As market sentiment remains highly volatile and driven by news flow, banks’ liquidity levels can become vulnerable due to the spread of inaccurate information.
As Nigerian banks put the finishing touches on their recapitalisation plans as directed by the Central Bank of Nigeria (CBN), industry watchers have noted how social media mercenaries and their hirelings are deliberately distorting the truth and pushing campaigns that spread false information, which could result in deposit outflows from their targeted banks.
Earlier this month, when the Central Bank of Nigeria (CBN) revoked the banking licence of Heritage Bank, it clearly stated the reasons for the decision: “This action has become necessary due to the bank’s breach of Section 12 (1) of BOFIA, 2020. The Board and Management of the bank have not been able to improve the bank’s financial performance, a situation which constitutes a threat to financial stability,” the CBN noted.
The CBN said Heritage Bank had continued to suffer and had no reasonable prospects of recovery, making the revocation of the license the next necessary step.
A statement by Hakama Sidi Ali, Acting Director of Corporate Communications of the CBN, said the apex bank acted in accordance with its mandate to promote a sound financial system in Nigeria and in exercise of its powers under Section 12 of the Banks and Other Financial Act, BOFIA, 2020.
Many market watchers, particularly those following developments in the banking industry, did not think the CBN should have acted otherwise and supported the subsequent appointment of the Nigeria Deposit Insurance Corporation (NDIC) as the liquidator.
Mischievous ‘List’ of Other Banks
Shortly after the apex bank’s action against Heritage Bank, social media mischief-makers released their own ‘list’ of other banks they felt would follow Heritage Bank’s fate, not minding the illegality of assuming such a regulatory position.
Thanks to the Central Bank of Nigeria (CBN) for quickly debunking the fake news which had mentioned the names of other banks — Fidelity Bank, Wema Bank, Polaris Bank, and Unity Bank.
“The attention of the Central Bank of Nigeria (CBN) has been drawn to some information circulating in the public domain, suggesting that the CBN is set to revoke the licenses of three additional banks following its regulatory action against Heritage Bank Plc on Monday, June 3, 2024.
“The CBN unequivocally states that these allegations are false and intended to trigger panic in the financial system. The Nigerian financial system remains safe, sound, and resilient. Our banks have begun submitting implementation plans for the Banking Sector Recapitalisation Programme in compliance with the CBN Circular reviewing the minimum capital requirements for Commercial, Merchant, and Non-Interest Banks (CMNIBs).
“These plans are currently being reviewed by the Bank. In addition to enhancing buffers to withstand economic shocks, this proactive measure by the CBN to require CMNIBs to recapitalise will result in increased capital for Nigeria’s banks, enabling them to provide much-needed credit to critical sectors of the economy. This will increase the financial system’s contribution to the growth and development of a $1 trillion Nigerian economy.
“The CBN would like to reassure all stakeholders of its unwavering commitment to ensuring the financial system’s stability. Our financial system remains on solid footing, and the CBN will continue to take all necessary steps to maintain its safety and soundness,” said CBN’s Sidi Ali in a June 4 statement in response to the false allegations of license withdrawals.
Fidelity Bank’s full year 2023 PBT grew by 131.5% to N124.26 billion
Fidelity Bank Plc, in its 2023 full-year audited financial statements, reported a 131.5 percent growth in Profit Before Tax (PBT) to N124.26 billion.
The results, released to the investing public at the Nigerian Exchange (NGX), show the bank grew gross earnings by 64.9 percent year-on-year (YoY) to N555.83 billion, driven by an 81.6 percent growth in Net Interest Income, which increased from N152.7 billion to N277.37 billion. This led to a Profit After Tax of N99.45 billion, representing a 112.9 percent annual growth.
“We closed the financial year with strong double-digit growth across key income and balance-sheet lines. Our performance in 2023 is an attestation of our capacity to deliver superior returns to shareholders despite the difficulties in our operating environment. Profit before tax grew by 131.5 percent to N124.3 billion from N53.7 billion in 2022FY, leading to an increase in Return on Average Equity (RoAE) of 26.5 percent from 15.6 percent in 2022FY,” said Nneka Onyeali-Ikpe, Managing Director/CEO, Fidelity Bank Plc.
A review of the bank’s financial performance showed that in 2023, Fidelity Bank grew Net Interest Income by 81.6 percent to N277.4 billion, driven by a 55.5 percent increase in interest income, reflecting a steady rise in asset yield throughout the year.
The average funding cost dropped by 20 basis points to 4.4 percent due to increased low-cost funds that grew from 83.6 percent in 2022FY to 97.4 percent in 2023. The combination of higher asset yield and lower funding cost led to an increase in Net Interest Margin (NIM) to 8.1 percent from 6.3 percent in 2022FY.
Similarly, Total Customer Deposits crossed the N4 trillion mark as deposits grew by 55.6 percent from N2.6 trillion in 2022FY. The increase was driven by 81.1 percent growth in low-cost funds.
Despite the challenging operating environment, the bank reaffirmed its devotion to helping individuals grow, inspiring businesses to thrive, and empowering economies to prosper by increasing Net Loans and Advances to N3.1 trillion from N2.1 trillion in 2022FY.
Despite the growth in its loan portfolio, regulatory ratios were maintained well above the required thresholds, with the liquidity ratio at 45.3 percent, up from 39.6 percent in 2022FY, and the capital adequacy ratio (CAR) at 16.2 percent compared to the minimum requirement of 15 percent.
Consistently Paid Dividends Since 2006
Fidelity Bank has consistently paid dividends since 2006. With the final dividend of 60 kobo per share it paid for the year 2023, Fidelity Bank paid investors a total dividend of 85 kobo per share for the reporting period, a 70 percent increase compared to the 50 kobo per share paid to its shareholders in 2022.
“We recognize the changing dynamics in the Nigerian banking space and the need to monitor and proactively manage evolving risks. The proposed final dividend of 60 kobo per share reflects our commitment to strong value creation and returns to our shareholders,” Onyeali-Ikpe said ahead of the dividend payment.
Multiple local and international awards winner
Ranked as one of the best banks in Nigeria, Fidelity Bank is a full-fledged commercial bank with over 8.3 million customers serviced across its 251 business offices in Nigeria and the United Kingdom, as well as on digital banking channels.
The bank has won multiple local and international awards, including the Export Finance Bank of the Year at the 2023 BusinessDay Banks and Other Financial Institutions (BAFI) Awards, Best Payment Solution Provider Nigeria 2023, Best SME Bank Nigeria 2022 by the Global Banking and Finance Awards, Best Bank for SMEs in Nigeria by the Euromoney Awards for Excellence 2023, and Best Domestic Private Bank in Nigeria by the Euromoney Global Private Banking Awards 2023.
Acquisition and recapitalisation of Union Bank UK a done deal
The African Export-Import Bank (Afreximbank) announced on Monday, June 10, that it has disbursed a $40 million Intra-African Investment Facility to Fidelity Bank Nigeria Plc to support the bank’s acquisition and recapitalization of Union Bank UK as part of its international expansion program.
Provided in two tranches of $20 million each, the first tranche enabled Fidelity to partially refinance the acquisition of a 100% equity stake in Union Bank UK, while the second tranche was used to support its recapitalization through the injection of additional equity into the acquired bank, as approved by the United Kingdom’s regulator.
With this acquisition, Fidelity Bank is now able to establish a new pan-African financial institution capable of providing correspondent banking and offshore banking services to banks in Africa and addressing the banking needs of Africans in the diaspora.
Fidelity Bank’s Upcoming Public Offer and Rights Issue: Good Buys for Investors
Recently, Fidelity Bank Plc concluded all necessary arrangements to raise up to N127.1 billion through a Rights Issue to existing shareholders and a Public Offer (the Combined Offer).
The Combined Offer is part of the bank’s strategy to increase its share capital base in compliance with the revised minimum capital requirements for Nigerian commercial banks introduced by the Central Bank of Nigeria (CBN) on March 28, 2024.
Overall, the bank expects that the capital raised will support its efforts to drive sustained growth and diversify its earnings base.
The Signing Ceremony for the Combined Offer was held at the Board Room of Fidelity Bank’s headquarters in Lagos on Wednesday, June 5, 2024.
The bank’s shareholders had already approved the Rights Issue and Public Offer at the Extraordinary General Meeting held on Friday, August 11, 2023. Under the Rights Issue, 3.2 billion ordinary shares of 50 kobo each will be offered at a ratio of 1 new ordinary share for every 10 ordinary shares held as of January 5, 2024, at N9.25 per share. For the Public Offer, 10 billion ordinary shares of 50 kobo each will be offered to the general investing public at N9.75 per share.
Stanbic IBTC Capital is the Lead Issuing House for the Combined Offer, while the Joint Issuing Houses include Iron Global Markets Limited, Cowry Asset Management Limited, Afrinvest Capital Limited, FSL Securities Limited, Futureview Financial Services Limited, Iroko Capital Market Advisory Limited, Kairos Capital Limited, and Planet Capital Limited. The Acceptance and Application lists for the Rights Issue and Public Offer are expected to open on Thursday, June 20, 2024, and close on Monday, July 29, 2024.
At the Signing Ceremony, Nneka Onyeali-Ikpe, Managing Director and Chief Executive Officer of Fidelity Bank Plc, said that the proceeds of the Combined Offer will be applied towards investment in IT infrastructure, business and regional expansion, and investment in product distribution channels.
Oladele Sotubo, Chief Executive of Stanbic IBTC Capital, commended Fidelity Bank’s management team for their commitment to executing the Combined Offer. He lauded their efforts in achieving the CBN’s revised minimum capital requirements for Nigerian commercial banks. He also expressed confidence that the deal would encourage other corporates to tap into the equity capital markets to raise funding for their strategic business needs.
Fitch Ratings Affirms Fidelity Bank’s Positive Future
Recently, Fitch Ratings revised the outlook on Fidelity Bank Plc’s Long-Term Issuer Default Rating (IDR) to positive from stable, while affirming the rating at ‘B-’.
The credit rating agency also affirmed Fidelity Bank’s National Long-Term Rating at ‘A(nga)’ with a stable outlook. Fitch stated that the outlook revision reflects its “expectations that the bank’s capitalization will strengthen in the near term as a result of core capital issuances, including to meet the new paid-in capital requirement of N500 billion for banks with an international license effective by the end of Q1 2026.”
“Fidelity’s IDRs are driven by its standalone creditworthiness, as expressed by its Viability Rating (VR) of ‘b-’. The VR balances the concentration of operations in Nigeria’s challenging operating environment, very high credit concentration, and high Stage 2 loans against a growing franchise, sound profitability metrics, good capital buffers, and reasonable foreign-currency (FC) liquidity coverage.
“Fidelity’s National Ratings are driven by its standalone creditworthiness. They balance a growing franchise and good capital buffers against weaker profitability than higher-rated peers,” the statement reads.
Fitch noted that Fidelity is Nigeria’s sixth-largest bank, accounting for 5% of domestic banking system assets at the end of 2023. The agency added that strong balance-sheet growth in recent years has increased the bank’s market shares, and it expects these to increase further but remain below those of the five largest banking groups.
Fidelity Awarded CG+ Rating at NGX – The Highest Rank Under the Corporate Governance Rating System (CGRS)
Fidelity Bank was recently awarded a CG+ rating, the highest rank under the Corporate Governance Rating System (CGRS), which screens quoted companies against prescribed best practices and standards. The CG+ rating awarded to Fidelity Bank indicates its compliance with the highest corporate governance standards, as the bank adheres promptly to all full disclosure requirements and global best practices.
Godstime Iwenekhai, Head of the Listings Regulation Department at NGX Regulation (NGXRegco), stated that the CGRS was designed to strengthen the governance structures of listed companies and provide a valid basis for discerning investors to differentiate between listed companies based on their compliance with acceptable standards of corporate governance.
After a review of the latest compliance report, which showed that Fidelity Bank sustained its highest-ranking rating of CG+, shareholders and market pundits commended the high corporate standards of the bank.
“In our view, corporate governance promotes ethical business practices, transparency, and fair competition,” Iwenekhai said.
He pointed out that the special character combination CG+ underlined compliance with best practices and highest corporate governance standards, which entitle the rated companies to special privileges at the stock market.
Corporate governance compliance at the stock market includes the prompt submission of detailed operational results from period to period as required by the market rules, full disclosure of all material and regulated information, and accurate rendition of reports and accounts.
Compliance also includes ensuring that the company’s shares are not encumbered in a way that impinges on free float or the number of shares available to the general investing public for efficient price discovery, compliance with all investor-protection safeguards in communication with shareholders, and organizing statutory meetings as required, among others.
The Nigerian Exchange (NGX) noted that the compliance tracker was aimed at maintaining market integrity and protecting investors, highlighting that listed companies are required to adhere to high disclosure standards.
“Financial information, which includes periodic disclosure and ongoing material events disclosure, should be released to NGX in a timely manner to enable it to efficiently perform its function of maintaining an orderly market,” NGX stated, referencing some of the criteria for its corporate governance rating.
Market experts and shareholders agreed that corporate governance compliance is a major factor in deciding to invest in a public company and the safety of such an investment.
For stockbrokers and investors, CG+ rating reassures investors of the safety of their investments in Fidelity Bank
Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management, said corporate governance compliance rating is extremely important as it indicates to the investing public the quality of a company’s compliance with listing requirements.
“As you know, stock prices are driven primarily by available information, and the NGX has a minimum level of disclosure expected of quoted companies. This disclosure helps the public make qualitative decisions about the state or performance of the companies they are seeking to invest in. These markers are therefore the initial indicators as to whether the companies are meeting their disclosure and other regulatory obligations,” said Amolegbe, a former president of the Chartered Institute of Stockbrokers (CIS).
Garba Kurfi, Managing Director of APT Securities & Funds, said the corporate governance rating shows the extent to which companies comply with corporate governance standards.
“A high rating means a company is very good at doing the right thing in a timely manner, while a low rating discourages foreign investors from investing in such companies,” said Kurfi, a leading market operator and member of the board of the Securities and Exchange Commission (SEC).
David Adonri, Managing Director of HighCap Securities, noted that CG+ means an excellent corporate governance rating. “When a company is organized and upholds good corporate governance, the benefit to stakeholders is maximized,” Adonri said.
Bisi Bakare, National Coordinator of the Pragmatic Shareholders Association of Nigeria, said Fidelity Bank has created an excellent impression in the minds of shareholders.
According to her, the bank has continually showcased exemplary leadership with consistently impressive results and successive growth over the past five years.
“Fidelity Bank is a very good bank, and shareholders are very happy with their investments. We have never regretted buying into Fidelity Bank,” Bakare said.
Boniface Okezie, National Coordinator of the Progressive Shareholders Association of Nigeria, said good corporate governance was the cornerstone of Fidelity Bank’s sustained growth and impressive returns over the years.
“Fidelity Bank remains one of the best stocks that investors should look forward to investing in for better returns. I’m very optimistic about the bank’s strong assets. With its good corporate governance and excellent customer service, there is every reason to hope for a more promising future,” Okezie said.
The high dividend nature of shares investment and high free float of Fidelity Bank, which makes the bank’s shares easily available, underline it as a most attractive investment option for all cadres of investors—small, medium, high net worth, retail, and institutional investors.
Comparative analysis showed that Fidelity Bank outperformed all other major market indices, with the bank’s average annual return for the period being twice the average return of the overall market and almost four times the average return in the banking sector.
The All-Share Index (ASI), the common, value-based index that tracks all share prices at the Nigerian Exchange (NGX) and is widely regarded as Nigeria’s benchmark for the equities market, recorded a five-year return of 219.61 percent, an average annual return of 43.9 percent.
Contrary to the significantly above-average performance of Fidelity Bank, the NGX Banking Index, which tracks the banking sector, doubled by 120.53 percent over the five-year period, representing an average annual return of 24.11 percent, more than 77 percentage points below Fidelity Bank’s average return.
Two other major price indices—the NGX 30 Index and NGX Main Board Index—recorded five-year cumulative returns of 185.73 percent and 265.6 percent, respectively, representing average annual gains of 37.15 percent and 53.1 percent, respectively.
David Adonri, Managing Director of HighCap Securities Limited, said the price of any stock in the market is a correct reflection of the market value for the stock.
Aruna Kebira, Managing Director of Globalview Capital Limited, said that the market price of a stock represents the disposition of the investing public to the stock at a given period, noting that there should be consideration for both the market value and the book value or fundamentals of a stock.
“It could be summarized that the market price of a stock is premised on the psychology of the market, the market’s mood, as well as market sentiments,” Kebira said.
Sola Oni, Chief Executive Officer of Sofunix Investment and Communications, said the stock market shows both the current and future prospects of shares.
“Share price reflects the current value of a company but also reveals the future prospects,” Oni said, noting that investment analysts traditionally combine market price and book values to determine the possible outlook of a stock.
For many independent investment research reports, Fidelity Bank was assigned a BUY ticker, a recommendation to investors to consider the potential attractive returns of the bank.
The research reports were based on the historical and current operational performances of the bank as well as the clear-sighted implementation of the bank’s growth plan. The reports also considered the quality of the board and management and the general human capital and resources of the bank.
For instance, the investment advisory reports included those of Afrinvest Group, FSDH Capital, and CardinalStone, among others.
Analysts were unanimous that Fidelity Bank’s share price could double in the period ahead given the professional assessment of top traditional performance parameters, including the company’s operational reports, investors’ preference, and projections.
Already, the interim report and account of the bank for the first quarter ended March 31, 2024, showed that the bank started the current business year on a stronger footing with three-digit growth across key performance indicators.