April 16, 2024/CSL Research
Fidelity Bank’s recently released its FY 2023 audited numbers showed significant y/y growth in Pre-tax profit, driven by significant growths in both Interest and Non-Interest Income. Interest Income grew 55.5% y/y, driven by expansion in earning assets and improved yields on assets. Net Loans to Customers were up 46.1% in December 2023 compared with the December 2022 position. Growth in Non-Interest Income on the other hand, was driven by foreign currency revaluation gains, trading gains and growth in several Fee Income lines.
Interest Expense grew moderately, up 27.5% y/y. However, the average funding cost dropped by marginally down 20bps to 4.4% due to an improved funding mix as low-cost deposits made up 97.4% of total deposits in December 2023 compared with 83.6% in December 2022. Overall, Net Interest Income grew strongly, up 81.6% y/y to N277.4bn for FY 2023 from N152.7bn in 2022, bringing Net Interest Margin (NIM) to 8.1% for FY 2023 from 6.3% in 2022.
FY 2O23
Source: Company’s Financials, CSL Research.
Net Fee and Commission Income remained resilient, up 74.0% y/y. The Fee and Commission Income lines that showed a y/y increase were ATM charges, account maintenance charge (up 44.2% y/y), commission on traveller’s cheque, comission on e-banking. Other Fee and Commission lines that showed strong y/y growth were commission on off balance sheet transactions, Letters of credit commissions and fees, other fees and commission and commission on fidelity connect.
Other Income (Other operating income and Net loss/gains from financial assets at fair value through profit or loss) grew strongly to N71.5bn in 2023 from N5.5bn in 2022. The y/y growth was driven mainly by revaluation gains of N44.1bn for FY 2023 compared with only N2.7bn in 2022 and significant net gains on derivatives amounting to N23.8bn compared with a negative N1.1bn for FY 2022.
The bank reported a strong growth in Impairment Charge to N67.4bn in 2023 compared with N5.4bn in 2022, bringing FY 2023 Cost of Risk (COR) to 2.6% compared with 0.3% in for FY 2022. The bank reported NPL ratio of 3.5% in 2023, up from 2.9% for FY 2022.
Operating Expenses grew 61.4% y/y to N194.9bn for FY 2023 from N120.8bn in 2022 driven mainly by regulatory charges, staff costs, technology costs, repairs and maintenance, The sstronger growth in Total Operating Income (up 114.9% y/y) compared to the growth in OPEX led to a significant improvement in Cost to Income Ratio (CIR ex-provisions) to 50.4% for FY 2023 compared with 67.1% in 2022.
Overall, Pre-tax Profit grew strongly, up 131.5% y/y while Net Profit was up 112.9y/y to N99.5bn, bringing FY 2023 ROAE to 26.5% compared to 15.6% for FY 2022
Capital adequacy ratio (CAR) of 16.2% remains above current regulatory minimum of 15.o%.
The Management proposed a final dividend of N0.60/s. This in addition to the interim dividend of N0.25/share brings total dividend to N0.85/s, implying a dividend yield of 9.4%.
We have a Buy recommendation on Fidelity Bank. Our estimates are under review. Current price: N9.00/s.
The bank will host a conference call on Friday, 19 April 2024, at 15.00 hours Lagos | 15:00 London | 10:00 New York | 16.00 Johannesburg to discuss the results
Kindly click on the below link to download the full report.
CSL Fidelity Bank FY 2023 Quick Take.pdf
