Fidelity Bank’s Reclassification Sets Stage for Tier 1 Aspirations

By Jemimah Wellington, JKNMedia Reporter

THE Nigerian Exchange Limited (NGX) made waves in July 2023 when it announced the reclassification of Fidelity Bank Plc from a small-price stock to a medium-price stock.

This move stirred the interest of financial analysts who speculated that the bank’s path to Tier 1 status might be closer than anticipated.

In 2022, Fidelity Bank experienced a brief stint in the Tier 1 category, boasting the highest gross earnings of N337.10 billion and a profit before tax of N53.68 billion.

Its robust financial performance, marked by higher interest income compared to interest expense, yielded a net interest margin of 7.70 per cent, outperforming similar banks.

The bank’s strong financial position was evidenced by its leading total assets of N3.99 trillion in 2022 and a relatively low non-performing loan (NPL) ration of 2.90 per cent, positioning it favourably among Tier 2 banks.

Despite grappling with operating costs, Fidelity Bank showcased resilience, boasting the second-lowest cost-to-income ration (CIR) among Tier 2 banks at 59.00 per cent in FY 2022.

Proshare analysts projected Fidelity Bank’s ascent to full Tier 1 status in the next review, citing its leading performance in various metrics including gross earnings, profitability, total assets, customer deposits, and loans and advances.

In 9M 2023, Fidelity Bank witnessed a rise in its non-performing loan ration (NPLR) to 3.54 per cent, albeit showing an improvement in its cost-to-cost-to-income ration (CIR) which settled at 49.86 per cent.

By the close of 2023, the bank’s total assets surged to N6.2 trillion, solidifying its position as the fifth-best banking stock on the NGX with a share price of N10.85 and a market capitalization of N347.3 billion.

Fidelity Bank’s commendable financial performance was underscored by a net income of N91.8 billion, reflecting a significant 162.46% year-on-year growth.

In line with its consistent performance, Fidelity Bank emerged as one the top performance on the NGX alongside FCMB and FBN Holdings, according to research analyzing the performance of Nigeria’s largest commercial banks.

The NGX’s reclassification of Fidelity Bank was prompted by its sustained trading above the N500 mark since February 2023, in compliance with the Rule 15.29 of the Exchange’s Rulebook.

The bank’s share price trajectory has been marked by volatility, with significant upward movement over the years. Analysis attribute this to Fidelity Bank’s robust earnings growth and financial performance, driving demand for its shares.

Stakeholders, including analysts and shareholder associations, lauded Fidelity Bank’s performance, expressing optimism about its future prospects and potential to meet regulatory requirements for Tier 1 status.

A statement issued notes that as Fidelity Bank continues to chart its course towards Tier 1 status, investors and industry observers remain keenly attuned to its performance and strategic initiatives, anticipating further milestones in its journey of growth and expansion in Nigeria’s banking landscape.

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