Earlier this week (precisely last Monday), the senior management of Fidelity Bank plc hosted a conference call with investors and analysts on the bank’s first-half (H1) 2015 unaudited financials.
Fidelity Bank plc recently reported 13.6% growth in gross earnings to N71.9 billion while the bank’s Profit before Tax (PBT) stood higher at N9.7billion. Interestingly, analysts observed the bank’s H1 PBT of N9.7billion appears to be tracking ahead of their consensus 2015 profit before tax.
The bank’s statement to the Nigerian Stock Exchange (NSE) and shareholders on its unaudited results for the H1 period ended June 30, 2015 shows gross earnings increased by 13.6% to N71.9billion from N63.3billion in H1 2014. Also, Net Fee Income (NII) increased by 25.9% to N15.2billion from N12.1billion in H1 2014; and operating income increased by 14.1% to N42billion from N36.8billion in H1 2014.
“We would expect to see modest upward revisions to consensus estimates,” analysts at Lagos-based investment house, FBN Capital Limited said in their first reaction to Fidelity Bank plc H1’15 results.
Fidelity Bank plc is listed on the banking subsector of the Nigerian Stock Exchange financial services sector. The bank, with a market capitalisation of circa N44.621billion and share price hovering around N1.54 as at early this week, has shares outstanding of 28,974,797,023 units.
In their reaction on the heels of the bank’s conference call with investors, FBN Capital analysts led by Olubunmi Asaolu further said, “On our new estimates, Fidelity shares are trading on a 2015E P/B multiple of 0.24x for a 2016E Return On Average Equity (ROAE) of 8.5%. Our N2.2 price target implies upside potential of 43%. We retain our Neutral rating in the meantime, however, to reflect our view that the shares may not re-rate meaningfully until the risk of NPL formation reduces or until signs of ROE expansion start to become visible”.
Fidelity Bank’s financial highlights show total expenses increased by 13.8% to N28.8billion from N25.3billion in H1 2014; Profit before Tax (PBT) increased by 2.5% to N9.7billion from N9.4billion in H1 2014; Profit after Tax (PAT) increased by 2.5% to N8.2billion from N8billion in H1 2014; net loans increased by 5.8% to N572.8billion from N541.7billion in Dec ember 2014; Deposits declined by 2.9% to N796.6billion from N820billion in December 2014 and Total Equity increased by 3.1% to N178.6billion from N173.1billion in December 2014. Also, the bank’s total assets rose by 0.5% to N1.192trillion from N1.187trillion in December 2014.
“Fidelity Bank’s management reiterated its 2015 guidance across the board. Better-than-expected Q2 2015 results provided a helping hand, thanks to non-interest income and opex. As a result, we have increased our 2015-16E earnings forecasts and our price target by just over 5%. Our 2015E ROE forecast of 8.7% remains below management’s guidance of 10%, largely because we are still not comfortable with the bank’s guidance on asset quality. Management continues to expect its cost of risk for the year to be around 1.0%, better than our 1.5% estimate. Although restructurings (oil and gas) have reduced some of the risk of asset quality deterioration, we expect to see more stress in the loan book in H2 2015,” FBN Capital analysts further said.
The analysts however insisted that when compared with their forecasts, Fidelity Bank plc PBT and PAT exceeded by 38% and 41% respectively “because profit before provisions came in ahead and opex surprised positively by 4%.”
Commenting on the H1’15 results, Nnamdi Okonkwo, managing director and Chief Executive Officer, Fidelity Bank plc said, “Business operations in H1 2015 were challenged by a difficult operating environment due to heightened political risks in first-quarter (Q1), weaker government revenues arising from lower crude oil prices, a tighter monetary policy environment and currency devaluation concerns which all translated to a significantly lower GDP growth rate.”
He said: “Despite these challenges we continued with the disciplined execution of our medium term strategy (albeit taking into consideration the weaker macro-economic environment). Profit before Tax (PBT) increased to N9.7bn despite significantly increased loan provisions anchored on our conservative view of selected sectors. We are pleased with the year-on-year (y-o-y) and quarter on quarter (q-o-q) growth in our profitability given the reduced level of business activities in H1 2015. We remain focused on the execution of our medium term strategic objectives in the Retail/SME/E-Banking and Niche Corporate Banking segments and look forward to delivering another positive set of results in the next quarter”.
Source : BusinessDay