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Saturday, June 25, 2022

Fidelity Bank Overtakes Stanbic IBTC, First Bank, Now Fifth Most Profitable Lender by ROE

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Fidelity Bank Nigeria Plc came from nowhere and leapfrogged Stanbic IBTC Holdings and FirstBank Holdings to become the fifth most profitable lender by return on equity (ROE), thanks to double digit growth in earnings.

This means Fidelity Bank is good in generating returns on the investment it received from its shareholders even amid a punitive regulatory environment.

It has the strongest ROE among the small and mid-sized banks, and an excellent risk management strategy strengthens asset quality.

For instance, Fidelity Bank recorded an ROE of 14.20 percent as at June 2021, according to MoneyCentral calculations.

That compares with Stanbic IBTC Holdings’ ROE of 12.43 percent; WEMA, 12.36 percent; FirstBank, 9.89 percent; Sterling Bank, 8.58 percent; Union Bank, 7.53 percent, and FCMB, 6.54 percent.

A gradual recovery in business activities spurred Fidelity Bank’s interest income that propelled earnings.

Interestingly, Fidelity Bank recorded one of the largest profit expansions among peer rivals.

Its net income spiked by 70.80 percent as at June 2021, and that compares with Zenith Bank, (+2.20 percent); Access Bank, (+42.44 percent); United Bank for Africa (+36.55 percent); Unity Bank, (+34.08 percent); Sterling Bank, (+5.10 percent); FCMB, (+22.10 percent); and Stanbic IBTC, (+50.13 percent).

It is important to note that the Nigerian banks are operating in a punitive regulatory environment responsible for deteriorating net interest margins and returns on equity.

Their pains could continue to the end of the year as the central bank has clung on to the 27.50 percent cash reserve ratio-which is one of the highest across the globe-, and the minimum loans to deposit ratio is likely to expose lenders to spiraling Non Performing Loans (NPLs) since they are being forced to extend loans to risky sectors that are not making profit due to poor macroeconomic conditions.

Analysts say banks will have to embark cost control measures and invest more in the latest technology needed to generate the desired revenue from electronic products while mitigating risks.

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