Thursday, August 04, 2016 5:22 PM / Research
There is no doubt that microeconomic challenges that influenced business outlook in 2015 financial year are largely unresolved in 2016 as banks are facing headwinds within a tougher operating environment.
The slow economic activities, low global oil price, shortage of FX, technical devaluation of currency and floating of Naira, increase in MPR by 200bpts to 14% in the face of growing inflation and negative GDP growth- this had impacted and still impacting both top-line and bottom-line of banks across the board.
As a result of these mounting challenges, Fidelity Bank Plc posted mixed performance outlook, with modest turnover growth of 5% to close at N36.06billiion while the bottom-line number of the bank plunged considerably by 43.9% to close at N2.26billion.
The weak bottom-line performance could be traced to weakness in interest and non-interest income along with high operating expenses as cost-to-income ratio remains bloated at 74.1%. In addition, the significant surge in impairment charges to the tune of N4.80billion gives much concern about qualities of risk assets of the bank in the face of growing cost of risk. The bank needs aggressive cost-cutting initiatives.
However, we commend the improved NPL ratio, which moderated below regulatory threshold of 5%, the bank posted 3.4% in Q2’16 against 3.6% recorded in Q2’15 periods - this further indicates effective recovery initiatives.
Just as noted above, the operating efficiency and cost management came in weaker as cost-to-income ratio closed higher at 74.1%.
Summarily, below are the key takeaways from the Half-year 2016 presentation as presented by the management of the bank;
· The surge in impairment charges is due to exposure to downstream and currency devaluation
· Portfolio in downstream and upstream have been restructured adequately
· More impairment in the current financial year is largely possible according to the management
· The bank sets to maintain active focus on SME
· Devaluation and high inflation alter the bank’s projection considerably
· Low cost deposit make up 72% of the total deposit
· All maturing obligation on dollar loan are adequately covered
· Exposure to Oando portfolio had been restructured
· Liquid ratio on dollar portfolio remains sufficient
· Low efficiency level as CIR remains bloated above 70%
1. Fidelity Bank Half-Year Earnings Presentation The key takeaways
2. Fidelity Bank Plc Reports Q2 2016 Results Shares Rated Underperform
3. FIDELITYBK declares N5.59 billion PAT in Q2 16 Result SP N1.23k
4. Fidelity Bank Plc Board of Directors Appoints Mr. Seni Adetu As An Independent Director
5. FIDELITYBK Downgraded from Neutral to Underperform on weak Q1 16 Results
6. Fidelity Bank Appoints Alhaji Mohammed Lawal Balarabe as Ag. Managing Director
7. Fidelity Bank Q1 2016 Expect negative reaction to 15 decline in PBT