Fidelity Bank Plc 2020H1: With Rising OpEx, Time To boost Earnings, Margins

Rating: Buy
Current Market Price: N1.78
Loan to Deposit Ratio: 100.55%
Year High: N2.40
Year Low: N1.78
Fair Value: N4.12
Equity AnalystTunde Segun Jeariogbe


  • This report observed the financial performance statistics of Fidelity Bank Plc for the half-year ended 30th June, 2020, compared same with similar quarter in 2019 and established growth trajectory.
  • We also observed few valuation metrics, and arrived at conservative projections using the full-year performance indices of the past few years.
  • Generally, the result can be rated average when put side-by-side with figures released in the similar quarter of 2019.
  • Although the Top Line only improved by marginal points, Bottom Line however grew at a more appreciable rate, the growth is more relevant given the economic realities of the period under review as previously reported.
  • See below for other financial indices and comparisons.
BourseNigerian Stock Exchange
Market ClassificationMain Board
Nature of BusinessCommercial Banking
Date of IncorporationNovember 19th 1987
Date ListedMay 17th 2005
End of Accounting Year31st December
RegistrarFirst Registrars Nigeria Limited
AuditorErnst & Young / PKF Professional Services
Share Price@Relsd (N)                                                         1.81
Earnings per Share                                                         0.39
Intrinsic Value(N)                                                         4.12
Share Outstanding28,974,797,023
Market Capitalisation                                       52,444,382,612

Company figures

  • Gross Earnings during the period stood at N105.75 billion, up from the N103.65 billion at the end of 2019 half-year.
  • Of this amount, Interest Income stood at N87.72 billion, as against the N85.83 billion in 2019 second quarter.
  • Interest Expenses was estimated at N39.30 billion, same as 19.68% below the reported N48.93 billion at the end of 2019 second quarter.
  • Net Interest Income stood at N48.42 billion, as against the N36.89 billion achieved the preceding half-year.
  • Operating Expenses grew by 22.40% above the comparable period; to N43.81 billion as against the prior half-year’s N35.79 billion.
  • Profit before Tax stood at N11.96 billion, same as 21.92% above the N9.81 billion posted last year.
  • Having considered the Tax Expense for the period, a total of N11.30 billion was reported as Profit for the period. This is 33.01% above the N8.49 billion earned at the end of the first six months in 2019.
  • Total Comprehensive Income for the period stood at N22.45 billion, as against N19.15 billion in the comparable period of 2019.
Statement of Comprehensive Income
GROSS EARNINGS105,755103,6552.03
INTEREST INCOME87,72785,8302.21
INTEREST EXPENSES39,30248,93119.68
NET INTEREST INCOME48,42536,89931.24
TOTAL COMP INCOME22,45219,15017.24
Statement of Financial Position
Total Assets2,403,2341,940,16323.87
Total Liabilities2,152,5451,724,59724.81
Net Assets250,689215,56616.29
Property Plan & Equipment38,27538,0110.69
Retained Earnings49,86543,62414.31
Total Deposits1,405,9451,097,01128.16
Total Loans and Advances1,413,6381,157,20122.16
  • Total Assets is currently valued at N2.40 trillion, same as 23.87% above the corresponding period valuation of N1.94 trillion
  • Similarly, due to improved deposits base, Total Liabilities posted for the period was N2.15 trillion as against N1.72 trillion in 2019 second quarter.
  • Net Assets is therefore estimated at N250.68 billion, which is 16.29% above the N215.56 billion estimated at the end of last year.
  • Retained Earnings remained positive at N49.86 billion up from last year’s N43.62 billion.
  • Total Deposit achieved at the end of the period is same as N1.40 trillion, better than the N1.09 trillion deposit reported in the corresponding quarter of 2019.
  • Total Loans and Advances stood at N1.41 trillion, as against N1.15 trillion in 2019..

Financial Strength/Solvency Ratios

  • Debt Ratio is estimated at 89.57%, as against 88.89% in the corresponding period of 2019. In other words, the Total Liability Value Reported is currently 89.57% of Total Assets Valuation.
  • Total Debt to Equity for the quarter stood at 858.65% which means that Debt can Replicate Equity 8.58 times, as against 8.00 times in the comparable period.
  • Equity Ratio which compares Equity to Total Assets stood at 10.43%, lower than the 11.11% in the corresponding period.
  • Estimated Beta value for Fidelity Bank as at the time this report was compiled stood at 1.25, better than the 1.15 industry average.
Financial Strength/Solvency Ratio
Debt Ratio89.57%88.89%0.76
Total Debt to Equity Ratio (MRQ)858.65%800.03%7.33
Equity Ratio10.43%11.11%6.11
Beta Value                                       1.25                                   1.158.70

Profitability Ratios

  • Pre-Tax Margin improved by 19.50% to 11.31% from the 9.47% estimated at the end of 2019 six-month year.
  • Interest Expenses to Gross Earnings dropped by 21.27% to 37.16%, as against the previously estimated 47.21%.
  • Return on Average Equity through the first six months of 2020 is 37.16%, compared to 47.21% estimated from the 2019 numbers.
  • See below table for detailed profitability ratios and comparison.
PRE-TAX MARGIN11.31%9.47%19.50
EFFECTIVE TAX RATE5.52%13.39%58.80
IE TO GE37.16%47.21%21.27

Efficiency Ratios

  • Operating Expenses at the end of the period is estimated at 41.43% of the estimated Gross Earning, below the 34.53% achieved in the 2019six-month financials.
  • Gross Earnings estimated is same as 4.40% of the Total Assets value posted for the period under analysis.
  • Total Loan and Advances posted for the quarter is 100.55% of Total Deposit, this is 4.68% downward adjustment over the 105.49% estimate in 2019. Note that this is far above the regulatory standard for Nigerian banks
OPEX TO GE41.43%34.53%19.97
GE TO TA4.40%5.34%17.63

Investment/Valuation Ratios

  • The profit earned per unit of Fidelity Bank is estimated at N0.39, 33.01% better than the N0.29 earned in similar quarter of 2019.
  • Total Comprehensive Income is estimated at N0.77, this is 17.24% above the N0.66 TCI/share achieved in 2019.
  • Adjusted P/E-Ratio for six months dropped to 1.16x from 1.41x, This can also be seen as reduced investment period.
  • The said earnings per share yielded 21.55% 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.
  • Estimated value of each units of Fidelity Bank shares in its book is N8.65, this is 16.29% improvement over the previous estimate of N7.44.
  • Confirming the academic under-priced stand of Fidelity Bank’s shares on the exchange is the Price to Book Value estimate that stood far below unity.
Investment/Valuation Ratios
Earnings Yield21.55%17.67%21.99


Exploring our blend of valuation tools, we conservatively valued each unit of Fidelity Bank shares at N4.12, thus, we rated it a BUY.