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**Company**: *Fidelity Bank Plc (FIDELITYBK)*

**Rating**: *Hold*

**Current Market Price**: *N2.00*

**NPL RATIO (Q3-2019)**: *6.53%*

**Year High**: *N2.90*

**Year Low**: *N1.40*

**Fair Value**: *N2.34*

*Equity Analyst*: **Tunde Segun Jeariogbe**

**Introduction **

- This report observed the financial performance of Fidelity Bank Plc for the first nine months of 2019, compared the same with the similar period in 2018 and established growth accordingly.
- We also combined a few valuation metrics to achieve conservative projections, using the full-year performance indices for the year ended 31
^{st}December 2019. - Generally, the result can be rated average, when put side-by-side with figures released in the similar quarter of 2018.
- Non-performing loan ratio for the period jumped from 5.39% estimated in the 2019 half-year to 6.53%.
- Performance indices recorded an appreciable gap from the comparable periods, while Total Comprehensive Income improved substantially over a comparable period of 2018.

See below for other financial indices:

**Company figures**

- Gross Earnings for the period stood at N161.05 billion up from the N139.00 billion posted at the end of the 2018 nine-month period.
- Interest Income stood at N135.11 billion, as against the N120.39 billion in the 2018 third-quarter.
- Interest Expenses was estimated at N76.87 billion, same as 23.52% over the reported N62.23 billion in 2018.
- Net Interest Income was estimated at N58.24 billion, as against the N58.16 billion achieved last year.
- Operating Expenses improved by 15.04% above the comparable period, as it is currently valued for N53.98 billion against N46.92 billion.
- Profit before Tax stood at N23.00 billion same as 14.65% above the N20.06 billion posted last year.
- Having considered the Tax Expense for the period, a total of N21.46 billion was reported as Profit for the period, which is 20.19% above the N17.85 billion earned at the end of the first nine months in 2018.

- Total Assets is currently valued at N1.970 trillion, same as 17.24% above the corresponding period valuation of N1.68 trillion.
- Similarly, due to improved deposit, Total Liabilities posted for the period was N1.74 trillion, up from N1.48 trillion in 2018 third-quarter business session.
- Net Assets is therefore estimated at N221.72 billion, 15.25% above the N192.38 billion estimated last year.
- Retained Earnings remained positive at N54.99 billion against N37.89 billion last year.
- Total Deposit achieved at the end of the period is same as N1.11 trillion, higher than the N986.83 billion deposit reported in the corresponding quarter of 2018.
- Total Loans and Advances stood at N1.07 trillion against N830.37 billion in 2018

**Financial Strength/Solvency Ratios**

- Debt Ratio which compared both Total Assets to Total Liabilities stood at 0.89x or 89%, implying that the Total Liabilities is 89% of Total Assets. Understand that Total Liabilities is inclusive of Total Deposits for the period.
- Total Debt to Equity for the quarter stood at 7.89x, same as 1.95% above the 7.74x estimated in 2018. This implies that the company used Debt equivalent to 7.89 times of its equity through the period.
- Equity Ratio which compared Equity to Total Assets stood at 0.11x, same as corresponding quarter estimate; implying that the reported Equity at the end of the period is 11% of Total Assets.
- Estimated Beta value for Fidelity Bank as at the time this report was compiled stood at 1.57 this stood above-market beta the industrial average of 1.56.

**Profitability Ratios**

- Pre-Tax Margin dropped by a marginal 1.05% to 14.28%, as against the 14.43% estimated at the end of the 2018 nine-month business session.
- Interest Expenses to Gross Earnings inched by 6.61% to 47.73%, as against the previously estimated 44.77%.
- Return on Average Equity through the first nine months of 2019 was 9.68%, against 9.28% estimated from 2018 numbers.
- See the table below for detailed profitability ratios and comparison:

**Efficiency Ratios**

- Operating Expenses figure posted at the end of the period is estimated at 33.52% of the estimated Gross Earnings, which is below the 33.76% achieved in the 2018 nine-month financials. This implies a marginal adjustment in the rate of expenses.
- Gross Earnings estimated from the bank’s financials is same as 8.17% of Total Assets value posted during the period under analysis.
- Total Loan and Advances posted for the quarter is 96.21% of Total Deposit, representing a 0.22% downward adjustment over the 84.15% estimate in 2018. Please note that this is far above the regulators’ standard for Nigerian banks.

**Investment/Valuation Ratios**

- Profit earned per unit of Fidelity Bank shares is estimated at N0.74, which is 20.19% above the N0.62 earned in the similar quarter of 2018.
- Total Comprehensive Income is estimated at N0.98, this is 96.08% above the N0.50 TCI/share achieved in 2018.
- Adjusted P/E-Ratio for nine months dropped to 0.76x from 1.08x, This can also be seen as the reduced waiting period for investors.
- The said earnings per share is a yielded 44.09% of the price of each unit of Fidelity Bank’s shares on the floor of the exchange on the day the result was unveiled to the investing public through the exchange.
- The estimated Book Value of each unit of Fidelity Bank is N7.65, this is 15.25% improvement over the previous estimate of N6.64 each.
- Confirming the academic under-priced nature of Fidelity Bank’s shares on the exchange is the Price to Book Value estimate that stood far below unity.

**Valuation**

Exploring our blend of valuation tools, we conservatively valued each unit of Fidelity Bank shares at **N2.34**, thus, we rated it a **Hold.**