Fidelity Bank Plc continued its decent run in 2019, recording double-digit growth in gross earnings (+15.87%), driven by growths across its income streams; Interest income (+12.22%) and non-interest income (+13.06%).

Although the average yield on earning assets remained flat at 13.80%, an increase in the value of earning assets pushed interest income to NGN135.12 billion, while non-interest income benefitted from NGN2.42 billion gains on disposal of fixed assets as well as an increase in fees and commission income (+27.83%). The bank also recorded an uptick in its cost of funds (6.70%, Vs. 6.20% in 9M:2018) owing to increased competition for cheap deposits; which led to a decline in its CASA mix to 78.76% (vs. 81.61% in 9M:2018).

Consequently, the Net Interest Margin trended down by 70bps to 6.00%, the lower band of its 2019FY target. The growth in operating income (+14.53%) barely outpaced the growth in operating cost (+14.48%) as the cost to income ratio settled at 71.70%.

Nonetheless, the bank recorded a PAT growth of 20.19% to NGN21.46 billion. Given its aggressive asset expansion, we revised our growth forecast for 2019FY and our forecast lies thus; gross earnings (+14.16%), interest income (+17.14%), non-interest income (+11.30%), and interest expenses (+16.10%).

This  year, the bank has been enjoying writebacks with the reconstruction of some loan facilities, Fidelity bank recorded a loan writeback of NGN1.45 billion in the third quarter, bringing the total writebacks in 2019 to NGN3.29 billion. The writebacks recorded in the year have been effective at bringing the cost of risk within its 2019FY guidance of 1.25%, bringing the bank’s ROE (13.80%) within the reach of its 2019FY ROE guidance of 13%.