Thursday, September 27,
2018 / 04:37
PM / CardinalStone Research
Bank Plc (FIDELITYBK) H1’18 results – Gross earnings rose by 3.6% YoY to N88.9
billion, in line with our estimate of N86.5 billion (+2.8% deviation). More
remarkably, after tax profit leapt by 31.1% YoY to N11.8 billion, ahead of our
N9.4 billion projection (+26.1% deviation). On a quarterly basis, PAT improved
by 56.0% QoQ to N7.2 billion thanks to an impressive 252.9% QoQ growth in
- Contrary to industry trend, FIDELITYBK grew its loan book in Q2’18 by 7.7% QoQ
(+3.5% YtD). Notwithstanding, interest from loans and advances declined by
23.4% QoQ. This significantly muted the impact of a 12.3% QoQ increase in
interest income from investment securities, as overall interest income during
the quarter slipped 10.5% QoQ to N34.4 billion.
- Net interest income declined during the quarter (-18.0% QoQ) pressured by
expensive deposits (61.2% of interest expenses) in the bank’s books. So far in
H1’18, the bank has grown its term deposits (+37.3% YtD) much faster than its
low cost deposits (+13.9% YtD). Though cost of funds declined 60bps YtD to
6.6%, we expect that FIDELITYBK will carefully monitor deposit mobilization
strategies to prevent undue pressure on year-end earnings. Overall, net interest
margin declined 80bps YtD to 6.5% in H1’18.
- Notwithstanding, the bank’s earnings during the quarter was significantly
boosted by non-interest income which grew 252.9% QoQ to N13.5 billion. Net fees
and commission income improved 128.9% QoQ in Q2’18. This was supported by a
N4.1 billion increase in credit related fees (Q1’18—N199 million; Q2’17—N325
million) given that the bank was able to grow credit assets during the quarter.
Further propelling non-interest income during the quarter were FX and
derivatives gains of N1.6 billion and N3.4 billion respectively.
- Credit losses increased 169.4% QoQ in Q2’18 to N1.9 billion. Cumulatively
though, impairment losses reflected a 46.1% YoY decline compared to H1’17.
Overall, cost of risk declined to 0.7% from 1.5% in FY’17, while NPL ratio
declined 30bps to 6.1%.
- Liquidity ratio declined to 33.2%, though above the regulatory threshold of
30.0%, while capital adequacy ratio (CAR) improved by 1.0pts to 17.0%, above
regulatory minimum of 15%. The growth in CAR was mainly driven by the 4.9%
increase in tier-I capital in the period.
we like FIDELITYBK’s H1’18 performance notably the significant improvement in
non-interest revenue during the quarter. More so, the bank was able to grow
loans (+3.5%) in contrast to peers, which consequently led to the increase in
credit related fees.
we would like to see this loan growth translate positively for interest income
in H2’18. 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%, we believe that the bank has room to bring
this number down through enhanced operational efficiency.
on our last review, our target price for the counter is N3.24 (BUY) which is a
96.4% upside to last close price of N1.65. We will review our estimates following
further discussion with management.
At the close of trading today, the shares
of Fidelity Bank Plc moved up by a tick size of +1.76% to close at N1.73k from the previous price of
N1.70k. YTD, the stock has dropped by -29.67%.
Bank Plc IR Page on Proshare MARKETS
1. Fidelity Bank Plc
IR Page – Proshare MARKETS
Bank Shares Have Declined by -30.9% YTD, Underperforming The NSEASI by 17%
Declares N11.84bn PAT in Q2 2018 Results,(SP:N1.65k)
BOI, Ford Foundation Unveils Lending Scheme for Aba Leather Manufacturers
Partners with World Remit for Instant Money Transfers to Nigeria
holds 30th AGM, pays Shareholders 11 kobo dividend
Fidelity Bank Ratings Affirmed; Outlook Stable
Reports Q1 2018 Results – Downward Revisions to Consensus 2018E PBT Forecast
declares N4.63bn PAT in Q1 2018 Results, (SP:N2.55k)