30/10/2018/InvestmentOne report
- Net interest income of N20.1billion, down 4.7% q/q; up 5.3% y/y
- Non-interest income of N5.5billion, down 12.7% q/q, down 9.4% y/y
- Profit before tax of N7.1billion, down 12.4% q/q; up 17.2% y/y
- Profit after tax of N6.3billion, down 10.0% q/q; up 15.9% y/y
Fidelity Bank released its Q3 2018 results on Friday, where it reported a 12.4% and 10.0% q/q decline in PBT and PAT respectively on the back of a 4.7% q/q decline in net interest income, a 12.7% q/q decrease in non-interest income and a 2.0% q/q rise in total expenses, despite a 63.0% q/q decline in loan impairment charges.
However, on a y/y basis for the 9M ending 30th September 2018, PBT and PAT were both up 23.6% respectively, attributable to an 8.1% y/y rise in net interest income and a 55.1% y/y decline in impairment charges, which offset the 6.2% decline in non-interest income and the 6.5% y/y increase in total expenses.
Net-Interest Income Dips Despite Credit Growth
Despite a 4.4% q/q rise in net loans, the bank recorded a 4.7% q/q decline in net interest income to N20.1billion, reflective of the lower yield environment we saw in Q3 2018; a trend we have continued to see across banking names under our coverage. However, as cost of funds came in 40bps lower q/q at 6.2%, the Bank’s Net Interest Margin came in 20bps higher q/q to 6.7%.
Furthermore, on a y/y basis, the bank recorded an 8.1% increase in net interest income, as interest income rose 9.1% y/y to N120.4billion, largely due to some reclassified credit related fees of c.N3.8billion into interest income in Q3 2018. This was more than enough to offset the 10.0% y/y rise in interest expenses.
Non-Interest Income Disappoints
On the back of marginal drop in fee and commission income and an even worse 16.1% q/q rise in fee and commission expense and a 32.8% q/q decline in other operating income, Fidelity Bank’s non-interest income dropped 12.7% q/q.
Similarly, on a y/y basis, non-interest income declined 6.2% to c.N16billion, due to the 40.5% y/y drop in other operating income and the reclassification done to net interest income.
Lower Impairment Charges; Higher Operating Expenses
In an apparent trend across banking names, impairment charges were down 63.4% q/q. An action attributed to the improvement in macro-economic conditions witnessed in the telecommunications and oil & gas downstream sectors. The bank’s NPL ratio dropped 10bps q/q to 6.0%. Similarly, Cost of Risk (CoR) also dropped 20bps q/q to 0.5%. Both ratios remain well within the bank’s target range of 6%-6.5% for NPL and 1.25% for its CoR.
Elsewhere, cost to income ratio was up 70bps q/q to 68.4%, riding on the back of a 2.0% q/q increase in total expenses due to a 15.1% q/q increase in personnel expenses and the presence of some AMCON charges taken during the quarter. Notwithstanding, the bank’s cost to income ratio remains within management’s guidance of ˜ 70% in FYE 2018.
Nevertheless, on a y/y basis, impairment charges were down 55.1% to N3.3billion, while total expenses rose 6.5%. The former, coupled with other income lines above, contributed to the 23.6% y/y rise in both PBT and PAT respectively.
Fidelity remains our one of our top picks among tier II names, with a Capital Adequacy Ratio of 17.0% and ROE of 13.9%.
FIDELITY BANK PLC Q3 2018/9M 2018 (YE: DEC) (N millions) |
| ||||
| |||||
Q3 2018 | Q/Q
| Y/Y
| 9M 2018 | Y/Y
| |
Interest Income | 40,352 | -3.0%
| 7.6%
| 120,399 | 9.1%
|
Interest Expense | -20,242 | -1.2%
| 10.0%
| -62,231 | 10.0%
|
Net Interest Income | 20,110 | -4.7%
| 5.3%
| 58,168 | 8.1%
|
Non-interest income | 5,502 | -12.7%
| -9.4%
| 15,993 | -6.2%
|
Profit before provisions | 25,612 | -6.6%
| 1.7%
| 74,161 | 4.7%
|
Loan Impairment charges | -692 | -63.4%
| -72.5%
| -3,285 | -55.1%
|
Operating Expenses | -17,897 | 2.0%
| 7.9%
| -50,556 | 6.5%
|
PBT | 7,052 | -12.4%
| 17.2%
| 20,064 | 23.6%
|
Tax | -776 | -27.9%
| 28.7%
| -2,207 | 23.6%
|
Tax rate
| 11.0%
| -236.2bps
| 98.4bps
| 11.0%
| 0.0bps
|
PAT | 6,276 | -10.0%
| 15.9%
| 17,857 | 23.6%
|
Source: Company financials, Investment One Financial Services Research
9M 2018 BANKS COMPARISON SHEET | ||||||||
NGN billion (unless stated otherwise) |
| FIDELITY | FBNH | ACCESS | ZENITH | GTB | UBA | |
Key Income Statement Figures | Gross Earnings | 139.0 | 441.5 | 375.2 | 474.6 | 337.3 | 374.8 | |
Net Interest Income | 58.2 | 221.5 | 122.9 | 228.5 | 170.6 | 150.7 | ||
Non-interest Income | 16.0 | 93.2 | 100.4 | 135.5 | 97.2 | 87.7 | ||
Total Expenses | -50.6 | -184.5 | -144.7 | -182.4 | -101.8 | -149.1 | ||
Loan Impairment Charges | -3.3 | -76.2 | -8.3 | -14.3 | -1.8 | -10.7 | ||
Profit Before Tax | 20.1 | 51.34 | 70.3 | 167.3 | 164.2 | 79.1 | ||
Y/Y PBT Growth
|
| 23.60%
| -7.40%
| -3.60%
| 9.70%
| 9.50%
| 1.30%
| |
Dividend (Kobo per share) | nil | nil | nil | nil | nil | nil | ||
EPS (kobo per share) | 80 | 162 | 69 | 458 | 503 | 172 | ||
Key Balance Sheet Figures | Total Assets | 1,681 | 5,348 | 4,555 | 5,618 | 3,213 | 4,507 | |
Total Liabilities | 1,488 | 4,652 | 4,082 | 4,840 | 2,631 | 3,998 | ||
Total Equity | 192 | 696 | 473 | 778 | 582 | 509 | ||
Key Ratios | Net Interest Margin | 6.70% | 7.70% | 5.30% | 9.65% | 8.60% | 5.90% | |
Cost of Fund | 6.20% | 3.60% | 5.60% | 3.30% | n/a | n/a | ||
Cost to Income | 68.40% | 59.50% | 64.80% | 50.10% | 38.30% | 62.50% | ||
NPL ratio | 6.00% | 19.80% | 4.70% | 4.90% | 5.60% | 7.00% | ||
Liquidity (bank level) | 38.30% | 42.20% | 44.20% | 72.00% | n/a | 43.90% | ||
Cost of Risk | 0.50% | 4.50% | 0.50% | 0.90% | 0.10% | 0.80% | ||
Capital adequacy ratio (bank level) | 17.00% | 17.40% | 20.30% | 21.00% | n/a | n/a | ||
ROE | 13.90% | 8.70% | 17.00% | 23.00% | 32.70% | 15.70% | ||
ROA | nil | 1.10% | 1.90% | 3.40% | 5.60% | 1.80% | ||
Source: Company financials, Investment One Financial Services Research
