Fidelity Bank: On the Path to Becoming Global Lender
Chigozie Amadi
The ongoing N127 billion capital raising exercise, Fidelity Bank Plc is eying new opportunities and is on the path to better performance as a global lender
The management of Fidelity Bank Plc since 2023 got shareholders’ approval to raise additional capital before the Central Bank of Nigeria (CBN) official announcement in March 2024.
The bank on June 20, 2024 commenced its Public Offer of 10,000,000,000 ordinary shares of 50 kobo each at N9.75 per share and Rights Issue of 3,200,000,000 ordinary shares of 50 kobo each at N9.25 per share.
This will translate into N127.10 billion fresh capital once the offer comes to an end July 29, 2024.
The additional capital will bring Fidelity Bank’s outstanding capital to 45.2 billion, ahead of Zenith Bank and Guaranty Trust Holdings Company Plc that currently have 31.39billion and 29.43billion outstanding shares on the Nigerian Exchange Limited (NGX), respectively.
The capital is purposefully meant to increase the lender’s capital base, upgrade Information Technology (IT) infrastructure, business and regional expansion, and improve product distribution channels.
Addressing capital market community on the new capital exercise, at the Nigerian Exchange Limited (NGX) week, Managing Director(Chief Executive Officer(CEO), Fidelity Bank, Dr. Nneka Onyeali-Ikpe, explained that the new capital raising was driven by its proactive business expansion plan having secured shareholders’ approval to raise new equity funds as early as August 2023.
“The offer will increase our capacity to support our customers and their businesses. In summary, this capital raise will help our customers to grow, their businesses to thrive, and their economy to prosper,” Onyeali-Ikpe said.
She assured all stakeholders that with its groundswell of supports from enthusiastic shareholders, customers and stakeholders, the bank is on course to achieving the N500 billion new minimum capital base, which will clearly confirm the bank, beyond any doubt, as one of the biggest banks in Nigeria.
Onyeali-Ikpe noted that being the first bank to launch offer out of the many banks in Nigeria after the CBN’s directive, Fidelity Bank has shown again to be a pace-setter.
According to her, Fidelity Bank sees the CBN recapitalisation directive as a significant opportunity for a stronger and more resilient banking industry.
“We have embraced the challenge as a catalyst to propel us, towards a long-term vision of becoming a market leader across every product that we offer and segment that we sell, not just in Nigeria, but as an international bank,” Onyeali-Ikpe said.
She said the proceeds of the N127.10 billion capital raising exercise would be instrumental in achieving its strategic growth plan.
She highlighted that the funds, firstly, would be deployed to drive, business growth and regional expansion.
“We will strategically expand our footprints within and outside Nigeria to serve as a broader customer base and to unlock new market opportunities.
“Secondly, we will have what we call technological transformation. We are committed to leveraging proprietary technology to improve operational efficiency and deliver exceptional customer service.
“Thirdly, we intend to diversify and grow. By investing in information technology (IT) infrastructure and product distribution channels, we will aim to diversify our earnings base through digitalization and business expansion,” Onyeali-Ikpe said.
She said the management recognised the importance of investors and are committed to delivering value to them as well.
“Our track record of accelerated growth and consistent dividend payment is a testament to this,” Onyeali-Ikpe said.
Speaking also, the Executive Director, Fidelity Bank, Mr. Stanley Amuchie, in a presentation, said the commercial bank has a strong market positioning in the Nigerian banking industry, stressing that notwithstanding the significant changes in the competitive landscape of the Nigerian banking sector, it has continued to perform well.
On rationale for the offer, he expressed that “due to the advances in technology and rapid evolution of banking business, it is imperative that Fidelity Bank is properly positioned to remain a competitive and forward-looking institution.”
According to him, Fidelity Bank is seeking to undertake landmark projects and business initiatives that would redefine its business structure, diversify earnings base and grow market share in the real sector of the economy.
“Fidelity Bank plans to capitalise on the vast opportunities available in Nigeria by expanding its existing domestic business.
“The bank aspires to expand its service touch points to select African countries, taking a cautious but value driven approach towards foreign market entry.
“Fidelity Bank is committed to its strategic plan of providing straight-through services that meet and exceed the needs of its growing clientele” he added on the rationale f behind the N127.10 billion capital raising exercise.
He stated that the bank remains focused on growing its reach within and beyond Nigeria, amplified by the acquisition of Union Bank UK Plc.
“Sustained year-on-year growth in asset base, revenue and profit; increased capital will guarantee sustained growth and shareholder return,” he added.
Fidelity Bank’s Growth Trajectory
Fidelity Bank over the years has sustained growth momentum in top to bottom line performance profit and rewarded shareholders with robust dividend payout.
In 2023 full year, for instance, the bank declared N556billion gross earnings, representing an increase of 170 per cent from N206 billion declared in 2020FY. Also, profit before tax moved from N28 billion in 2020FY to N124 billion, representing an increase of 343per cent.
In terms of assets, Fidelity Bank has seen its total deposits from N1,699billion in 2020 to N4,015billion in 2023, while net loans crossed the N3 trillion mark to N3,092 billion in 2023 from N1,326billion reported in 2020.
The three-month report, released at the NGX, showed that gross earnings increased by 89.9 per cent to N192.1 billion in first quarter (Q1) 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 Q1 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 Q1 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.
Fidelity Bank’s Stock Price Performance
A recent analysis has shown that lender’s outperformed all major market indices for measuring returns at the stock market, with the bank’s average annual return over the past five years twice the average return by the overall market and almost four times of average return in the banking sector.
A review of official trading reports at the Nigerian stock market showed that investors in Fidelity Bank have earned more than 507 per cent in capital gains over the past five years, between May 31, 2019 and May 31, 2024
Fidelity Bank’s share price rose by 507.14 per cent over the period, representing average annual capital gain of 101.43 per cent. This significantly exceeds all other major return benchmarks, including the banking sector.
With 507 per cent capital gain in five years and average annual gain of more than 100 per cent, the return analysis implies that investment in Fidelity Bank is more attractive than other class of assets, including fixed-income securities such as government and corporate bonds; real estate investment and mutual funds among others.
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.
The high divisible nature of shares investment and high free float of Fidelity Bank, which makes the bank’s shares easily available, underline the bank as a most attractive investment option for all cadres of investors- small, medium and high networth; retail and institutional investors.
The All Share Index (ASI) – the common, value-based index that tracks all share prices at the NGX, which is widely regarded as Nigeria’s benchmark for stock market, recorded a five-year return of 219.61 per cent, an average annual return of 43.9 per cent.
Contrary to the significantly above average performance of Fidelity Bank, the NGX Banking Index-which tracks the banking sector, doubled by 120.53 per cent over the five-year period, representing average annual return of 24.11 per cent, more than 77 percentage points below Fidelity Bank’s average return.
Fidelity Bank is quoted on the main board, like most other major banks and companies at the stock market.
The average annual return of 101.43 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.
