - 2020 (N'bn)

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Source: Fidelity Bank Financial Statement, Proshare Research

 

Profit before tax (PBT) declined marginally by -0.48% Y-o-Y from N30.35bn in 2019 to N30.21bn in 2020. The highest percentage growth in PBT was recorded in 2017 with a +73.70% change in PBT while 2016 saw the highest percentage decline of -21.13%.

 

PBT declined Y-o-Y despite a +21.56% growth in other operating income and a -2.27% Y-o-Y decline in operating expense (see chart 3 below).

 

Converting to US DOLLARS terms, PBT declined significantly by -19.82% Y-o-Y from $98.89m in 2019 to $79.28m in 2020.

 

Chart 3: Fidelity Bank's Profit Before Tax 2015 - 2020 (N'bn)

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Source: Fidelity Bank Financial Statement, Proshare Research

 

Growth in impairment charges for the period was significant seeing the bank recorded a reversal the previous year. Impairment charges grew Y-o-Y by -397.35% from a reversal of N5.29bn in 2019 to a loss of N15.74bn in 2020. During the period under review, 2020 recorded the highest percentage growth in impairment charges while 2019 recorded the highest percentage decline in impairment charges (see chart 4 below).

 

Chart 4: Fidelity Bank's Impairment Charges 2015 - 2020 (N'bn)

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Source: Fidelity Bank Financial Statement, Proshare Research

 

Total Assets- Building Up the Balance Sheet

Growth in total assets of the bank witnessed an upward swing with 2020 recording the highest percentage growth in total assets over the last six years.

 

Total assets grew Y-o-Y by +30.44% from N2.11trn in 2019 to N2.76trn in 2020. Growth in total assets was caused by a +44.47% Y-o-Y increase in cash and balances with central banks, a +46.85% growth in due from banks, and a +55.89% Y-o-Y growth in other assets (see chart 5 below).

 

In US dollar terms, total assets grew Y-o-Y by +5.09% from $6.89bn in 2019 to $7.24bn in 2020.

 

 

Chart 5: Fidelity Bank's Total Assets 2015 - 2020 (N'trn)

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Source: Fidelity Bank Financial Statement, Proshare Research

 

Return on Assets- When Assets Sweat Less

Return on assets (ROA) dropped for the period, from 1.44% in 2019 to 1.10% in 2020. The bank recorded its highest ROA in 2019 while 2016 saw its lowest return on asset (see chart 6 below).

 

Chart 6: Fidelity Bank's Return on Assets 2015 - 2020

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Source: Fidelity Bank Financial Statement, Proshare Research

 

Loan-to-Deposit Ratio (LDR)- A Drop Still Attractive

The loan-to-deposit ratio (LDR) declined to 78.16% in 2020 from 91.98% in 2019, although above the regulatory minimum of 65%. In 2015 the bank recorded the lowest LDR of 75.13% while 2017 recorded the highest LDR of 99.16% (see chart 7 below).

 

Total deposit grew Y-o-Y by +38.67% from N1.23trn in 2019 to N1.69trn in 2020 while total loans grew by +17.83% Y-o-Y from N1.13trn in 2019 to N1.33trn in 2020.

 

Chart 7: Fidelity Bank's Loan-to-Deposit Ratio 2015 - 2020

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Source: Fidelity Bank Financial Statement, Proshare Research

 

Total Equity- Shareholders Sample Sweet Growth FY2020

The total equity of the bank has spun upwards even though growth has been unsteady. For the unaudited result FY2020, total equity grew Y-o-Y by +16.62% from N234.03bn in 2019 to N272.93bn in 2020. The equity growth was driven by a +77.56% Y-o-Y growth in retained earnings and a +79.47% increase in fair value reserve.

 

In 2019, the bank posted its highest percentage growth in equity with a +20.38% change as against the 2018 highest decline of -3.45% (see chart 8 below).

 

Translating into US dollars, total equity declined Y-o-Y by -6.04% from $762.44m in 2019 to $716.36m in 2020. This was a result of a devaluation of the naira.

 

Chart 8: Fidelity Bank's Total Equity 2015 - 2020 (N'bn)

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Source: Fidelity Bank Financial Statement, Proshare Research

 

Return on Equity- Equity Returns Not-So-Glamorous

Fidelity bank's return on equity (ROE) was not so inspiring in FY 2020 taking a trend similar to its ROA, ROE declined to 11.07% in 2020 from 11.97% in 2019. The bank recorded its highest ROE in 2019 but posted its lowest ROE in 2016 when ROE closed the year at 5.97% (see chart 9 below).

 

Chart 9: Fidelity Bank's Return on Equity 2015 - 2020

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Source: Fidelity Bank Financial Statement, Proshare Research

 

 

COVID-19 took a toll on most businesses in 2020 and for Fidelity bank, the knock to its gross earnings was mild, as gross earnings slipped by under 5%. Analysts expect the bank's performance to improve noticeably in FY 2021 as COVID-19-induced disruptions remain muted.  


 

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Nevertheless, the bank may find itself more severely hurt in dollar terms in the year as a depreciation of the value of the naira could take a bite out of the dollar performance of its books.

 



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 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

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