FIDELITYBK: FY'23 PAT doubled despite Q4'23 weakness

In its audited FY'23 result, Fidelity Bank Plc (NGSE: FIDELITYBK "" TP: N15.67) reported a PAT growth of 112.9% to N99.5 billion with an EPS of N3.1 (vs FY'22: N1.6). The financial performance was primarily driven by the improvement in its net interest income (NII). Specifically, net interest income (NII) rose by 81.6% to N277.4 billion, buoyed by higher asset yields and expanded earning assets. Similarly, NIR increased by 4.0x to N109.3 billion as policy reforms in the FX market led to a net foreign exchange gain of N44.1 billion (vs FY'22: N2.7 billion). As a result, operating income surged by 114.9% to N386.6 billion, which offset the growth in OPEX by 61.4% to N194.9 billion and moderated the cost-to-income ratio (CIR) by 16.7ppts to 50.4%.

On the downside, we saw a material jump in impairment charge (+1138.9%) to N67.4 billion. The rise in impairment charges was driven by the 9.9x jump in loan loss expenses to N63.4 billion and resulted in a 1.7ppts increase in cost-of-risk (CoR) to 2.0%. Elsewhere, due to the impact of the Finance Act and the expiration of CIT Exemption Order 2011 on taxes, tax expense rose significantly by 3.6x to N24.8 billion.

In Q4'23, earnings declined significantly by 34.6% YoY and 80.0% QoQ to N7.7 billion. The more material quarterly decline emanated from the 70.3% and 2.3x increases in OPEX and impairment charges to N69.6 billion and N35.3 billion, respectively. The duo substantially derailed Q4'23 earnings and masked the robust 89.1% QoQ increase in NIR to N35.7 billion. Therefore, CIR rose to 58.9% (from 38.5% in Q3'24), while CoR rose to 4.2% in Q4'23 (from 1.8% in Q3'23).

Overall, the Q4'23 PAT of N7.7 billion was the weakest quarterly earnings for 2023 (compared to Q1'23 PAT of N15.6 billion, Q2'23 of N37.7 billion, and Q3'23 of N38.5 billion), contributing only N0.26 to the FY'23 EPS of N3.1.

FIDELITYBK's annualized ROE and ROA were 26.7% (FY'22: 15.4%) and 2.0% (FY'22: 1.3%), respectively. The has declared a final dividend of 0.60, translating to a final dividend yield of 6.6% as of yesterday's closing price. 

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