BY Desmond Okon
Investors in Fidelity Bank Plc have earned about 406 percent in capital gains over the past five years, ranking above major return benchmarks in the Nigerian stock market and the entire banking sector.
Trading reports at the Nigerian stock market for the five-year period between May 31, 2019 and May 31, 2024, showed that Fidelity Bank outperformed all key indices in the stock market.
Analysis of market data showed that Fidelity Bank’s share price rose by 405.95 percent over the period, representing an average annual capital gain of 81.19 percent.
These returns underscore the bank’s immense value as a stock for all times, helping investors to hedge against inflation while preserving significant long-term value.
Comparative analysis showed that Fidelity Bank outperformed all other major market indices with the bank’s average annual return for the period twice the average return by the overall market and almost four times of average return in the banking sector.
The all share index (ASI) — the common, value-based index that tracks all share prices at the Nigerian Exchange (NGX), which is widely regarded as Nigeria’s benchmark for equities market — recorded a five-year return of 215.83 percent, an average annual return of 43.17 percent.
Contrary to the significantly above average performance of Fidelity Bank, the NGX banking index, which tracks the banking sector, doubled by 118.92 percent over the five-year period.
This represents an average annual return of 23.78 percent, more than 57.4 percentage points below Fidelity Bank’s average return.
Two other major price indices: the NGX 30 Index and NGX Main Board Index, recorded a five-year cumulative return of 182.38 percent and 263.18 percent respectively — representing an average annual gain of 36.48 percent and 52.64 percent respectively.
The NGX 30 Index tracks share prices of the 30 largest companies in the stock market while the NGX Main Board Index represents the largest and most diversified group of listed companies on the stock exchange.
Fidelity Bank is quoted on the main board, like most other major banks and companies on the stock market.
The average annual return of 81.2 percent underlines that Fidelity Bank provides substantial returns for investors, even where such investors had borrowed money at the ruling interest rate and the invested fund was adjusted for the impact of inflation rate.
Nigeria’s inflation rate peaked at a high of 33.69 percent 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 percent.
Fidelity Bank’s share price, which closed May 31, 2019 at N1.68 per share, rose successively to N8.50 per share by the end of May 2024.
The ASI had, during the period, risen from its opening index of 31,069.37 points to close weekend at 98,125.73 points. The NGX Banking Index rose from 361.57 points to 791.54 points.
Similarly, the NGX 30 Index, which opened the period at 1,286.68 points, closed the period at 3,633.28 points. The NGX Main Board Index also appreciated from 1,267.54 points to close at 4,603.49 points.
Market analysts are unanimous that share prices are illustrative of the fundamental values of quoted companies.
David Adnori, the managing director of HighCap Securities Limited, said the price of any stock in the market is a correct reflection of the market value for the stock.
A five-year review of the audited reports and accounts of Fidelity Bank showed a strong correlation between the bank’s upwardly share pricing trend and expansive growth in its business operations.
The bank’s pre-tax profit had risen from N30.35 billion in 2019 to N124.26 billion in 2023, an increase of 309.4 percent. Net profit-after-tax also grew by 203.3 percent from N42.80 billion in 2019 to N129.80 billion in 2023. Earnings per share have risen successively from 98 kobo in 2019 to N3.11 per share in 2023.
The bank’s balance sheet had expanded by 195.26 percent from N2.11 trillion in 2019 to N6.23 trillion in 2023, the fastest growth in the industry. Customers’ deposits, which underlines the competitive market share, more than tripled from N1.225 trillion in 2019 to N4.01 trillion in 2023, indicating an increase of 227.35 percent. Shareholders’ funds had also grown from N234.03 billion to N437.31 billion.
Market pundits expected Fidelity Bank’s share price to continue to rise, citing several factors that illustrated the upside potential for the stock.
In addition, independent investment research reports by many market pundits showed that Fidelity Bank was assigned a “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 the 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 the professional assessment of top traditional performance parameters including the company’s operational reports, investors’ preference and projections.
Already, the interim report and account of the bank for the first quarter ended March 31, 2024, showed that the bank started the current business year on a stronger footing with three-digit growths across key performance indicators.
The three-month report, released at the NGX, showed that gross earnings increased by 89.9 percent to N192.1 billion in the first quarter (Q1) of 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 percent and non-interest income growing by 84 percent in Q1.
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 percent to N39.5 billion in Q1 of 2024 as against N17.9 billion in the same quarter in 2023. The bank’s performance was driven by expanding market share with total deposit rising by 17 percent within the three months to N4.7 trillion, compared with N4 trillion recorded at the end of 2023.
The bank also increased its support for national economic growth with net loans and advances rising by 21 percent from N3.1 trillion at the end of 2023 to N3.7 trillion by March 2024.
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