Net interest income of N20.1billion, down 4.7% q/q; up 5.3% y/y
Non-interest income of N5.5billion, down 12.7% q/q, down 9.4% y/y
Profit before tax of N7.1billion, down 12.4% q/q; up 17.2% y/y
Profit after tax of N6.3billion, down 10.0% q/q; up 15.9% y/y
Fidelity Bank released its Q3 2018 results on Friday, where it reported a 12.4% and 10.0% q/q decline in PBT and PAT respectively on the back of a 4.7% q/q decline in net interest income, a 12.7% q/q decrease in non-interest income and a 2.0% q/q rise in total expenses, despite a 63.0% q/q decline in loan impairment charges.
However, on a y/y basis for the 9M ending 30th September 2018, PBT and PAT were both up 23.6% respectively, attributable to an 8.1% y/y rise in net interest income and a 55.1% y/y decline in impairment charges, which offset the 6.2% decline in non-interest income and the 6.5% y/y increase in total expenses.
Net-Interest Income Dips Despite Credit Growth
Despite a 4.4% q/q rise in net loans, the bank recorded a 4.7% q/q decline in net interest income to N20.1billion, reflective of the lower yield environment we saw in Q3 2018; a trend we have continued to see across banking names under our coverage. However, as cost of funds came in 40bps lower q/q at 6.2%, the Bank’s Net Interest Margin came in 20bps higher q/q to 6.7%.
Furthermore, on a y/y basis, the bank recorded an 8.1% increase in net interest income, as interest income rose 9.1% y/y to N120.4billion, largely due to some reclassified credit related fees of c.N3.8billion into interest income in Q3 2018. This was more than enough to offset the 10.0% y/y rise in interest expenses.
Non-Interest Income Disappoints
On the back of marginal drop in fee and commission income and an even worse 16.1% q/q rise in fee and commission expense and a 32.8% q/q decline in other operating income, Fidelity Bank’s non-interest income dropped 12.7% q/q.
Similarly, on a y/y basis, non-interest income declined 6.2% to c.N16billion, due to the 40.5% y/y drop in other operating income and the reclassification done to net interest income.
Lower Impairment Charges; Higher Operating Expenses
In an apparent trend across banking names, impairment charges were down 63.4% q/q. An action attributed to the improvement in macro-economic conditions witnessed in the telecommunications and oil & gas downstream sectors. The bank’s NPL ratio dropped 10bps q/q to 6.0%. Similarly, Cost of Risk (CoR) also dropped 20bps q/q to 0.5%. Both ratios remain well within the bank’s target range of 6%-6.5% for NPL and 1.25% for its CoR.
Elsewhere, cost to income ratio was up 70bps q/q to 68.4%, riding on the back of a 2.0% q/q increase in total expenses due to a 15.1% q/q increase in personnel expenses and the presence of some AMCON charges taken during the quarter. Notwithstanding, the bank’s cost to income ratio remains within management’s guidance of ˜ 70% in FYE 2018.
Nevertheless, on a y/y basis, impairment charges were down 55.1% to N3.3billion, while total expenses rose 6.5%. The former, coupled with other income lines above, contributed to the 23.6% y/y rise in both PBT and PAT respectively.
Fidelity remains our one of our top picks among tier II names, with a Capital Adequacy Ratio of 17.0% and ROE of 13.9%.
FIDELITY BANK PLC Q3 2018/9M 2018 (YE: DEC) (N millions)
Q3 2018
Q/Q
Y/Y
9M 2018
Y/Y
Interest Income
40,352
-3.0%
7.6%
120,399
9.1%
Interest Expense
-20,242
-1.2%
10.0%
-62,231
10.0%
Net Interest Income
20,110
-4.7%
5.3%
58,168
8.1%
Non-interest income
5,502
-12.7%
-9.4%
15,993
-6.2%
Profit before provisions
25,612
-6.6%
1.7%
74,161
4.7%
Loan Impairment charges
-692
-63.4%
-72.5%
-3,285
-55.1%
Operating Expenses
-17,897
2.0%
7.9%
-50,556
6.5%
PBT
7,052
-12.4%
17.2%
20,064
23.6%
Tax
-776
-27.9%
28.7%
-2,207
23.6%
Tax rate
11.0%
-236.2bps
98.4bps
11.0%
0.0bps
PAT
6,276
-10.0%
15.9%
17,857
23.6%
Source: Company financials, Investment One Financial Services Research
9M 2018 BANKS COMPARISON SHEET
NGN billion (unless stated otherwise)
FIDELITY
FBNH
ACCESS
ZENITH
GTB
UBA
Key Income Statement Figures
Gross Earnings
139.0
441.5
375.2
474.6
337.3
374.8
Net Interest Income
58.2
221.5
122.9
228.5
170.6
150.7
Non-interest Income
16.0
93.2
100.4
135.5
97.2
87.7
Total Expenses
-50.6
-184.5
-144.7
-182.4
-101.8
-149.1
Loan Impairment Charges
-3.3
-76.2
-8.3
-14.3
-1.8
-10.7
Profit Before Tax
20.1
51.34
70.3
167.3
164.2
79.1
Y/Y PBT Growth
23.60%
-7.40%
-3.60%
9.70%
9.50%
1.30%
Dividend (Kobo per share)
nil
nil
nil
nil
nil
nil
EPS (kobo per share)
80
162
69
458
503
172
Key Balance Sheet Figures
Total Assets
1,681
5,348
4,555
5,618
3,213
4,507
Total Liabilities
1,488
4,652
4,082
4,840
2,631
3,998
Total Equity
192
696
473
778
582
509
Key Ratios
Net Interest Margin
6.70%
7.70%
5.30%
9.65%
8.60%
5.90%
Cost of Fund
6.20%
3.60%
5.60%
3.30%
n/a
n/a
Cost to Income
68.40%
59.50%
64.80%
50.10%
38.30%
62.50%
NPL ratio
6.00%
19.80%
4.70%
4.90%
5.60%
7.00%
Liquidity (bank level)
38.30%
42.20%
44.20%
72.00%
n/a
43.90%
Cost of Risk
0.50%
4.50%
0.50%
0.90%
0.10%
0.80%
Capital adequacy ratio (bank level)
17.00%
17.40%
20.30%
21.00%
n/a
n/a
ROE
13.90%
8.70%
17.00%
23.00%
32.70%
15.70%
ROA
nil
1.10%
1.90%
3.40%
5.60%
1.80%
Source: Company financials, Investment One Financial Services Research
