Fidelity Bank: Improved Share Price As Growth Indicator

Fidelity Bank: Improved Share Price As Growth Indicator

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2 mins read

When Nigerian Exchange Limited (NGX) management announced in July 2023 that Fidelity Bank Plc would be reclassified from a small-price stock to a medium-price stock, financial analysts saw this as a significant step closer to the bank achieving Tier 1 status.

Fidelity Bank briefly entered the Tier 1 category, achieving the highest gross earnings of N337.10 billion and a profit before tax of N53.68 billion in full-year 2022,. With its higher interest income compared to interest expense, the bank boasted a net interest margin of 7.70%, surpassing similar banks.

The bank also held the highest total assets at N3.99 trillion in 2022, with relatively low-risk asset exposure resulting in non-performing loans (NPLs) at 2.90%, the second lowest among Tier 2 banks, ahead of Wema Bank.

Although Fidelity Bank faced challenges in curtailing operating costs, with a cost-to-income ratio (CIR) above 50%, it managed to achieve the second lowest CIR among Tier 2 banks at 59.00% in FY 2022, slightly behind FCMB at 53.90%.

In the first nine months of 2023, Proshare analysts predicted that Fidelity Bank would ascend to full Tier 1 status in the next Tier 1 Banking Sector Report review, leading second-tier banks in gross earnings, profitability, total assets, customer deposits, and loans and advances.

However, Fidelity Bank saw its non-performing loan ratio (NPLR) rise to 3.54% after Wema Bank’s 2.50%, while its cost-to-income ratio (CIR) settled at 49.86%, an improvement from the previous year.

In its full-year 2023 results, the bank’s total assets as of December 31, 2023, had risen to N6.2 trillion. Fidelity Bank closed 2023 as the fifth best banking stock on the NGX, with a share price of N10.85 and a market capitalization of N347.3 billion, reflecting an annual gain of 149.4%.

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The bank demonstrated a commendable financial performance, achieving a net income of N91.8 billion in the first nine months of 2023, a substantial 162.46% year-on-year growth from the corresponding period in 2022. It also registered an impressive return on equity of 28.48% during the same period.

In both 2022 and 2023, Fidelity Bank was among the top-performing banks on the NGX, alongside FCMB and FBN Holdings. A research analysis of thirteen of Nigeria’s largest commercial banks showed a 29.9% increase in post-tax profit between July and September 2022 compared to the same period in 2021.

Despite economic headwinds, banks remained resilient, with loans to customers growing by 5.5% between June and September 2022 to stand at N23.76 trillion. However, this growth was slightly slower than the previous year.

NGX’s reclassification of Fidelity Bank became necessary as its shares traded above the N5.00 mark since February 2023, meeting the criteria for medium price stock according to the exchange’s rules.

Fidelity Bank continued to impress with its financial performance, emerging as the company with the highest earnings per share on the NGX for the second year running. Its share price showed intense upward volatility over the years, indicating strong investor demand.

Analysts believe that Fidelity Bank’s share price reflects its earnings growth and financial performance, with higher dividend yields and future earnings forecasts driving demand for its shares. The bank’s resilience and impressive results position it well among its peers, indicating its potential for Tier 1 status and satisfying shareholders’ expectations for growth and profitability.

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