Takeaways From Fidelity Bank Plc Q1 2019 Conference Call and Questions We Seek Answers To

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Monday, April 29,  2019  06:30 PM / Proshare MARKETS                           

 

Fidelity Bank Plc held its Q1 2019 Investors and Analyst Conference Call Earnings Presentation. Proshare NG participated along with leading market analysts and professionals.

 

However, despite repeated efforts, we could not get in the following (4) questions analysts seek clarification on, either due to format or time constraints:

  • What are the likely impacts of IFRS9 provisions on the banks results for FY 2019 given that the adjustments in 2018 saw shareholder funds fall -3.4%, from N194.4bn in 2017 to N201.4bn in 2018?
  • Will the growth in Fidelity’s loan book likely lead to an upward adjustment in impairment provisions, even though the book provisions declined from 5.7% in Q1 2018 to 4.9% in Q1 2019?
  • The banking system is increasingly consolidating with the merger between Diamond Bank and Access Bank, are there any near term expectations of a Fidelity Bank merger, especially ahead of Basel III?
  • What is Fidelity Bank’s likely conversion rate to digital banking over the next three quarters of 2019, and are there new plans to optimize costs using technology?

 

Answers to these question would provide the investing public some sense of the banks forward strategy and competitive preparedness as the year progresses. 

However, the management of the bank during the overview of its operating environment within the period under review stated that political risks impacted on the capital and money markets in Q1 2019 just as there was growing credits on the back of improving macros. The Naira was relatively stable as oil price was also stable within the period under review.

 

Thus, the bank’s retail and digital banking evolution report, as presented in its IR presentation, reflected the followings;

  • Consistent growth in savings deposits anchored on increasing customer growth and improved digital penetration at 43%.
  • Over 81% of customers transactions are now done on electronic banking channels.
  • Our virtual assistant, Ivy is improving's customer engagements and insights have been very positive.
  • Retail lending is starting to gradually pick up.


Fidelity Bank Plc recorded a gross earnings of N48.44bn in Q1 2019 as against N43.33bn in Q1 2018, up by +11.8% YoY while the bank’s Profit After Tax increased by +28.36%  YoY from N4.62bn in Q1 2018 to N5.93bn in Q1 2019.

 

Table – Q1 2019 Unaudited Results

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The bank’s balance sheet/statements of financial position reflected that it recorded growths in Loans and advances and customer deposits respectively among other balance sheet items.

At the close of trading today, the share price of Fidelity Bank Plc dropped by -1.03% to close at N1.92k as against N1.94k previous price.


Visit Fidelity Bank Plc IR Page in Proshare MARKETS

 

Graph– One Year Share Price Movement

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In a nutshell, below are the key takeaways from the Q1 2019 earnings presentation made by the bank’s management team;

  1. Fidelity Bank recorded an FX income growth of 334.4% which was largely a combination of FX trading income and revaluation gains. Further clarification by the bank will be a welcome idea as the Naira was relatively stable during this period.
  2. The bank claimed to have used the NIFEX rate in its balance sheet conversion at an exchange rate of N360/USD as at Q1 2019. Though, the NIFEX rate was relatively close to the NAFEX rate which is the rate considered to be market determined. It is important to state that there has been a cessation of the NIFEX rate as the final calculation of the rate was slated for December 31, 2018 while its final publication on FMDQ website took effect on March 30, 2018.
  3. The bank’s capital adequacy ratio (CAR) dropped to 16.5% in Q1 2019 from 16.7% in FY2018 and 17% in Q3 2018 respectively, excluding the Regulatory Adjustment, Fidelity CAR would have been 17.9% in Q1 2019. The bank’s expectation on the impact of IFRS 9 on 2019 profitability must be clearly clarified ahead of time.
  4. The bank set a guidance of 6% to 6.5% on Net Interest Margin and currently behind the set target as at Q1 2019 (5.1%).
  5. Its FCY loans grew by 16.0% YTD and now constitute about 41.9% of total loan book while the transport sector was largely responsible for the decline in NPL to 4.9%



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Source: Audited Annual Accounts of Nigerian Banks FY 2018 


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