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Quick take: Earnings beat estimates on strong Non Interest Income and write backs

Fidelity Bank sustained the growth in earnings during 9M 2019 results as the bank posted double-digit growth across major income lines.



Quick take: Earnings beat estimates on strong Non Interest Income and write backs

Fidelity Bank (Fidelity) sustained the growth in earnings during 9M 2019 results as the bank posted double-digit growth across major income lines. Gross Earnings grew 16% y/y to N161.1 billion (annualised; N214.7 billion), coming significantly above our FY 2019 estimate of N190.9 billion. Buoyed by the strong growth of 28% y/y in Net Fee and Commission Income and a strong increase of  89% y/y in the Other Operating Income, Pre-tax Profit grew 15% y/y to N23.0 billion (annualised; N30.6 billion), which is ahead of our 2019 estimate of N25.9 billion.

The growth in Other Operating Income was driven by Profit on disposal of Property, plant and equipment (N2.5 billion in 9M 2019 compared to N11 million in 9M 2018) and Dividend Income (N1.4 billion in 9M 2019 compared to N229 million in 9M 2018).


[READ MORE: Quick Take: Seasonality and high leverage weigh on earnings]

Interest Income grew 12% y/y and 5% q/q. The growth in Interest Income was on the back of higher Interest earned on loans and advances to customers (up 14% y/y to N95.9 billion). We believe this was supported by the double-digit growth in the loan book (Net loans to customers grew 29% y/y as of 9M 2019).

Interest Expense, on the other hand, rose 24% y/y and 7% q/q, on the back of higher Interest Expense on Term deposits (+20% y/y) as well as borrowed funds (+27% y/y). We believe the higher interest expense incurred on Term deposits reflects higher cost of retaining maturing expensive term deposits given the decline of 10%y/y to N226.6 billion in total Term Deposits. The rise in Interest expense caused Net Interest Income to remain flat, both on a y/y basis and q/q basis.

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Notably, Customers Deposits grew 13% y/y to N1.1 trillion from N986.8 billion in 9M 2018. We believe this will continue to support higher transactional volumes on the bank’s digital platforms.

The bank recorded an impressive growth in Net Fee and Commission Income (up 24% y/y to N5.4 billion), on the back of higher account maintenance charges (up 18% y/y), ATM Charges (up 23% y/y), Commission on Fidelity connect (up 26% y/y) and Commission on E-banking activities (up 92% y/y). We attribute the strong growth in these income lines to the retail strategy adopted by the bank which is hinged on leveraging technology in delivering superior services.

The bank reported positive Impairment Charge (on account of writebacks) of N4.8 billion in 9M 2019 compared to a negative of N3.3 billion in 9M 2018 reflecting recovery efforts of management.

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Operating Income grew modestly, up 3% y/y to N76.0bn but was stronger during Q3 (up 21% y/y). The mild growth on a y/y basis was due to a net loss of N4.71 billion on financial assets reported in 9M 2019.

Operating Expenses grew 14% y/y but declined 8% q/q. The above inflationary growth in OPEX compared to Operating Income (+3% y/y) led to a 771bps increase in Cost to Income Ratio (CIR ex-provisions) to 76.1% in 9M 2019.


Overall, Pre-tax Profit grew by 15% y/y to N23.0 billion while Profit after tax grew 20% y/y to N21.5 billion. On a quarterly basis, however, Pre-tax Profit declined by 5% y/y to N7.9 billion, due largely to the absence of writebacks in Q3 (the bank recorded Impairment Charge of 630m compared to writebacks of N6.5 billion in Q2 2019).


[READ ALSO: Quick Take: Lower revenue & higher leverage underpins weak operating performance]

EPS came in at N0.74 in 9M 2019 compared to No.62 in 9M 2018. Annualised RoAE also improved to 13.8% in 9M 2019 compared to 12.1% in 9M 2018.

We have a target price of N2.79/s for Fidelity with a Buy recommendation. Current price: N1.68/s.




Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

PO Box 9117,

Lagos State,


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CBN announces new policy measures, reduces interest rates for financial institutions

CBN will be reducing interest rates on its facilities through participating financial institutions from 9% to 5% per annum for a year.



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As part of its monetary and financial policy measures to further mitigate the impact of the coronavirus pandemic on households, and businesses, the Central Bank of Nigeria (CBN), has approved regulatory forbearance for the restructuring of credit facilities in the Other Financial Institution (OFI) sub-sector.

This was disclosed in a circular signed by the CBN’s Director for Financial Policy and Regulatory Department, Kevin Amugo, on Wednesday, May 27, 2020.


In the circular, stated that Amugo the apex bank will be reducing interest rates on its facilities through participating financial institutions from 9% to 5% per annum for a year with effect from March 1, 2020.

According to the circular, CBN has approved regulatory forbearance for the restructuring of credit facilities in the OFI sub-sector as follows:

‘’CBN Intervention facilities availed through participating OFIs are granted a further one-year moratorium on all principal repayments, effective March 1, 2020.

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‘’Interest rates on the CBN intervention facilities through participating OFIs hereby reduced from 9% to 5% per annum for 1-year effective March 1, 2020.

‘’OFIs are granted leave to consider temporary and time-limited restructuring of the tenor and loan terms for households and businesses affected by COVID-19, subject to the recently issued guidelines for restructuring affected credit facilities in the OFIs sub-sector.”

This new policy measure by the apex bank is in continuation of its intervention in the nation’s economy so as to help manage the crisis caused by the coronavirus pandemic and reduce its effects on household and businesses.

This is coming a day before the Monetary Policy Committee (MPC) meeting for the month of May which has been slated for tomorrow Thursday, May 27, 2020.

Meanwhile, the CBN said that it shall continue to monitor developments and implement appropriate measures to safeguard financial stability and support stakeholders impacted by the COVID-19 pandemic.




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Economy & Politics

President Buhari directs Ministries of Power, Finance, BPE to seal Siemens deal

Presidency has approved the release of funding for the first part of Phase 1 of the PPI, to kick-off the pre-engineering and concession financing workstreams.



Nigeria-Siemens power deal get N61 billion allocation 

President Muhammadu Buhari has directed the Ministries of Power, Finance, and the Bureau of Public Enterprise (BPE) to conclude the nation’s engagement with Siemens AG over regular power supply.

The directive, which was issued via the Presidency’s Twitter handle on Wednesday, was to start the pre-engineering & concessionary financing aspects of the Presidential Power Initiative (PPI).


PPI is a power infrastructure upgrade and modernization Programme agreed to by the Federal Government and Siemens AG of Germany, with the support of the German Government. The ultimate goal of the initiative, according to the government, is to modernize and increase the Nigerian electricity grid capacity from its current capacity of  about 5 GW to 25 GW, over three phases.

How it works: Under the PPI, Nigeria on behalf of the other shareholders in the Electricity Distribution Companies (DisCos), will invest in infrastructure upgrades in the form of improved payment systems, distribution substations, transformers, protection devices, smart meters, and transmission lines among others.

The President explained that all DisCos have, directly and through the BPE, been diligently carried along over the last 15 months to understand in detail the challenges in the electricity systems.

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Funding: The funding for the PPI will be secured under concessionary terms (up to 3-year moratorium and 12-year repayment at concessionary interest rates) through the German Euler Hermes cover, which Nigeria will on-lend as a convertible loan to the other shareholders in the DisCos.

According to the statement, President Buhari has approved the release of funding for the first part of Phase 1 of the PPI, to kick-off the pre-engineering and concession financing workstreams.

“To ensure fairness and transparency of the intervention, the President has also directed that the nation engage the International Finance Corporation (‘IFC’) to assist in developing the commercial structure of the intervention…

“The President has also directed that to ensure value for money and preserve the integrity & transparency of the procurement process under the Govt-to-Govt framework, Siemens AG shall be solely responsible for nominating its EPC partners to perform all onshore works; NO middlemen.


“Our goal is simply to deliver electricity to Nigerian businesses and homes… Our intention is to ensure that our cooperation is structured under a Govt-to-Govt framework. No middlemen will be involved, so that we can achieve value for money for Nigerians,” President Buhari added.


The PPI journey started on August 31, 2018, when Chancellor Angela Merkel visited Nigeria and met with President Buhari. Then the Chancellor brought along with her a business delegation that included the Global CEO of Siemens.

Nigeria and Germany agreed to explore cooperation in a number of areas, including Power.

PPI was designed to deliver improved power supply nationwide, with attendant results in job creation, investor confidence, cost and ease of doing business and economic growth. The partnership is also  expected to guarantee training & capacity building for thousands of young Nigerians (non-graduates, students & graduates).

Other goals include the creation of economic opportunities for Nigerian engineering companies that will serve as local vendors for the provision of manpower and equipment. Overall, the partnership will guarantee inflow of additional investment into the power sector.


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Endeavour honours founders of Kobo360

Fixing Africa’s supply chain is clearly important for commerce on the continent.




Endeavour, a leading global movement for high-impact entrepreneurship, has honoured the founders of Kobo360, Obi Ozor and Ife Oyedele as Endeavor Entrepreneurs.

Kobo360 is a digital logistics platform that uses big data and agile technology to reduce friction and improve efficiency in the African logistics ecosystem.


Managing Director, Endeavor in Nigeria, Gihan-Mbelu, explained that the company is excited to welcome Kobo360 into Endeavor’s network which includes some of the world’s most exciting scale-up entrepreneurs and most experienced mentors and investors.

He said, “Fixing Africa’s supply chain is clearly important for commerce on the continent, and Kobo360’s rapid growth over the past 3 years is evidence that the company’s valuable services are in critical demand. Obi and Ife are inspiring founders and their relentless focus on scaling Kobo360 serves as an inspiration to high-impact entrepreneurs everywhere.”

Meanwhile, since launching in 2017, Kobo360 has surpassed several milestones, including a $30 million Series A in August 2019.

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“It’s an honour to be joining this global network of high-impact entrepreneurs and to have Endeavor recognise our efforts to transform Africa’s logistics sector using technology. As entrepreneurs, we wanted to turn African problems into African opportunities.

“Focusing on logistics, Ife and I started Kobo360 to not only fix the inefficiencies that exist, but to build opportunities for the businesses we serve and most importantly, the hundreds of thousands of truck drivers across Africa. This is a fundamental milestone in Kobo360’s journey; our Global Logistics Operating System [GLOS] will revolutionize supply chain across emerging markets, Ozor, Co-founder & CEO of Kobo360.

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