November 1, 2019/InvestmentOne Report
· Non-interest income of N6.7billion, down 11.0% q/q, up 22.6% y/y
· Profit before tax of N7.9billion, down 5.1% q/q; up 12.8% y/y
· Profit after tax of N7.1billion, down 8.6% q/q; up 12.8 y/y
Fidelity bank published its 9M 2019 results earlier this week, posting a 14.6% y/y and 20.2% y/y rise in PBT and PAT respectively, driven by a 40.7% y/y rise in non-interest income and a write back of N4.8billion. This was enough to cushion a 14.5% y/y rise in total expenses and net interest income coming in flat.
However, on a sequential basis, PBT and PAT declined by 5.1% and 8.6% respectively. Net interest income stood at N21.3billion, flat q/q, while non-interest income declined 11.0% q/q. Bottom line performance was further exacerbated by impairment charges of N630million (versus a write back of N6.5billion in Q2 2019), and a 346bps q/q rise in effective tax rate to 11.0%.
Nonetheless, as we have seen across board, Fidelity bank’s net interest income came under pressure in Q3 2019, largely attributable to the CBN’s LDR policy. However, the bank’s net interest margin improved 20bps q/q to 6.0%, due to the 30bps q/q increase in average yield on earning assets, which offset the 10bps q/q rise in cost of funds to 6.7%, even as net loans increased 7.4% q/q (26.4% YtD).
However, non-interest income declined 11.0% q/q (up 40.7% y/y in 9M 2019), as net fee and commission income and FX income declined 9.2% and 87.6% respectively q/q, despite the 1.8% q/q inch up in total deposits.
In terms of asset quality, Fidelity’s NPL ratio stood at 4.8% – down 60bps q/q. This was on the back of a 4.9% q/q drop in absolute NPLs and the rise in loan book size. Furthermore, cost of risk stood at 0.02%, as impairment charges came in at N630million, from a write back of N6.5billion in Q2 2019.
Similarly, cost to income ratio improved by 110bps q/q to 71.7% (although still higher than management’s guidance of <70% for FY 2019), owing to the 8.2% q/q decline in total expenses
Finally, with a CAR of 16.4% and ROE of 13.8%, we hold a BUY position on the bank, with a TP of N2.49k, implying an upside potential of 45.0% based of yesterday’s close price.
FIDELITY BANK PLC Q3/9M 2019 (YE: DEC) (N millions) | ||||
Q3 2019 | Q/Q
| 9M 2019 | Y/Y
| |
Interest Income | 49,286 | 4.5%
| 135,116 | 12.2%
|
Interest Expense | -27,939 | 7.3%
| -76,870 | 23.5%
|
Net Interest Income | 21,347 | 1.1%
| 58,246 | 0.1%
|
Non-interest income | 6,744 | -11.0%
| 22,497 | 40.7%
|
Profit before provisions | 28,091 | -2.1%
| 80,743 | 8.9%
|
Loan Impairment charges | -630 | -109.7%
| 4,843 | -247.4%
|
Total Opex | -19,709 | -8.2%
| -57,878 | 14.5%
|
PBT | 7,952 | -5.1%
| 23,003 | 14.6%
|
Tax | -875 | 38.4%
| -1,542 | -30.1%
|
Tax rate
| 11.0%
| 345.9bps
| 6.7%
| -429.6bps
|
PAT | 7,077 | -8.6%
| 21,461 | 20.2%
|
Source: Company financials, Investment One Financial Services Research
9M 2019 BANKS COMPARISON SHEET | ||||||
NGN billion (unless stated otherwise) | FBNH | GTB | ACCESS | STANBIC | FIDELITY | |
Key Income Statement Figures | Gross Earnings | 439.85 | 316.39 | 513.66 | 176.16 | 161.05 |
Net Interest Income | 211.44 | 172.94 | 210.22 | 58.67 | 58.25 | |
Non-interest Income | 92.20 | 99.96 | 97.75 | 81.94 | 22.50 | |
Total Expenses | -176.94 | -99.60 | -194.25 | -71.59 | -57.88 | |
Loan Impairment Charges | -22.11 | -2.65 | -10.61 | 90.00 | 4.84 | |
Profit Before Tax | 60.01 | 170.65 | 103.10 | 69.11 | 23.00 | |
Y/Y PBT Growth
| 16.90%
| 3.90%
| 46.70%
| -2.00%
| 14.60%
| |
Dividend (Kobo per share) | nil | nil | nil | nil | nil | |
EPS (kobo per share) | 138 | 519 | 279 | 513 | 74 | |
Key Balance Sheet Figures | Total Assets | 5,734 | 3,519 | 6,606 | 1,833 | 1,971 |
Total Liabilities | 5,130 | 2,883 | 5,991 | 1,541 | 1,749 | |
Total Equity | 605 | 637 | 615 | 292 | 222 | |
Key Ratios | Net Interest Margin | 7.3% | 9.0% | 6.3% | 4.6% | 6.0% |
Cost of Fund | 3.3% | 2.6% | 4.8% | 3.5% | 6.7% | |
Cost to Income | 71.5% | 36.5% | 63.1% | 50.9% | 71.7% | |
NPL ratio | 12.6%
| 5.6%
| 6.3% | 2.7% | 4.8% | |
Liquidity (bank level) | 36.8% | n/a | n/a | 96.5% | 32.6% | |
Cost of Risk | 1.9% | 0.3% | 0.6% | 0.0% | 0.0% | |
Capital adequacy ratio (bank level) | 15.1% | n/a | 17.4% | 24.2% | 16.4% | |
ROE | 12.2% | 33.0% | 22.0% | 27.5% | 13.8% | |
ROA | 1.2% | 5.7% | 2.1% | 4.3% | n/a | |
Source: Company financials, Investment One Financial Services Research
