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FCMB Group Plc. (FCMB:NL) & Fidelity Bank Plc (Fidelity.NL)

Striking outing in 2018, topped with juicy dividends

FCMB (FCMB.NL) and Fidelity (FIDELITY.NL) published FY 18 results last night with both banks posting solid growth in earnings. FCMB reported EPS of N0.76, slightly higher than our expectation of N0.74. The difference was largely due to a write-back in the last quarter. On the other hand, Fidelity bank recorded EPS of N0.79, slightly lower than our estimate of N0.82. On a YoY basis, EPS reported by both banks increased 74% and 29% respectively. However, earnings over the last quarter moderated in line with our expectation by 35% and 16% QoQ for FCMB and Fidelity respectively.

For FCMB, earnings growth over 2018 was driven by stronger Non-Interest Revenue (NIR) and lower impairment charge. Also, lower funding cost over the period helped increase Net Interest Income marginally over the year. Fidelity, on the other hand, was a story of resilience in NIR and improved asset quality (-40bps YoY to 6.0%) resulting in moderation in impairment charge.

Both banks surprised us in terms of dividend payment. FCMB took a shift from its usual N0.10 dividend payment to declare a dividend of N0.14/share for FY 18. Though, the payout ratio (19%) was slightly lower than 2017 payout of 23%, we see this an improvement given the fact the bank maintained N0.10 dividend payment even during periods of higher earnings. Based on the last traded price, the dividend translates to a dividend yield of 7.2%. Not left out of the ‘generosity trend’, Fidelity increased payout ratio to 28% (FY 17:18%), with dividend of N0.22 (2017: N0.11), translating to a 9.6% dividend yield on current price.

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