Analyst advises Fidelity Bank Plc to Consider Merger to Attain Tier 1 Status by 2025

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Fidelity Bank will have to embark on an aggressive scheme of mergers and acquisitions to attain a highly coveted ambition of seating among the Tier 1 lenders by 2025, according to Chapel Hill Denham Limited.

Of course, Fidelity Bank has a strong balance sheet and profit size gives it the leeway to pursue an ambitious venture.

For the first three months through March 2022, the lender’s total asset was up 22.93 percent to N3.55 trillion.

That compares with Stanbic IBTC Holdings total asset of N3.09 trillion; Union Bank’s N2.57 trillion; First City Monument Bank Plc, N2.48 trillion; Sterling Bank, N1.66 trillion, WEMA Bank, N1.26 trillion, and Unity Bank N591.03 million.

To catch up with the smallest bank in the Tier-1 banking space (Guaranty Trust Holdings Company (GTCO) total asset: N5.50 trillion), Fidelity Bank would need to pass through the merger of acquisition route to actualise the Tier-1 ambition.

The analysts highlighted that the merger of Fidelity and Sterling would produce a combined total asset of N6.60 trillion while a synergy between Fidelity and FCMB would generate asset size of N6.04 trillion.

Interestingly, the successful business combination of Fidelity, Sterling, and WEMA Bank would lead to a combined total asset of N6.49 trillion.

Market participants expect Fidelity Bank to emulate Access Bank who acquired Diamond Bank and engaged in other acquisitions to become the largest lender by total assets in Nigeria.

Analysts at Chapel Hill have raised their target price on Fidelity’s stock to N4.25, which implies a 30.40 percent upside based on the June 19 closing price as they retain their BUY rating on the stock.

The lender currently trades at price to book (PB) of 0.30x and ROAE of 12.70 percent, a discount to the sector average of PB of 0.60x and 14.60 percent.