Fidelity Bank: Between shareholders’ value and the fundamentals

Fidelity Bank Plc has released its latest audited financial statement and accounts to the investing public. A major highlight of the report is a recommendation of a 42.9 per cent increase in dividend pay-out by the board of directors of the bank.

In one of the highest return growths in the stock market, Fidelity Bank, which set a personal record with its first interim dividend in 2022, is increasing cash dividends payable to shareholders for the 2022 business year from N10.137 billion in 2021 to N15.7 billion in 2022.

According to regulatory filing at the Nigerian Exchange (NGX), shareholders, who received interim dividend of 10 kobo per share earlier in 2022, will receive a final dividend per share of 40 kobo, totalling a pay-out of 50 kobo for the 2022 business year as against 35 kobo paid for the 2021 business year.

Fidelity Bank is one of the leading inflation-hedging stocks at the capital market having closed 2022 with a Dividend Yield of 11.5%. The bank’s share price has seen further appreciation in 2023.

Profit and loss performance

Key extracts of the audited financial statement and accounts for the year ended December 31, 2022 showed a double in profitability, driven by strong growths in the top-line and the structural balance of the bank’s operations.

Gross earnings rose by 34.4 per cent in 2022 to N337.05 billion as against N250.78 billion in 2021. Segmental topline analysis showed that the bank’s performance was driven largely by its core commercial banking operations.

Gross interest income rose by 45.2 per cent from N203.57 billion to N295.58 billion, representing 87.7 per cent and 81.2 per cent of gross earnings in 2022 and 2021 respectively. After interest expenses, net interest income stood at N152.70 billion in 2022 compared with N94.88 billion in 2021, an increase of 60.94 per cent.

Total operating expenses stood at N120.78 billion in 2022 as against N96.31 billion in 2021, an increase of 25.4 per cent; lagging behind top-line growth. Expenses were driven by more than a quarter growth in other non-personnel operating expenses, reflecting the impact of spiralling hyperinflation that characterised the 2022 business year.

After taxes, net profit rose from N23.10 billion to N46.72 billion, an increase of 102.2 per cent. With these, earnings per share rose correspondingly from 80 kobo in 2021 to N1.61 in 2022.

Balance sheet

Total assets touched the N4 trillion mark at N3.99 trillion in 2022 as against N3.28 trillion in 2021, an increase of 21.65 per cent. Customer deposits, which underlines public acceptance and market status, grew by 27.7 per cent from N2.02 trillion to N2.58 trillion.

Ratios and values

In the latest financial statement, key ratios underlining corporate efficiency, profitability, asset management, sustainability and shareholders’ value creation, among others, all trended upward.

Net Interest Income, which measures the profitability of the core banking operations, improved from N94.88 billion in 2021 to N152.70 billion in 2022.

Pre-tax profit margin- which indicates the institutional profitability as a corporate entity, increased by about six percentage points from 10.05 per cent in 2021 to 15.93 per cent in 2022.

Net profit margin also improved from 9.21 per cent to 13.86 per cent. Return on total equity- which denotes value creation as a business owned by shareholders, grew from 8.1 per cent in 2021 to 14.86 per cent in 2022.

Return on total assets almost doubled in 2022 at 1.35 per cent as against 0.77 per cent in 2021. Dividend cover- which measures return sustainability and dividend outlook, stood at 3.22 times in 2022 as against 2.29 times in 2021.

This implies that in spite of about 43 per cent increase in dividend pay-out in 2022, the bank has a stronger prospect of sustaining such increased dividend pay-out, on the back of its enhanced earnings.

Management review

Managing Director, Fidelity Bank Plc, Mrs Nneka Onyeali-Ikpe said the 2022 performance reflected the bank’s continuing focus on its execution strategy, despite global and national macroeconomic headwinds.

She pointed out that improvements in the profitability of the bank was driven by a business-wide understanding of the key goals and strategies as the bank continued to prioritise investments in human capital and technology as enablers for growth.

With the congruence between its upward financial figures and ratios, Fidelity Bank appears to be justifying investors’ confidence in the bank. The steep share price appreciation seems to be a futuristic valuation of the earnings outlook, a vote of confidence on the Onyeali-Ikpe-led management.

Its strong financial ratios enhance the bank’s ratings as a stable and secure financial entity. Sustainability is the global corporate benchmark, this is where the value lies for all stakeholders; especially for the shareholders.

Culled from Daily Post