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Banking Sector

Analysts Place “Buy” on Fidelity Bank

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fidelity bank - Investors King

Highly-rated, independent investment advisory firms have picked Fidelity Bank as a very attractive stock with potential to generate high returns for investors.

Independent investment research reports by many market pundits reviewed at the weekend showed that Fidelity Bank was assigned “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 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 were unanimous that 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.

CardinalStone stated that Fidelity Bank’s share price could double citing the bank’s “robust earnings growth” and the increasing profitability of its core banking operations.

After an extensive review of the global and domestic stock markets, FSDH Capital selected Fidelity Bank as one of the “FSDH Top Picks”, a group of stocks that the investment advisory firm considered to be most attractive for discerning investors. FSDH Capital’s stock selection considered a stock’s pricing history, dividend history, fundamental values and peer ratios among others.

Providing background on analysts’ exhaustive research for stock selection, Afrinvest explained that the company’s fair value estimate “takes into account a weighted average of price estimates derived from a blend of valuation methodologies including the Discounted Cash Flow (DCF) and its variants as well as other relative and comparable trading multiples valuation models”.

“However, we attach the most weight to DCF valuation methodology, particularly the Dividend Discount Model (DDM), Free Cash Flow (FCF) model and Residual Income Valuation/Model (RIV/RIM). The utilization of comparable trading multiples is guided by the analysts’ understanding of the banks’ fundamentals, as well as key price drivers from the firm, industry and macroeconomic perspectives,” Afrinvest stated.

The “buy” rating, according to analysts, implies that “the expected total return over the next 12 months is 25 per cent or more. Investors are advised to take positions at the prevailing market price as at the report date”.

Afrinvest projected that Fidelity Bank, with a dividend yield of 9.3 per cent, has price upside potential of more than 35 per cent. This effectively makes the stock an inflation-hedging stock, implying that investors in the bank’s shares can retain money value despite the current inflationary environment.

Futureview Group said Fidelity Bank’s recent operational reports highlighted the bank’s “excellent operational performance and the breadth of its income sources”.

The audited report and accounts of Fidelity Bank for the year ended December 31, 2023 had shown that gross earnings rose by 65 per cent to N555.83 billion. The top-line performance was driven by significant growths across income lines including 55 per cent growth in interest income, 562 per cent increase in other operating income and 44 per cent growth in fee and commission income.

The bottom-line fared better with net profit after tax rising by 99 per cent to N99.46 billion in 2023.  Earnings per share (EPS) thus jumped by 93 per cent to N3.11, providing a strong buffer for the bank to increase dividend payout without undermining its sustainability.

Interim report and account of the bank for the first quarter ended March 31, 2024 also 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 Nigerian Exchange (NGX), showed that gross earnings increased by 89.9 per cent to N192.1 billion in first quarter 2024. The bank’s top-line performance continued to be driven by broad-based growths across income lines with interest income rising by 90.7 per cent and non-interest income growing by 84 per cent in first quarter 2024.

Growth in interest income was primarily 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, and remittances, supported by increased customer transactions.

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

Managing Director, Fidelity Bank Plc, Nneka Onyeali-Ikpe said the bank’s performance was due to its strategic focus on customer-centricity, digital innovation and operational excellence.

“Despite the challenging macroeconomic environment, we remained resilient and agile, delivering double-digit growth on key income lines while advancing our business sustainability agenda.

“Beginning the year on this inspiring note reaffirms our strategy of helping individuals to grow, inspiring businesses to thrive and empowering economies to prosper. We are committed to our guidance as we build a more resilient business franchise with a well-diversified earnings base in 2024,” Onyeali-Ikpe said.

Ranked as one of the best banks in Nigeria, Fidelity Bank is a full-fledged customer commercial bank with over 8.5 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, the Best Payment Solution Provider Nigeria 2023 and 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.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

Financial Institutions Racked Up N678m in Fines Last Year

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Retail banking

Financial institutions in Nigeria paid a total of N678 million in fines in the 2023 financial year, according to analysis of their various financial statements.

The analysis examined the annual reports of nine prominent financial groups, including FBN Holdings, Access Holdings, Guaranty Trust Holding Company, Zenith Bank Plc, United Bank for Africa Plc, Fidelity Bank, Wema Bank, Stanbic IBTC Holdings, and FCMB Group.

These reports provided insights into the fines imposed by various regulatory authorities, including the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), the National Insurance Commission, and others.

Compared to the previous year, the total amount of fines paid by these institutions decreased significantly by 89.25% from N6.31 billion in 2022 to N678 million in 2023.

This decline reflects improved regulatory compliance among financial institutions and signals a positive trend toward greater adherence to established guidelines and standards.

Among the financial groups analyzed, Zenith Bank stood out for its increase in penalties compared to the previous year. While the bank had incurred no fines in 2022, it paid N21 million in penalties in 2023.

The penalties levied against Zenith Bank included fines for late rendition of CBN returns, unauthorized employment practices, outstanding auditor recommendations, and compliance checks on politically exposed persons.

Similarly, FBN Holdings reported a decrease in fines paid during the period, totaling N17.26 million compared to N26 million in the previous year.

The fines imposed on FBN Holdings were related to late submission of audited financial statements and non-compliance with regulatory reporting requirements.

Access Holdings also experienced a significant reduction in penalties, with fines decreasing from approximately N604 million in 2022 to N81.60 million in 2023.

Despite the decrease, Access Holdings incurred fines from various regulatory bodies, including the CBN, PenCom, and NGX RegCo, for infractions such as unauthorized advertising, data recapture sanctions, and late filing of financial statements.

Other financial institutions, such as GTCO, UBA Group, Fidelity Bank, Wema Bank, Stanbic IBTC Holdings, and FCMB Group, also reported fines for various regulatory violations, including breaches of transaction rules, late submission of reports, and non-compliance with industry regulations.

The significant decrease in fines paid by financial institutions in 2023 reflects the industry’s commitment to improving regulatory compliance and upholding best practices.

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Banking Sector

CBN Governor Vows to Tackle High Inflation, Signals Prolonged High Interest Rates

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Central Bank of Nigeria - Investors King

The Governor of the Central Bank of Nigeria (CBN), Dr. Olayemi Cardoso, has pledged to employ decisive measures, including maintaining high interest rates for as long as necessary.

This announcement comes amidst growing concerns over the country’s soaring inflation rates, which have posed significant economic challenges in recent times.

Speaking in an interview with the Financial Times, Cardoso emphasized the unwavering commitment of the Monetary Policy Committee (MPC) to take whatever steps are essential to rein in inflation.

He underscored the urgency of the situation, stating that there is “every indication” that the MPC is prepared to implement stringent measures to curb the upward trajectory of inflation.

“They will continue to do what has to be done to ensure that inflation comes down,” Cardoso affirmed, highlighting the determination of the CBN to confront the inflationary pressures gripping the economy.

The CBN’s proactive stance on inflation was evident from the outset of the year, with the MPC taking bold steps to tighten monetary policy.

The committee notably raised the benchmark lending rate by 400 basis points during its February meeting, further increasing it to 24.75% in March.

Looking ahead, the next MPC meeting, scheduled for May 20-21, will likely serve as a platform for further deliberations on monetary policy adjustments in response to evolving economic conditions.

Financial analysts have projected continued tightening measures by the MPC in light of stubbornly high inflation rates. Meristem Securities, for instance, anticipates a further uptick in headline inflation for April, underscoring the persistent inflationary pressures facing the economy.

Despite the necessity of maintaining high interest rates to address inflationary concerns, Cardoso acknowledged the potential drawbacks of such measures.

He expressed hope that the prolonged high rates would not dampen investment and production activities in the economy, recognizing the need for a delicate balance in monetary policy decisions.

“Hiking interest rates obviously has had a dampening effect on the foreign exchange market, so that has begun to moderate,” Cardoso remarked, highlighting the multifaceted impacts of monetary policy adjustments.

Addressing recent fluctuations in the value of the naira, Cardoso reassured investors of the central bank’s commitment to market stability.

He emphasized the importance of returning to orthodox monetary policies, signaling a departure from previous unconventional approaches to monetary management.

As the CBN governor charts a course towards stabilizing the economy and combating inflation, his steadfast resolve underscores the gravity of the challenges facing Nigeria’s monetary authorities.

In the face of daunting inflationary pressures, the commitment to decisive action offers a glimmer of hope for achieving stability and sustainable economic growth in the country.

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Banking Sector

NDIC Managing Director Reveals: Only 25% of Customers’ Deposits Insured

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Retail banking

The Managing Director and Chief Executive Officer of the Nigeria Deposit Insurance Corporation (NDIC), Bello Hassan, has revealed that a mere 25% of customers’ deposits are insured by the corporation.

This revelation has sparked concerns about the vulnerability of depositors’ funds and raised questions about the adequacy of regulatory safeguards in Nigeria’s banking sector.

Speaking on the sidelines of the 2024 Sensitisation Seminar for justices of the court of appeal in Lagos, themed ‘Building Strong Depositors Confidence in Banks and Other Financial Institutions through Adjudication,’ Hassan shed light on the limited coverage of deposit insurance for bank customers.

Hassan addressed recent concerns surrounding the hike in deposit insurance coverage and emphasized the need for periodic reviews to ensure adequacy and credibility.

He explained that the decision to increase deposit insurance limits was based on various factors, including the average deposit size, inflation impact, GDP per capita, and exchange rate fluctuations.

Despite the coverage extending to approximately 98% of depositors, Hassan underscored the critical gap between the number of depositors covered and the value of deposits insured.

He stressed that while nearly all depositors are accounted for, only a quarter of the total value of deposits is protected, leaving a significant portion of funds vulnerable to risk.

“The coverage is just 25% of the total value of the deposits,” Hassan affirmed, highlighting the disparity between the number of depositors covered and the actual value of deposits within the banking system.

Moreover, Hassan addressed concerns about moral hazard, emphasizing that the presence of uninsured deposits would incentivize banks to exercise market discipline and mitigate risks associated with reckless behavior.

“The quantum of deposits not covered will enable banks to exercise market discipline and eliminate the issue of moral hazards,” Hassan stated, suggesting that the lack of full coverage serves as a safeguard against irresponsible banking practices.

However, Hassan’s revelations have prompted calls for greater regulatory oversight and transparency within Nigeria’s financial institutions. Critics argue that the current level of deposit insurance falls short of providing adequate protection for depositors, especially in the event of bank failures or financial crises.

The disclosure comes amid ongoing efforts by regulatory authorities to bolster depositor confidence and strengthen the resilience of the banking sector. With concerns mounting over the stability of Nigeria’s financial system, stakeholders are urging for proactive measures to address vulnerabilities and enhance consumer protection.

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