Rating: Hold
Current Market Price: N2.56
NPL RATIO: 4.10%
Year High: N2.60
Year Low: N1.50
Fair Value: N4.10
Equity Analyst: Tunde Segun Jeariogbe

Introduction

• This report observed the financial performance statistics of Fidelity Bank Plc for the first nine months of 2020, compared same with the similar quarter of 2019 and established growth accordingly.
• We also observed few valuation metrics, and achieved 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 last year.
• Non-Performing Loan jumped to 4.10% from 2.96% in the corresponding period.
• Performance indices stood at marginal gap from the comparable periods, while Total Comprehensive Income improved substantially over the prior comparable period.
• See below for other financial indices comparison.

FIDELITY
Bourse	Nigerian Stock Exchange
Code Name	FIDELITYBK
Sector	FINANCIAL SERVICES
Market Classification	Main Board
Nature of Business	Commercial Banking
Date of Incorporation	November 19th 1987
Date Listed	May 17th 2005
End of Accounting Year	31st December
Website	www.fidelitybank.ng
Registrar	First Registrars Nigeria Limited
Auditor	Ernst & Young / PKF Professional Services
Share Price@Relsd (N)	2.29
Earnings per Share	0.70
Intrinsic Value(N)	4.10
Share Outstanding	28,974,797,023
Market Capitalisation	66,352,285,183

Company figures

• Gross Earnings stood at N155.03 billion, down from the N161.05 billion at the end of 2019 third quarter business session.
• Interest Income stood at N128.25 billion, as against the N132.55 billion in 2019 third quarter.
• Interest Expenses was estimated at N57.46 billion, same as 25.24% below the previously reported N76.87 billion.
• Net Interest Income was estimated at N70.78 billion as against the N55.68 billion achieved last year.
• Operating Expenses grew by 5.01% above the N59.27 billion reported in the comparable period, as against N56.39 billion.
• Profit before Tax stood at N21.34 billion, same as 3.64% above the N20.59 billion posted earlier.
• Having considered the Tax Expense for the period, a total of N20.40 billion was reported as Profit, which is 7.08% above the N19.05 billion earned at the end of the first nine months in 2019.

FIDELITY
Statement of Comprehensive Income
	2020(Mill)	2019(Mill)	%CHG
GROSS EARNINGS	155,030	161,055	3.74
INTEREST INCOME	128,250	132,558	3.25
INTEREST EXPENSES	57,469	76,870	25.24
NET INTEREST INCOME	70,781	55,688	27.10
OPEX	59,217	56,394	5.01
DEPRECIATION	4,573	3,889	17.59
PBT	21,348	20,598	3.64
TAX	943	1,542	38.85
PAT	20,406	19,056	7.08
TOTAL COMP INCOME	33,937	26,081	30.12
Statement of Financial Position
Total Assets	2,575,198	1,970,621	30.68
Total Liabilities	2,313,024	1,748,893	32.26
Net Assets	262,174	221,728	18.24
Property Plan & Equipment	38,738	37,639	2.92
Retained Earnings	58,968	54,995	7.22
Total Deposits	1,498,419	1,116,416	34.22
Total Loans and Advances	1,455,843	1,214,550	19.87
STAGE3 ECL	59,724	35,994	65.93

• Total Assets is currently valued at N2.575 trillion, 30.68% above the N1.970 trillion valuation corresponding period.
• Similarly, due to the improved deposit mobilised, Total Liabilities during the period was N2.313 trillion, as against N1.748 trillion in 2019 third quarter.
• Net Assets is therefore estimated at N262.17 billion, which is 18.24% above the N221.72 billion estimated last year.
• Retained Earnings remained positive at N58.96 billion compared to N54.99 billion of the last third quarter.
• Total Deposit is same as N1.49 trillion, higher than the N1.11 trillion deposit reported in the corresponding quarter of 2019.
• Total Loans and Advances amounted to N1.45 trillion, up from N1.21 trillion in the preceding third quarter.

Financial Strength/Solvency Ratios

• Debt Ratio which compares Total Assets to Total Liabilities stood at 89.82%, implying that the Total Liabilities is 89.82% of Total Assets. Understand that Total Liabilities is inclusive of Total Deposits for the period.
• Total Debt to Equity for the quarter stood at 8.82x, same as 11.85% above the 7.88x estimated in 2019. This implies that the company used Debt equivalent to 8.82 replicate of its equity through the period.
• Equity Ratio, which compares Equity to Total Assets, stood at 10.18% as against 11.25% in the corresponding quarter; implying that the reported Equity at the end of the period is 10.18% of Total Assets.
• Estimated Beta value for Fidelity Bank as at the time this report was compiled stood at 1.33 this stood above market beta the industrial average of 1.11.

Financial Strength/Solvency Ratio
TICKERS	2020	2019	%CHG
Debt Ratio	89.82%	88.75%	1.21
Total Debt to Equity Ratio (MRQ)	882.25%	788.76%	11.85
Equity Ratio	10.18%	11.25%	9.52
Beta Value	1.33	1.11	19.82
Non-Performing Loan Ratio	4.10%	2.96%	38.43

Profitability Ratios

• Pre-Tax Margin inched north by a marginal 7.67% to 13.77%, as against the 12.79% estimated at the end of 2019 nine months business session.
• Interest Expenses to Gross Earnings declined by 22.33% to 37.07% against the previously estimated 47.73% in the corresponding period.
• Return on Average Equity through the first nine months of 2020 was 7.78%, as against the 8.59% estimated from 2019 nine months numbers.
• See the table below for detailed profitability ratios and comparison:

PROFITABILITY RATIOS
TICKERS	2020	2019	%CHG
PRE-TAX MARGIN	13.77%	12.79%	7.67
EFFECTIVE TAX RATE	4.42%	7.49%	40.99
IE TO GE	37.07%	47.73%	22.33
ROAE	7.78%	8.59%	9.44
ROAA	0.79%	0.97%	18.06

Efficiency Ratios

• Operating Expenses at the end of the period is estimated at 38.20% of the estimated Gross Earnings, this is slightly above the 35.02% achieved in the 2019 nine months financials. Please note that this implies marginal adjustment in rate of expenses.
• Gross Earnings estimated from the bank’s financials is same as 6.02% of the Total Assets value posted for the period under analysis.
• Total Loan and Advances for the quarter is 97.16% at Total Deposit, which is a 10.69% downward adjustment over the 108.79% estimate in 2019. Please note that this is far above the regulators’ standard for Nigerian banks.

EFFICIENCY RATIOS
TICKERS	2020	2019
OPEX TO GE	38.20%	35.02%	9.09
GE TO TA	6.02%	8.17%	26.34
LDR	97.16%	108.79%	10.69
Capex/Share	0.20	0.18	7.61

Investment/Valuation Ratios

• The profit earned per unit of Fidelity Bank shares is estimated at N0.70, representing 7.08% above the N0.66 reported in similar quarter of 2019.
• Total Comprehensive Income per share is estimated at N1.17, 30.12% above the N0.80 TCI/share achieved last year.
• Adjusted P/E-Ratio for the nine months dropped to 1.08x from 0.85x, This can also be seen as reduced investment period for investors.
• The said earnings per share is a yielded 30.75% of the price of each units of Fidelity Bank’s shares on the floor of the exchange on the day the result was made available to the investing public through the exchange.
• Estimated value of each units of Fidelity Bank shares in its book is N9.05, 18.24% improvement over the previous estimate of N7.65.
• Confirming the academic under-priced stand of Fidelity Bank’s shares on the floor of the exchange is the Price to Book Value estimate that stood far below unity

FIDELITY
Investment/Valuation Ratios
Tickers	2020	2019	%Chg
EPS	0.70	0.66	7.08
TCIP/SHARE	1.17	0.90	30.12
P/E-Ratio	1.08	0.85	27.29
Earnings Yield	30.75%	39.15%	21.44
BV/Share	9.05	7.65	18.24
PBV	0.25	0.22	15.28

Valuation

Exploring our blend of valuation tools, we conservatively valued each unit of Fidelity Bank at N4.10, thus, we rated it a Hold.