Economy

Fidelity Bank investors earn 406% gain in 5 years

Published

6 months ago

June 2, 2024

Investors in Fidelity Bank Plc earned about 406 per cent in capital gains over the past five years, ranking above other major return benchmarks at the Nigerian stock market and the banking sector.

Trading reports covering May 31, 2019 to May 31, 2024 showed that its share price rose by 405.95 per cent, an average annual capital gain of 81.19 per cent. These returns underscore Fidelity Bank’s immense value as a stock for all times, helping investors to hedge against inflation while preserving significant long-term value.

Comparative analysis showed that Fidelity Bank outperformed all other major market indices with the bank’s average annual return for the period twice the average return by the overall market and almost four times of 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), which is widely regarded as Nigeria’s benchmark for the equities market, recorded a five-year return of 215.83 per cent, an average annual return of 43.17 per cent.

Contrary to the significantly above average performance of Fidelity Bank, the NGX Banking Index-which tracks the banking sector, doubled by 118.92 per cent over the five-year period, representing average annual return of 23.78 per cent, more than 57.4 percentage points below the bank’s average return.

Two other major price indices – the NGX 30 Index and NGX Main Board Index – recorded five-year cumulative returns of 182.38 per cent and 263.18 per cent, representing average annual gain of 36.48 per cent and 52.64 per cent respectively.

The NGX 30 Index tracks share prices of the 30 largest companies at the stock market while the NGX Main Board Index represents the largest and most diversified group of listed companies at the stock exchange. Fidelity Bank is quoted on the main board, like most other major banks and companies at the stock market.

The average annual return of 81.2 per cent underlines that Fidelity Bank provides substantial return for investors, even where such investors had borrowed money at the ruling interest rate and the invested fund was adjusted for impact of inflation rate.

Nigeria’s inflation rate peaked at a high of 33.69 per cent in April 2024 while the Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) recently increased the Monetary Policy Rate (MPR), otherwise known as benchmark interest rate, to 26.25 per cent.

Fidelity Bank’s share price, which closed May 31, 2019 at N1.68 per share, rose successively to N8.50 per share by the end of May 2024. The ASI had, during the period, risen from its opening index of 31,069.37 points to close weekend at 98,125.73 points.

The NGX Banking Index rose from 361.57 points to 791.54 points. The NGX 30 Index, which opened the period at 1,286.68 points, closed the period at 3,633.28 points. The NGX Main Board Index appreciated from 1,267.54 points to close at 4,603.49 points.

Market analysts are unanimous that share prices are illustrative of the fundamental values of quoted companies. Managing Director, HighCap Securities Limited, Mr. David Adnori, said the price of any stock in the market is a correct reflection of the market value for the stock.

Five-year review of the audited reports and accounts of Fidelity Bank showed strong correlation between the bank’s upwardly share pricing trend and expansive growth in its business operations. Pre-tax profit rose from N30.35 billion in 2019 to N124.26 billion in 2023, an increase of 309.4 per cent.

Net profit after tax also grew by 203.3 per cent from N42.80 billion in 2019 to N129.80 billion in 2023. Earnings per share has risen successively from 98 kobo in 2019 to N3.11 per share in 2023. Book balance expanded by 195.26 per cent from N2.11 trillion in 2019 to N6.23 trillion in 2023, within the fastest growth in the industry.

Customers’ deposits, which underlines the competitive market share, more than tripled from N1.225 trillion in 2019 to N4.01 trillion in 2023, an increase of 227.35 per cent. Shareholders’ funds had also grown from N234.03 billion to N437.31 billion.

Independent investment research reports by many market pundits showed that Fidelity Bank was assigned a “buy” ticker, a recommendation to investors to consider its potential attractive returns. The reports were based on the bank’s historical and current operational performances, and clear-sighted implementation of its growth plan.

The reports also considered the quality of board and management and the general human capital and resources of the bank. The investment advisory reports included those of Afrinvest Group, FSDH Capital and CardinalStone among others.

Analysts say Fidelity Bank’s share price could double in the period ahead given professional assessment of top traditional performance parameters including the company’s operational reports, investors’ preference and projections.

The interim report and account for the first quarter ended March 31, 2024 showed that the bank started the current business year on stronger footing with three-digit growths across key performance indicators.

The three-month report, released at the NGX, confirmed gross earnings increased by 89.9 per cent to N192.1 billion in Q1 2024. Top-line performance continued to be driven by broad-based growth across income lines with interest income rising by 90.7 per cent and non-interest income growing by 84 per cent in Q1 2024.

Growth in interest income was spurred by a higher yield environment and strong earning assets base, while the increase in non-interest income was led by double-digit growth in account maintenance charges, foreign exchange (forex)-related income, trade, banking services, remittances, and increased customer transactions.

Profit before tax doubled by 120 per cent to N39.5 billion in Q1 2024 as against N17.9 billion in Q1 2023. The performance was also driven by expanding market share with total deposits rising by 17 per cent within the three months to N4.7 trillion, compared with N4 trillion recorded at the end of 2023.

The leading financial institution also increased its support for national economic growth with net loans and advances rising by 21 per cent from N3.1 trillion at the end of 2023 to N3.7 trillion by March 2024.

Economy

FG services foreign debt with $3.5bn

Published

4 days ago

November 13, 2024

Kayode Sanni-Arewa

The Federal Government spent $3.58 billion servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.

This is according to data from the Central Bank of Nigeria on international payment statistics.

The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.

Data from CBN’s international payment statistics reveal that the highest monthly debt servicing payment in 2024 occurred in May, amounting to $854.37m.

In comparison, the highest monthly expenditure in 2023 was $641.70m, recorded in July. The sharp contrast in May’s figures between the two years ($854.37m in 2024 versus $221.05m in 2023) highlights the rising cost of debt obligations, as Nigeria battles massive devaluation of the naira.

The CBN showed significant month-on-month changes in debt servicing costs, with some months recording sharp increases compared to the previous year. A breakdown of the data revealed varied trends across the nine months.

In January 2024, debt servicing costs surged by 398.89 per cent, rising to $560.52m from $112.35m in January 2023. February, however, saw a slight decline of 1.84 per cent, with payments reducing from $288.54m in 2023 to $283.22m in 2024.

March recorded a 31.04 per cent drop in payments, falling to $276.17m from $400.47m in the same period last year. April saw a significant rise of 131.77 per cent, with $215.20m paid in 2024 compared to $92.85m in 2023.

The highest debt servicing payment occurred in May 2024, when $854.37m was spent, reflecting a 286.52 per cent increase compared to $221.05m in May 2023. June, on the other hand, saw a 6.51 per cent decline, with $50.82m paid in 2024, down from $54.36m in 2023.

July 2024 recorded a 15.48 per cent reduction, with payments dropping to $542.50m from $641.70m in July 2023. In August, there was another decline of 9.69 per cent, as $279.95m was paid compared to $309.96m in 2023. However, September 2024 saw a 17.49 per cent increase, with payments rising to $515.81m from $439.06m in the same month last year.

The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.

The global credit ratings agency, Fitch, recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.

This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.

It also estimated that approximately 30 per cent of Nigeria’s external reserves are constituted by foreign exchange bank swaps.

Regarding external debt, the agency said external financing obligation