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Business News

Quick Take on Fidelity Bank’s Q1 2020 Earnings Report

Fidelity Bank Plc felt the impact of the downward adjustment in fees on banking transactions by Nigeria’s apex bank, as Net Fee and Commission Income declined 25% y/y to N4.0 billion.

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Fidelity Bank Plc

Fidelity Bank Plc felt the impact of the downward adjustment in fees on banking transactions by Nigeria’s apex bank, as Net Fee and Commission Income declined 25% y/y to N4.0 billion. The decline in Net Fee and Commission Income was due to lower income recorded in ATM charges (down 13% y/y), Account Maintenance Charges (down 10% y/y), Commission on Fidelity Connect (down 30% y/y) and Commission on E-banking Activities (down 35% y/y).

Going forward, we expect the weakness in these income lines to soften as the bank ramps up its efforts in improving the volume of transactions on its electronic channels. Other Income also declined 32% y/y, largely due to lower net foreign exchange gains (N1.4 billion in Q1 2020 vs N2.3 billion in Q1 2019).

READ ALSO: GTBank’s Profit before Tax rises by 2.1% to N58.2 billion in Q1 2020

Fidelity’s unaudited report for Q1 2020 showed Interest Income growth of 11% y/y to N43.9 billion, on the back of higher Interest Income on loans and advances (up 17% y/y) which reflects the strong growth in the bank’s loan book (Net loans to Customers grew 21% y/y in Q1 2020). Interest Expense on the other hand, declined 16% y/y to N19.3 billion despite the strong growth in Customers Deposits (up 33% y/y), reflecting improved funding costs. Overall, Net Interest Income grew significantly, up 49% y/y to N24.6 billion in Q1 2020. Despite the robust growth in Net Interest Income, Pre-tax Profit was flat y/y, due to weaker Net Fee and Commission Income (-25% y/y), Other Income (-32% y/y) and the double-digit growth in OPEX (up 30% y/y).

The bank’s Impairment Charge rose 1.03x t0 N2.1 billion in Q1 2020, leading to a 27bps rise in annualized cost of risk to 0.7% in Q1 2020. Considering the substantial increase in the loan book in FY 2019 (up 33% y/y) and subdued macro conditions, we expect Impairment Charge to rise in the short to medium term.

READ ALSO: UBA reports a 13.3% profit increase in audited FY 2019 financial statement

Operating Expenses grew 30% y/y to N21.6 billion in Q1 2020. The higher growth in OPEX compared to growth in Operating Income (up 24% y/y) led to a 294bps increase in Cost to Income Ratio (CIR ex-provisions) to 71.3% in Q1 2020. The increase in OPEX was due to higher regulatory charges emanating from banking sector resolution cost (up 37% y/y) and NDIC premium (up 34% y/y) alongside increased spending on marketing, communication & entertainment (up 105% y/y).

Overall, both Pre-tax Profit and Profit after tax declined by 1% y/y to N6.6bn and N5.9bn respectively. Annualised RoAE however moderated to 9.8% in Q1 2020 compared to 12.0% in Q1 2019 and 13.3% in FY 2019.

We have a target price of N2.97/s for Fidelity with a Buy recommendation.


CSL STOCKBROKERS LIMITED CSL Stockbrokers is a member of the Nigerian Stock Exchange.

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    Real Estate

    FG to unveil dedicated portal for sale of houses to Nigerians

    The Federal Government has announced plans to launch a dedicated web portal for the sale of buildings to Nigerians in the next few weeks.

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    Nigeria needs N1.5 trillion within the next 3 years to fix roads - Fashola

    The Federal Government has announced plans to launch a dedicated web portal for the sale of buildings to Nigerians in the next few weeks.

    The platform is expected to help contributors to the National Housing Fund (NHF) access mortgage loans on a first-come, first-serve basis.

    This disclosure was made by the Minister of Works and Housing, Babatunde Raji Fashola while speaking at the ninth meeting of the National Council on Lands, Housing and Urban Development in Jos, Plateau State.

    Fashola, who was represented by the Minister of State for Works and Housing, Abubakar Aliyu, pointed out that the ministry is currently at the completion stages of the first phase of the national housing programme in 34 states of the federation, which provided land for it.

    He said, “We urge the state governments to alert their residents to this opportunity for interested persons to apply.”

    Fashola commended the Federal Mortgage Bank of Nigeria (FMBN) for being at the forefront of the cooperative housing initiative at the federal level, adding that it has the advantage of allowing cooperative members to choose what they design and build to fit their budgets.

    They can leverage their members to get group discount for the purchase of building materials as well as the engagement of contractors.

    Fashola disclosed that FMBN as the driver of the housing initiative has engaged 86 co-operatives in projects; approved N35, 784 billion cumulatively; disbursed N10.95 billion; and processed as at January, 57 co-operative housing development loans.

    Hotflex

    Fashola emphasized that what the Federal Government can do directly in housing is limited compared to what states can do, just as state governments are also limited, compared to what the private sector and individuals can do.

    He said, “The majority of houses available for sale or rent belong to individuals and private companies compared to what states or Federal Government has available. Therefore, many of the tenants who owe rent, who face eviction or who seek to rent or buy property are dealing with private citizens or companies and less so with government agencies.’

    My recommendation for improving access and affordability to housing in the Covid-19 era is for private companies and individuals to give back some of what they control to citizens in the way the Federal Government has given back to citizens some of what it controls.’’

    He explained, “for example in cases where the rent of businesses or individuals are due for renewal, the private landlords can give back, by accepting monthly, quarterly or half-yearly rent instead of one year, two or three years rent in advance.”

    Bottom line

    Nigeria has been bedevilled by a housing crisis that has left Africa’s most populous nation ill-equipped to properly provide accommodation for its citizens and inhabitants.

    Some of the housing problems in the country include unresolved rent tenure arrangements, high cost of building materials, access to infrastructure, deficiency of housing finance arrangements, stringent loan conditions from mortgage banks, time to process legal documents and inadequate government housing policies.

    Jaiz bank

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    Coronavirus

    Covid-19: Nigeria committed to procuring 29 million J&J vaccines

    The Nigerian Government is still committed to acquiring 29.59 million doses of Johnson & Johnson covid-19 vaccines through the Afrixem Bank AVAT initiative. 

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    AstraZeneca suspends COVID-19 vaccine final stage trial over safety concerns, COVID-19: J&J starts vaccine trials on humans after success on monkeys

    The Nigerian Government says it is still committed to acquiring 29.59 million doses of Johnson & Johnson covid-19 vaccines through the Afrixem Bank AVAT initiative.

    This was disclosed Mrs Zainab Ahmed, Minister of Finance at the recent ‘Collaborative Africa Budget Reform Initiative (CABRI) General Assembly webinar.

    What the Minister said

    “Therefore, the supplementary budget for COVID-19 vaccines will cover the cost of additional vaccines over and above those provided by COVAX, as well as the full cost of operations and logistics for delivering the vaccines around the country.

    Already, the sum of N29.1 billion has been released from the Routine Immunization budgetary provision (Service Wide Vote) to the National Primary Healthcare Development Agency (NPHCDA) as an advance for the operational cost of deployment of the COVID-19 vaccines. The N29.1 billion represents about 52 percent of the amount required over 2021-22,” she said.

    She added that FG plans to vaccinate 70 percent of eligible (18 years and above) Nigerians over the 2021 and 2022 fiscal years, with the COVAX agreement willing to cover 43.1 million of the eligible population.

    In case you missed it

    The World Health Organization (WHO)  announced the approval of China’s Sinopharm vaccine for Covid-19 vaccination. The vaccine is reported to have 79% efficacy against covid.

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