Fidelity Bank Rides on Waves of Diversified Shareholding Structure, Up 20%
Nigeria’s sixth largest lender, Fidelity Bank Plc, has maintained a valuation uptrend, spiked by about 20% as investors continue to increase their equities positions in the financial service boutique ahead of the second quarter 2023 earnings season.
The Tier-2 bank share gained popularity among value hunters on account of its well-diversified shareholding structure, and sustained earnings growth, analysts told MarketForces Africa as its valuation crossed N201 billion.
Fitch recently upgrade the bank’s ratings citing an improvement in its local-currency funding profile, as evidenced by the increase in the share of 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.
Compared with a number of its peers, Fidelity Bank remains one of the few lenders in the banking sector without the single largest shareholders, making its share purchase widely distributed.
The Bank’s shares are widely held. According to the Register of Members, no single shareholder held up to 5% of the issued share capital during the year ended 31 December 2022, according to details obtained from its audited report.
Its shareholding structure is unusually different from what is obtainable in the banking sector – it has always been dad-mom-daughter-son-uncle-aunt-grandpa-grandmom-granddaughter and more- shareholding structure.
At the close of the trading session on Friday, Fidelity Bank Plc crossed N201 billion market valuation. The Tier-2 bank’s fresh rerating came after a raft of positioning in the equities market pushed key indices higher.
Following market rallies that greeted Godwin Emefiele’s suspension as apex bank chief, the market saw a spike in demand for bank shares due to its seeming undervaluation and rival dividend payment competition.
In the last seven trading sessions, the bank gained about 20%, which pushed the year to return above 60% as the race to tier-1 banking class gets tough.
Fidelity Bank’s share price settled at N6.94 per on Friday’s close, with a market valuation of N201.085 billion spread over its 28.974 billion outstanding shares.
Ahead of earnings season, some analysts hope that the equities market will sustain the current temperature – trading at a 15-year high. Fidelity Bank recorded 27.4% year-on-year growth in customer deposits in the financial year 2022, from N2.0 trillion in 2021 to N2.6 trillion.
Its net Loans and Advances rose by 27.6% from N1.7 trillion in 2021 to N2.1 trillion in 2022. The bank saw its total assets expand by 21.6% from N3.3 trillion in 2021 to N4.0 trillion.
Rising Fraud Incidence
Fidelity Bank Plc has continued to deliver cutting-edge performance across key indices in recent years amidst a rising number of fraud incidence records. According to some market analysts, there is so much to like about the Tier-2 lender that has persistently strived to join the top bank league – albeit, unsuccessful.
The bank has come up strong also in service delivery, though the level of fraud perpetrated against the financial service company with a 5% market share of total banking assets, is on the uptrend.
Fidelity Bank fraud and forgery exposures spiked above N1 billion, from N650 million in the corresponding year 2021. The increase was traceable to a surge in fraud incidence in the period.
According to its audited financial statement, the number of fraud incidents in the bank rose by more than 67% to 2518 from 1503 in 2021. As a result, the bank lost more than N237 million to fraudulent activities. This translates to six times (6x) increase in fraud-related loss annually.
According to Fitch Ratings, Fidelity Bank controls 5% of domestic banking system assets at the end of 2022, which also noted that the Tier-2 lender has seen strong balance sheet growth in recent years and increased market shares. #Fidelity Bank Rides on Waves of Diversified Shareholding Structure, Up 20%
