CardinalStone Research
Fidelity Bank Plc (FIDELITYBK: NGSE) recorded a 1.4% YoY decline in earnings in its unaudited Q1’20 result. The bank’s weak performance reflected the combined impact of higher operating costs (+29.6% YoY), the surge in loan loss charges (2x increase), and lower non-interest revenue (-27.4% YoY).
Pressures from the mentioned income statement items offset the 48.8% YoY growth in net interest income during the review quarter. Annualised ROE was 9.8% (December: 13.3%).
Highlights:
- Net interest income surged 48.8% YoY, supported by higher interest income (+11.4% YoY) and falling interest expenses (-15.6% YoY). The growth in interest income relates to increased income from loans and advances (+16.4% YoY), in line with the 19.0% YoY loan growth. Similarly, the lower interest expenses reflected the 36.7% YoY and 18.7% YoY declines in interest costs on term deposits and debt securities respectively
- Non-interest income weakened 27.4% YoY, dragged by lower fees and commission income (-27.5% YoY), and net FX gains (-35.6% YoY). Among others, the decline in fees and commission reflects 34.5% YoY and 13.4% YoY fall in E-Banking and ATM fees respectively. These pressures may have been impacted by the recent review of fees by the CBN
- Operating expenses rose 29.6% YoY leading to a jump in cost to income to 71.3% from 68.4% in Q1’19. Loan loss provisions also increase two-fold to N2.1 billion, leading to a higher cost of risk of 0.7% compared to 0.4% in Q1’19
- Gross loans and advances to customers increased by 3.5% during the quarter. NPL ratio also rose to 4.7% from 3.3% in December 2019. Also, deposits rose 10.4%, with low-cost deposits accounting for 78.8% compared to 79.8% in December 2019
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