Company Analysis

# Fidelity Bank 2021-9M: Robust Loan-Deposit Ratio, Profit, Better Dividend Prospects

**Rating**: Buy**Current Market Price**: N2.56**Year High**: N2.80**Year Low**: N2.08**Fair Value**: N4.36**Equity Analyst**: Tunde Segun Jeariogbe

**Introduction**

- This report observes the financial performance statistics of Fidelity Bank Plc for the first nine months of 2021, compared same with the similar period in 2020, and establish growth accordingly.
- We also observed a few valuation metrics and achieved conservative projections using the full-year performance indices from the year ended 31st December 2020.
- Generally, the result can be rated average when placed side-by-side with figures released in the corresponding period of 2020.
- Performance indices stood at the appreciable gap from the comparable periods, though the Total Comprehensive Income dropped substantially against that of the comparable period of 2020.
- See below for a comparison of other financial indices.

**Company figures**

- Gross Earnings posted for the period stood at N174.35 billion up from the N155.03 billion posted at the end of 2020 nine months.
- Interest Income stood at N137.41 billion, up from N128.25 billion in 2020 preceding nine months.
- Interest Expenses was estimated at N72.45 billion, the same as 26.07% above the reported N57.46 billion in 2020.
- Net Interest Income was estimated at N64.95 billion, down from N70.78 billion in the corresponding period.
- Operating Expenses dropped by 6.98% to N55.03 billion from N59.21 billion in the comparable period of last year.
- Profit before Tax stood at N28.05 billion, same as 31.40% above the N21.34 billion posted last year.
- Having considered the Tax Expense for the period, a total of N26.51 billion was reported as Profit for the period, this is 29.92% above the N20.40 billion earned at the end of the first nine months in 2020.

- Total Assets is currently valued at N3.182 trillion, the same as 23.59% above that of the N2.575 trillion in the full-year ended December 31, 2020.
- Similarly, due to improved deposit, the Total Liabilities posted for the period was N2.900 trillion against N2.313 trillion in 2020 full-year.
- Net Assets is therefore estimated at N282.65 billion, which is 7.81% above the N262.17 billion estimated in the last full year.
- Retained Earnings remained positive at N53.70 billion, against N58.96 billion of last full-year.
- Total Deposit at the end of the period is the same as N1.972 trillion, higher than the N1.498 trillion deposit reported in 2020 audited full-year.
- Total Loans and Advances stood at N1.766 trillion from N1.455 trillion in 2020 full-year.

**Financial Strength/Solvency Ratios**

- Debt Ratio which compared Total Assets to Total Liabilities stood at 91.92%, implying that the Total Liabilities is 91.92% of Total Assets. Note that Total Liabilities is inclusive of Total Deposits for the period.
- Total Debt to Equity for the period stood at 10.26x, same as 16.30% above the 8.82x estimated in 2020, which implies that the company used Debt equivalent to 10.26 replicate of its equity through the period.
- Equity Ratio which compares Equity to Total Assets stood at 8.88%, as against 10.18% in the corresponding quarter; implying that the reported Equity at the end of the period is 8.88% of Total Assets.
- Estimated Beta value for Fidelity Bank as of the time this report was compiled stood at 1.01x, slightly above the market beta but lower than the 1.11 industry average.

**Profitability Ratios**

- Pre-Tax Margin inched north by 16.84% to 16.09%, against the 13.77% estimated at the end of 2020 nine months.
- Interest Expenses to Gross Earnings grew by 12.10% as it is now estimated at 41.56%, against the previously estimated 37.07% in the corresponding period of last year.
- Return on Average Equity through the first nine months of 2021 was 9.38% against 7.78% estimated from 2020 nine months numbers.
- See the below table for detailed profitability ratios and comparison.

**Efficiency Ratios**

- Operating Expenses at the end of the period is estimated at 31.59% of the estimated Gross Earnings, which is below the 38.20% achieved in the 2020 nine-month financials.
- Gross Earnings estimated from the bank’s financials is the same as 5.48% of the Total Assets value posted for the period under analysis.
- Total Loan and Advances posted for the quarter is 89.54% of Total Deposit, this is 7.84% downward adjustment over the 97.16% estimate in 2020. Note that this is far above the regulators’ standard for Nigerian banks.

**Investment/Valuation Ratios**

- The profit earned per unit of Fidelity Bank is estimated at N0.92, 29.92% above the N0.70 earned in a similar period of 2020.
- Total Comprehensive Income per share is estimated at N0.53, which is 54.36% below the N1.17 TCI/share achieved in 2020.
- Adjusted P/E Ratio for the nine months dropped to 1.00x from 1.08x, which can also be interpreted as a reduced investment period.
- The said earnings per share yielded 33.39% of the price of each unit of Fidelity Bank’s on the exchange on the day the result was released to investors through the exchange.
- The estimated value of each unit of Fidelity Bank in its book is N9.76, representing a 7.81% improvement over the previous estimate of N9.05 per share.
- Confirming the academic under-priced stand of Fidelity Bank’s shares on the exchange is the Price to Book Value estimated at far below unity.

**Valuation**

Exploring our blend of valuation tools, we conservatively valued each unit of Fidelity Bank at **N4.36**, thus, we rate it a **Buy.**