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Fidelity Bank: Regulatory-induced fee cut, surge in OPEX halt profit growth

Fidelity’s UNAUDITED report for Q1 2020 showed Interest Income growth of 11% y/y to N43.9bn, on the back of higher Interest Income on loans

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Fidelity Bank customers went on Twitter rampage to demand better service, Fidelity Bank: Write-back Supports Earnings Growth, Fidelity Bank: Earnings beat estimates; Pre-tax Profit soars 29% y/y, NIGERIA| FIDELITY BANK: Regulatory-induced fee cut, surge in OPEX halt profit growth

Fidelity’s UNAUDITED report for Q1 2020 showed Interest Income growth of 11% y/y to N43.9bn, 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 N19.3bn 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 N24.6bn 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).

READ MORE: Debt crisis looms in emerging markets

The bank felt the impact of the downward adjustment in fees on banking transactions by the apex bank, as Net Fee and Commission Income declined 25% y/y to N4.0bn. 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 (N1.4bn in Q1 2020 vs N2.3bn in Q1 2019).

(READ MORE: Nigerian banking stocks ignore red flags, boost Nigeria Stock Market)

The bank’s Impairment Charge rose 1.03x t0 N2.1bn 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.

Fidelity Bank Plc, Fidelity Bank financial report, Fidelity Bank Insider Trading Policy, Nigeria's Insider Trading Policy, NSE stcoks, Companies on Nigerian Stock Exchange NSE, NIGERIA| FIDELITY BANK: Regulatory-induced fee cut, surge in OPEX halt profit growth

Fidelity Bank

Deal book 300 x 250

Operating Expenses grew 30% y/y to N21.6bn 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).

READ MORE: Seven early lessons on personal finance from the Covid-19 pandemic 

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.

 

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Companies

Africa Prudential proposes dividend of N1 billion for shareholders

Africa Prudential Plc has proposed a sum of N1 billion as dividend for shareholders.

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African Prudential could be worth more than N4.55

The Board of Directors of Africa Prudential Plc has proposed a sum of N1 billion as dividend to shareholders for the period ended 31st of December 2020.

This is according to a disclosure signed by the firm’s secretary, Joseph Jibunoh and sent to the Nigerian Stock Exchange, as seen by Nairametrics.

According to the notification, the proposed dividend will be paid electronically to qualified shareholders on the 26th of March, 2021, subject to appropriate withholding tax and approval from the company’s Annual General Meeting (AGM) scheduled a day earlier.

The breakdown of the proposed dividend shows that a sum of 50 kobo will be paid for each outstanding 2,000,000,000 ordinary shares of the company, held by its shareholders, totalling N1 billion. The proposed dividend is 28.6% lower than the 2019 figures of N1.4 billion.

The comparative decline in the company’s proposed dividend for the year might be attributed to a recent dip in profit and other key metrics recorded by the firm in its latest audited financial statement for 2020. For example, the firm posted a profit of N1.45 billion for the year, indicating a decline of 13.98% YoY. In addition, its earnings per share declined by 14.29% to print at 72 kobo.

What you should know

  • Africa Prudential had recently announced the appointment of Mrs Zubaida Rasheed as Director.
  • Africa Prudential Plc, formerly known as UBA Registrars Ltd, was incorporated as a private limited liability company on 23rd March 2006. It was listed in the NSE on 17th of January, 2013.

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Corporate Press Releases

Konga launches revolutionary membership programme, Konga Prime

Konga Prime puts money back into the pockets of subscribers by helping them make great savings.

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Konga, Nigeria’s leading composite e-Commerce giant, has rolled out Konga Prime, a revolutionary membership programme, with a lot of benefits for shoppers.

Konga Prime members enjoy unlimited free shipping, have access to exclusive offers and early bird deals, among others.

The incentives-filled loyalty programme went live on Monday March 1st, 2021.

Specifically, Konga Prime brings together a suite of exciting benefits which delivers great value to subscribers, helping them enjoy exclusive deals and other incentives such as faster deliveries of their orders. In addition, Konga Prime puts money back into the pockets of subscribers by helping them make great savings, incomparable to that offered by any other retail platform.

Furthermore, members of Konga Prime including busy individuals and families get to enjoy premium access to the full range of Konga’s cutting-edge assets. Among these are its powerful e-Commerce engine and online presence as well as the nationwide reach of a growing list of over 31 stores spread across the nooks and crannies of Nigeria. With this, Konga Prime members can take advantage of nationwide delivery of their items as fast as the next day.
Also, members have the added incentive of unlimited free delivery from Konga.com and access to discounts that make shopping faster and cheaper for all categories of shoppers.

Interested subscribers can sign up for Konga Prime here: https://www.konga.com/konga-prime Membership of Konga Prime is available to all customers, effective March 1st, 2021, beginning with Lagos and Abuja, the Federal Capital Territory (FCT). Equally important, Konga is currently offering specially discounted rates for interested subscribers to sign up for Konga Prime. In other words, subscription rates for Konga Prime membership have been slashed by as much as 50% for early bird subscribers.

In Lagos, membership of Konga Prime is currently up for N1,000 a month, as against N2,000 and N2,490 for three months, instead of N4,950 along with a 7-day free trial period. For Abuja, membership rates presently stand at N1,290 a month, as opposed to N2,500 and N3,490 for three months, instead of N6,950.

Meanwhile, the Konga Prime rollout is set to be extended to other states soon.

Vice President, Konga Online, Kenny Oriola, says the initiative is one that will deliver great value for members, including exclusive access to a growing list of special offers. These include unlimited free delivery, early access to exclusive deals as well as partner benefits and rewards.

“This initiative was implemented to provide a platform that allows our esteemed customers enjoy great value, including having their orders delivered to their preferred location for free. Saving time and money is not just the end goal here, but having access to exclusive deals, and mouth-watering discounts on special products also makes this service one to subscribe to.

‘‘Today, we kick-off this initiative in Lagos and Abuja. Subsequently, other states across the country will benefit from this service. We urge all interested subscribers to take advantage of the ongoing discounted rates to sign up for this value-adding programme,’’ he disclosed.

Further, Oriola submits that in the future, Konga will leverage its wide-ranging assets to add additional benefits for members in a variety of services and offerings, adding that the list of benefits will continue to grow over time.

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