Fidelity Bank Plc kicked off 2019 on an impressive note as its latest Q1 2019 results showed that Gross Earnings grew 11.8% y/y to N48.4bn (annualised; N193.7bn), coming above our FY 2019 estimate of N190.9bn.
Buoyed by the strong growth of 47.5% y/y in Net Fee and Commission Income and a jump of 230% y/y in the Other Income line, Pre-tax Profit grew strongly 34.0% y/y to N6.7bn (annualised; N26.7bn), which is slightly ahead of our 2019 estimate of N25.9bn. The sturdy growth in the Other Income line was bolstered by net foreign exchange gains of N2.3bn realised in Q1 2019 compared to N146m in Q1 2018.
Interest Income grew 2.6% y/y to N38.7bn. On a q/q basis, Interest Income was up 16.2% q/q. On the other hand, Interest Expense rose 6.5% y/y and 4.7% q/q to N22.9 bn, on the back of growth in Customer Deposits, up 18% y/y and 4% q/q. Notably, Customers Deposits crossed the N1trn mark as it closed at N1.01trn in Q1 2019 (Q1 2018; N859.4bn)- we view this positively.
Further down the Income Statement, the bank recorded an impressive growth of 47.5% y/y to N5.4bn in Net Fee and Commission Income, on the back of higher account maintenance charges (up 28% y/y), Commission on travellersí cheque and foreign bills (up 40% y/y) and Commission on E-banking activities (up 74% y/y).
We attribute the improvement in these income lines to the bankís retail strategy, which involves the use of technology in delivering exceptional banking services.
Although, Impairment Charges grew 47% y/y, Cost of Risk (COR) remained flat at 0.4% in Q1 2019, which is below our 2019 COR estimate of 0.7%.
Despite the mild decline of 2.5% y/y in Net Interest Income, Operating Income grew 17.3% y/y to N24.4bn in Q1 2019 from N20.8bn in Q1 2018.
Although, Operating Expenses grew 10.4% y/y to N16.7bn, the higher growth in Operating Income (+17.3% y/y) led to a 427bps decline in Cost to Income Ratio ( CIR ex-provisions) to 68.4% in Q1 2019 from 72.7% in Q1 2018, which was slightly below our 2019 estimate of 69.0%.
Overall, Pre-tax Profit grew by 34% y/y to N6.7bn (Q1 2018; N4.9bn) while Profit after tax grew 28% y/y to N5.9bn, albeit the slower growth in PAT was due to the higher effective tax rate of 11% compared to 7.1% in Q1 2018. EPS came in at N0.21 in Q1 2019 compared to No.16 in Q1 2018. Annualised RoAE also improved to 12.0% in Q1 2019 compared to 9.7% in Q1 2018.
We have a target price of N2.79/s for Fidelity with a Buy recommendation. Current price: N1.91/s.
CSL STOCKBROKERS LIMITED CSL Stockbrokers,
Member of the Nigerian Stock Exchange,
First City Plaza, 44 Marina,
PO Box 9117,
Gold prices rise, as President Trump decides on China today
Gold prices jumped on Friday as China and America’s drift deepened over further moves by China to impose security laws on Hong Kong
Gold prices jumped on Friday as China and America’s drift deepened over further moves by China to impose security laws on Hong Kong, lifting the allure of safe havens amid market uncertainties.
U.S. President Donald Trump’s top economic adviser cautioned the Chinese lately that Hong Kong, which has enjoyed special privileges, may now be treated like China when it comes to financial matters and trade.
Trump, who had earlier vowed a tough action on China, will hold a news conference today to announce what measures his administration will take.
Spot gold gained about 0.1% at $1,719.63 per ounce, and U.S. gold futures rose 0.4% to $1,734.60.
The friendship between the Americans and Chinese had weakened, since the outbreak of the Covid-19 pandemic.
President Trump and President Jinping of China have accused each other as a result of issues surrounding the COVID-19 pandemic.
Why do Investors buy Gold? Global Investors most often buy the safe-haven asset in times of uncertainty and use it to hedge against cash (inflationary macros).
“The possible U.S. response could range from a tearing up of the Phase 1 trade deal and fresh tariffs on China, to milder travel or financial sanctions on Chinese officials,” said Shane Oliver, chief economist at Australian wealth manager AMP to Reuters News.
“It is seen as a major threat to the rally we’ve had and the recovery,” “If it’s at the relatively mild end, then I don’t think it would derail the recovery bull market, but if it’s at the more extreme end with tariffs and harsh treatment of Hong Kong, then I think it gets more problematic,” Oliver added.
AfDB board denies asking Adesina to step down, as Obasanjo says the bank risks being hijacked
“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign.”
The Bureau of the Board of Governors of the African Development Bank (AfDB) has denied media reports making the rounds that AfDB’s president, Akinwumi Adesina, has been asked to step down pending the completion of the probe and determination of allegations against him.
The bank’s top governing board members said that they have not asked Adesina to step down from his position as president, even as the board continues to review the fallout of complaints by some whistleblower. The statement from the Chairman of the bank’s board of governors, Niale Kaba, said:
“The Bureau of the board of governors informs the public that it has not taken any decision. Everyone must allow the Bureau to do its work and allow due process to reign. All governors will be carried along in resolving the issue.’’
Kaba also stressed that there was no governance crisis at AfDB as was being speculated in certain quarters. He confirmed that the Bureau of the Board of Governors of AfDB met on Tuesday, May 26, after the request by the U.S Secretary calling for an independent probe. The essence of the meeting was to take a closer look at the allegations by the whistleblowers against Akinwumi Adesina, said allegations which had already been investigated by the ethics committee of the bank.
Kaba further disclosed that even though no decision has been taken yet, the bureau assures that it is treating the case with the utmost seriousness that it deserves.
Adesina, who maintains his innocence of those allegations, had stated that a fair, transparent, and just process will vindicate him.
In a related development, former Nigerian President Olusegun Obasanjo had thrown his weight behind Adesina and kicked against the demand by the United States of America for a fresh, independent probe of the AfDB President who had earlier been cleared by the ethics committee of the bank.
In his letter to 12 former African Presidents, Obasanjo said that Africa must stand up and not allow its institutions to be unduly controlled by non-African countries.
Obasanjo said that the bank has witnessed tremendous growth under Adesina’s leadership and has doubled its capital base since he took over.
How N400 billion ecological funding can save Nigeria’s coastline
The waves of current from the ocean have become more violent, eroding the nation’s coastline which poses a serious threat.
With the higher rainfalls predicted for the year 2020, states in Nigeria may have to worry about something more serious than a flood – the erosion of the coastlines.
According to Mr Kabiru Abdullahi, Lagos State Commissioner for Water Front Infrastructure Development, the waves of currents from the ocean have become more violent, eroding the nation’s coastline and compounding environmental degradation, and flooding.
This development is already posing serious threats to several parts of Lagos state, which is known to be a coastal city.
According to NAN, the state government had already constructed 18 groins to wade off the violent currents from the oceans, but Abdullahi admitted that given the current situation, there is a need to construct at least 60 more groins.
These groins, he explained, would act as breakers, trapping sand from moving down the beaches.
What can N400 billion do to save the situation
Coastline erosion is a seasonal problem which will always occur when there is a rise in sea level, as is expected during the rainy season. If the government does not armour the shorelines with seawalls, jetties and groins, there could be more property and land losses.
According to the commissioner, N400 billion would be just enough to construct groins to cover another 60 kilometres in addition to the 7.2 kilometres done so far.
“On the Eko Atlantic City Project, so far, 18 groins have been constructed at 400 metres intervals covering a distance of about. We still have about 60 kilometres to go which is estimated to cost about N400 Billion,” he said.
The Ecological fund is an intervention fund set up by the Federal Government to address the various environmental challenges in communities across the country, but interestingly, the Lagos state government has not accessed any ecological fund on this project so far.
Lagos state budget for 2020 was put at N1.17 trillion with environment getting N66.586 billion of the sum. With this sum, there is no way the ministry of environment can take on the task of funding a N400 billion project on coastline and shoreline protection, and this is only one of the numerous environmental challenges the state has to deal with. The state budget has even been reviewed downwards in view of the COVID-19 induced economic challenges.
Illegal dredging activities and land reclamation for urban development are also creating serious environmental issues for Lagos and left on its own, and without intervention funding from the federal government, the coastline situation could be left to deteriorate even further with the onset of the rain
As the commissioner suggested, the federal government might want to consider allocating some of the “recently released tranche of Abacha loot of about $313 million” for this purpose, as it no doubt qualifies as a critical infrastructure for the country.