Published On: Thu, Apr 17th, 2014

Fidelity Bank’s dwindling performance highlights restructuring urgencies


Incorporated in 1987, as a private limited company with a merchant banking licence, Fidelity Bank has since evolved to become a publicly listed financial institution aspiring to be a top tier Nigerian bank through organic and inorganic means.

In line with CBN banking model, the bank currently has an international banking licence and operates a bank only entity, having a widely distributed banking presence with over 213 branches across Nigeria, a balance size of N1.08 trillion and a deposit base of N806.32 billion (as of December 2013).

It has strong public sector relationships and is mainly focused on Small and Medium Enterprises (SMEs) sector with specialised products aimed at deepening SME banking. In May 2013, it concluded a $300 million Eurobond capital raise.

Financial results for 2013

The regulatory headwinds or the tightening policy stance of the Central Bank of Nigeria (CBN) is taking toll on the bottom-line performance of Fidelity Bank as 2013FY profits lessen.

For the year ended December 2013, its gross earnings rose by 5.97 percent year-on-year (yoy) to N126.91 billion compared with N119.13 billion same period of the prior year (FY12).

Despite the good 

performance at the top-line levels, the bank was unable to translate it to bottom-line growth as huge interest and similar expense as well as other operating expenses pressured profits.

Profit before tax (PBT) shrank by 57.8 percent to N9 billion in FY13 from N21.35 billion as of FY 2012.

Interest and similar income grew by 9.3 percent to N86.25 percent in 12M13 as against N78.9 billion in 12M12. Net interest income in the review period crashed to N30.81 billion in FY13 as against N36.81 billion as of FY12. The reduction was caused by a 31.43 percent surge in interest expense to N55.44 billion in 2013.

Operating expenses were up by 8.1 percent yoy to N54.81 billion in 2013 compared with N50.70 billion in 2012. Profit after tax (PAT) in the review period shrank by 56.51 percent y/y to N 7.72 billion as against N17.92 billion in 2012. Earnings per share (EPS) slumped by 56.45 percent to 27k from 62k in 2012.

However, there is room for improvement as half of Nigeria’s 170 million populations are unbanked. This means that Fidelity Bank can exploit this opportunities and join the top banks in the country.

Its total assets jumped by 13.8 percent y/y to N1.081 trillion in 12M13, as against N914.30 billion in 12M12.

In the year ended December 2013, deposits to customers climbed by 12.5 percent y/y to N806.32 billion compared with N716.75 billion in the corresponding period of N2012. Total loans and advances to customers for the year ended December 2013 were up by 14.30 percent y/y to N506.94 billion from N443.5 billion in 2012. Loans to deposit ratio remained stable at 62 percent.

Total equity of the bank as of December 2013, increased slightly by 1.2 percent to N163.45 billion in 2013 from N161.45 billion in 2012.

The unimpressive operational performance has hurt returns to owners of the bank as Return on Average Equity (ROAe) slumped to 4.72 percent in 2013 from 11.11 percent in 2012, while Return on Average Assets (ROAe) remained abysmally flat at 0.74 percent.

Based on further analysis by BusinessDay, net margin, a measure of profitability and efficiency fell to 6.08 percent in FY13 from 15.1 percent in FY12.

Share performance and outlook

The bank’s share price closed at N2 on April 14, 2014, on the floor of the Nigerian Stock Exchange, with a market capitalisation of N57.95 billion on the same day, while share outstanding were 28.97 billion ordinary shares.



Displaying 5 Comments
Have Your Say
  1.' Brightlovey says:

    Poor analysis. Nothing new here and no analysis whatsoever. This is just news reporting. Translating their financial charts and tables into an essay. Disappointed!

  2.' Chinenye U.C says:

    This can not in any way serve as a good analysis since the major factors involved were ignored. You should have taken time to find out the reason for the decresed profitability; whether due to business restructuring or decreased patronage. In the absence of any of the two above, this write up is nothing but a paid demarketing. I expect you to find out and correct the wrong impression you have created.

  3.' jude says:

    Poor reporting from a newspaper like Businessday. Editor must task the reporters to do in depth analysis rather than this shallow reportage. The implication could be collateral.

  4.' Mazi J.O. Obasi says:

    Given the Bank’s position in the Industry, it did not fare any worse than its peers. Regulation almost straddled the Banking firms in our financial system. With restrictions and escalating costs, this result wasn’t that dismal. The revenue(top line)has an increase so does the bottom line
    (net profit)if marginal. The depositors base is also on the upswing but needs pressure to accelerate to a needed level. The loan portfolio also witnessed a minimal growth even at the tight money atmosphere in the Country. The top management change is also a factor in the whole process. This is not an excuse for not aggressively going for better returns going forward. The reserves are there, the quality of the Assets are there. Reign in costs to streamline these positions going forward until the regulatory grips loosens. The paper has been very harsh on the Bank. Do you have an axe to grind with its financial editorial staff? Your PR night want to examine that probability. For the incoming CEO, show confidence and resilience, growth plans home and abroad. The Banking industry in the country is still embryonic particularly in the Manufacturing and Small Business levels. Oil and Gas too are going a serious localization. Seek an adventurous foothold if there is none at the moment. Your Brand is kicking. Give it a greater force.

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