Fidelity bank, last week released its results for the first quarter ended March 2025. There was a huge bounce in revenue and profit after tax

Gross earnings increased by 64.2% from N192 billion in 2024 to N315.4 billion in 2025. 

Profit after tax rose by 189.7% from N31.4 billion in 2024 to N91.1 billion in 2025. 

The key driver behind the bounce was higher interest income (more specifically higher interest income on loans and advances to customers)

Stage 2 loans are still quite heavy 

You can split loans into three buckets: Stages 1, 2 and 3

Stage 1 loans are performing or in good standing. These amounted to N3.5 trillion in Q1 2024. Up about N331 billion from December last year.

Stage 2 loans are those with elevated risk. They stood at N993 billion down from N1.2 trillion in 2024.

Stage 3 loans are essentially impaired or non performing. They stood at N125 billion in Q1, up about N14 billion from December last year.

If stage 2 loans worsen, they get moved to stage 3.

The dilemma

Last week Friday, the stock hit an all time high of N21.5 Looking at the technical analysis chart below, the rational thing would be to wait for the stock to retrace before taking a position. Which it has already started on.

Yesterday, the stock dipped by about 1.2%

From a technical analysis basis, the right thing to do would be to wait for a pull back in the N19.5 to N20 range. 

Valuation

On a forward earnings basis, one can clearly argue that the stock is underpriced. Doing some napkin math using the Q1 25 numbers, one can assume that the bank would end FY 2025 with an earnings per share of between N7 to N8 (one must take into account dilution from its private placement in the works). 

That would mean the bank is trading at a PE ratio of around 2.8 times earnings. If one were to use a modest valuation of 4 times earnings, the stock be trading in the N28 to N30 range. 

The two standard methods of valuing a banking stock are a price to book value and tangible book value per share. 

The stock is currently trading at a price to book value of 1.08 times and a price to tangible book value per share of 1.9 times. One could argue it is fairly priced.

Another way to some rough napkin math is to compare the market capitalization to its assets. Currently, the market cap is N1 trillion.  The bank has N10.4 trillion in assets (bulk of that being N4.6 trillion in loans and circa N2 trillion in investment securities). 

In essence, it is trading at about a tenth of its assets.