Fidelity Bank Loses 25% of Its Market Value
Fidelity Bank Plc lost a quarter of its market value in a week due to investors’ weak sentiment. At the close of the trading session for the week, the Tier 2 bank was priced down to N194 billion ahead of its second quarter of 2023 earnings release.
Equities analysts at Meristem Securities downgraded Fidelity Bank PLC to sell as its estimates showed negative upside potential, setting N5.61 as the target price. Also, analysts at Futureview kept the stock in the hold bucket as its estimates showed limited upside.
In the stock market, Fidelity Bank opened the week at N8.93 and closed at N6.70 on Friday. Equities analysts’ recommendations suggest Fidelity Bank faces potential price deprecation in the local bourse amidst selling rallies record last week.
Recall that the Nigerian mid-tiered lender maintained a plan to join the tier-1 capital class, albeit, unsuccessfully. In a bid to deepen its business operation and drive growth, the management announced a plan to acquire a 100% stake in Union Bank UK.
However, about a year after, Fidelity Bank has been unable to close the deal, its audited stamen for the financial year 2022 showed no payment information for the acquisition of Union Bank.
In September 2022, the bank told the Nigerian Exchange its plan to issue private placement to strengthen the tier-2 capital lender’s position in the market. In an extraordinary general meeting (EGM) notice submitted to regulators, the management said that the private placement will be carried out in conformity with applicable laws and subject to the procurement of all regulatory approvals.
In April 2023, the management announced successfully the bank raised N13.972 billion from private placements. According to Fitch Ratings, Fidelity Bank’s funding profile improved, with a surge in low-cost current and savings accounts in the bank’s customer deposit base to 87.1% at the end of the first quarter of 2023 from 75% in 2021.
Fidelity Bank has higher credit concentrations relative to the capital level and high levels of delinquent loans, as well as weaker profitability and foreign-currency liquidity than larger domestic peers, according to Fitch ratings.
Based on total assets, Fidelity Bank is the sixth-largest bank with 5% of domestic banking system assets in 2022. The acquisition plan was not subjected to its annual shareholders meeting in May 2023, signifying that the plan might have been set aside.
Single-depositor concentration is considered high for the bank, with the 20 largest deposits representing 25% of customer deposits at the end of the financial year 2022. Fitch said in its rating note. > Futureview Analysts Place Banking Stocks on Sell Radar
The bank also faces concentration risk as stage 2 loans, accounting for 20% of gross loans at the end of the first quarter of 2023; concentrated within the oil and gas and power sectors were largely US dollar-denominated. #Fidelity Bank Loses 25% of Its Market Value