Investors in Fidelity Bank Plc have earned more than 507 percent in capital gains over the past five years, ranking above all other major return benchmarks in the Nigerian stock market and the entire banking sector.
Trading reports at the Nigerian stock market for the five years between May 31, 2019, and May 31, 2024, showed that Fidelity Bank outperformed all key indices in the stock market.
Fidelity Bank’s share price rose by 507.14 percent over the period, representing an average annual capital gain of 101.43 percent.
These returns underscore Fidelity Bank’s immense value as a stock for all times, helping investors to hedge against inflation while preserving significant long-term value.
With 507 percent capital gain in five years and an average annual gain of more than 100 percent, the return analysis implies that investment in Fidelity Bank is more attractive than other classes of assets, including fixed-income securities such as government and corporate bonds; real estate investment and mutual funds among others.
The high divisible nature of shares investment and high free float of Fidelity Bank, which makes the bank’s shares easily available, underline the bank as a most attractive investment option for all cadres of investors- small, medium, and high net worth; retail and institutional investors.
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 the equities market, recorded a five-year return of 219.61 percent, an average annual return of 43.9 percent.
Contrary to the significantly above-average performance of Fidelity Bank, the NGX Banking Index-which tracks the banking sector, doubled by 120.53 percent over the five years, representing an average annual return of 24.11 percent, more than 77 percentage points below Fidelity Bank’s average return.
Two other major price indices- the NGX 30 Index and NGX Main Board Index, recorded five-year cumulative returns of 185.73 percent and 265.6 percent respectively, representing average annual gains of 37.15 percent and 53.1 percent respectively.
The NGX 30 Index tracks the 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 101.43 percent underlines that Fidelity Bank provides a substantial return for investors, even where such investors had borrowed money at the ruling interest rate and the invested fund was adjusted for the impact of the inflation rate.
Nigeria’s inflation rate peaked at a high of 33.69 percent in April 2024 while the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) recently increased the Monetary Policy Rate (MPR), otherwise known as the 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 N10.20 per share by the end of May 2024. The ASI had, during the period, rose from its opening index of 31,069.37 points to close weekend at 99,300.38 points. The NGX Banking Index rose from 361.57 points to 797.37 points. The NGX 30 Index, which opened the period at 1,286.68 points, closed the period at 3,676.44 points. The NGX Main Board Index appreciated from 1,267.54 points to close the weekend at 4,634.31 points.
Market analysts are unanimous that share prices are illustrative of the fundamental values of quoted companies.
Managing Director of HighCap Securities Limited, Mr. David Adonri, said the price of any stock in the market is a correct reflection of the market value for the stock.
Managing Director, Globalview Capital Limited, Mr. Aruna Kebira, explained that the market price of a stock represents the disposition of the investing public to the stock at a given period, noting that there should be consideration for both the market value and the book value or fundamentals of a stock.
It could be summarized that the market price of a stock is premised on the psychology of the market, the markets mood as well as market sentiments, Kebira said.
Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni, said the stock market shows both the current and prospects of shares.
Share price reflects the current value of a company but also reveals the prospects, Oni said, noting that investment analysts traditionally combine market price and book values to determine the possible outlook of a stock.
A five-year review of the audited reports and accounts of Fidelity Bank showed a strong correlation between the bank’s upward 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 banks’ balance sheet had expanded by 195.26 percent from N2.11 trillion in 2019 to N6.23 trillion in 2023, which is the fastest growth in the industry. Customer deposits, which underlines the competitive market share, more than tripled from N1.225 trillion in 2019 to N4.01 trillion in 2023, 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.
Independent investment research reports by many market pundits showed that Fidelity Bank was assigned buy ticker, a recommendation to investors to consider the potentially 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 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 Banks share price could double in the period ahead given professional assessment of top traditional performance parameters including the company’s operational reports, investors preference and projections.
Already, 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 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 the first quarter of 2024.
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 the first quarter of 2024 as against N17.9 billion in the first quarter of 2023. The bank’s performance was driven by expanding market share with total deposits 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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