Fidelity Bank’s ₦127.1B Public Offer & Rights Issue Explained

Fidelity Bank PLC recently undertook a combined capital raise of up to ₦127.1 billion (One Hundred Twenty-Seven Billion, One Hundred Million Naira). This capital infusion, which aligns with the Central Bank of Nigeria’s revised minimum capital requirements for commercial banks, is part of its strategic plan to increase its share capital base, enhance its operational capacity, and improve overall shareholder value. In this article, we will explore the details of these financial instruments, their implications for investors, and what it means for the future of Fidelity Bank

Key Details

• Rights Issue: Fidelity Bank offers 3.2 billion ordinary shares of 50 kobo each at ₦9.25 per share to existing shareholders. Existing shareholders can subscribe to new shares in the ratio of 1 new ordinary share for every 10 ordinary shares held as of January 5, 2024.
• Public Offer: The bank is simultaneously offering 10 billion ordinary shares of 50 kobo each to the general investing public at ₦9.75 per share.
• Purpose of the Offer: The capital raised will fuel growth, IT infrastructure investment, regional expansion, and product distribution channels. Investors find Fidelity Bank appealing due to its strong corporate governance rating and impressive stock market performance.
• Closing Date for Public Offer: If you’re considering participating, keep an eye on the acceptance and application lists, which open on June 20, 2024, and close on July 29, 2024.

About Fidelity Bank PLC

Fidelity Bank Plc is a full-fledged commercial bank, operating primarily through branches and service centres located across Nigeria, with authorisation from the CBN to operate internationally through branches located in foreign countries. The Bank provides a range of banking and other financial services to over 8.3 million corporate and individual customers from 250 business offices in the country with a total asset base of ₦6.2 trillion, all as of 31 December 2023. The Bank also operates in the United Kingdom through its wholly-owned subsidiary, FidBank UK Limited, located in London.

Financial products and services offered by the Bank include granting of loans and advances, equipment leasing, corporate and trade finance operations, treasury and investment services, retail banking (including current and savings accounts, debit cards, ATM services, electronic banking, agency banking and retail lending), money market activities, private banking/wealth management services, foreign exchange services, funds transfer services, and bank guarantees. (Bank’s website)

History of Shared Performance

Fidelity Bank's shares have shown a consistent performance over the years. The bank's commitment to growth and profitability has been reflected in its share price, which has experienced steady appreciation. The bank has also been regular in paying dividends to its shareholders, further enhancing its attractiveness as an investment. Fidelity Bank's shares are listed on the Nigerian Stock Exchange (NSE) under the ticker symbol FIDELITYBK.

Factors Driving Fidelity Bank's performance

 Fidelity Bank’s impressive performance is driven by several key factors:

•  Resilience and Strategic Agility:

Despite sector challenges, Fidelity Bank has demonstrated resilience. Their strategic agility allows them to seize market opportunities even in challenging environments.

• Capital Adequacy and Shareholder Funds:

Fidelity Bank maintains a robust Capital Adequacy Ratio (CAR) well above regulatory requirements.

• Commitment to Social Responsibility:

Fidelity Bank contributes to youth entrepreneurship (e.g., Enactus team support) and community welfare (e.g., flood relief donations).

• Innovation and Sustainability:

The bank invests in technology-driven solutions for efficiency and customer satisfaction.

The Fidelity Bank's Public Offer

Fidelity Bank's public offer involves the issuance of new shares to the public at a specified price. This initiative is designed to attract new investors and increase the bank's equity capital. The proceeds from this offer are expected to be used for expanding the bank's operations, improving its technological infrastructure, and enhancing its service delivery. The public offer is open to all investors, including individuals and institutional investors. By participating in this offer, investors have the opportunity to become shareholders in one of Nigeria's leading financial institutions, potentially benefiting from the bank's future growth and profitability.

Fidelity Bank's Rights Issue

In conjunction with the public offer, Fidelity Bank is also conducting a rights issue. This rights issue allows existing shareholders to purchase additional shares at a discounted price before these shares are offered to the general public. The rights issue is an attractive option for current shareholders, as it provides them with the opportunity to increase their stake in the bank at a favourable price.  The proceeds from the rights issue will be used to support the bank's growth initiatives, including expanding its loan portfolio, enhancing its digital banking platforms, and strengthening its overall financial position.

5 Benefits of Fidelity Bank's public offer and rights issue for Investors

Investors participating in Fidelity Bank's public offer and rights issue stand to gain several benefits such as:

1. Potential for Capital Appreciation:

As Fidelity Bank grows and improves its financial performance, the value of its shares is likely to increase, offering capital appreciation to shareholders.

2. Dividend Income:

Shareholders may also benefit from dividend payments, which are typically distributed from the bank's profits.

3. Rights Issue Discount:

Existing shareholders have the opportunity to purchase additional shares at a discounted price through the rights issue. This can be advantageous if you believe in the bank’s growth prospects.

4. Portfolio Diversification:

Adding Fidelity Bank shares to your investment portfolio diversifies your holdings. It gives you exposure to the banking sector and reduces risk.

5. Supporting Growth Initiatives:

Your investment contributes to the bank’s capital base, enabling it to expand, invest in technology, and enhance services.

Remember to assess your risk tolerance and financial goals before participating!

How to Apply for the Public Offer

To apply for shares in Fidelity Bank’s public offer, follow these steps:

Eligibility Check: Ensure you meet the eligibility criteria. The public offer is open to both existing shareholders (through the rights issue) and the general investing public.

Contact your stockbroker or visit the Fidelity Bank Plc website to fill the application and make payment.

Considerations

Before investing in Fidelity Bank Nigeria Plc’s public shares offer and rights issue, consider the following risks:

1. Market Risk: Stock prices can be volatile due to market fluctuations. The value of your investment may rise or fall based on broader economic conditions.
2. Sector-Specific Risks: The banking sector faces unique challenges, such as regulatory changes, credit risk, and interest rate fluctuations. Be aware of these factors.
3. Credit Risk: Fidelity Bank’s loan portfolio could be exposed to defaults by borrowers.
4. Operational Risk: Issues related to internal processes, technology, or fraud can impact the bank’s performance.
5. Liquidity Risk: If the bank faces liquidity shortages, it may affect its ability to meet obligations.
6. Currency Risk: If you’re not investing in Naira (₦), currency fluctuations can impact returns.
7. Political and Economic Environment: Nigeria’s political stability and economic policies can affect the banking sector. Stay informed about local developments.
8. Interest Rate Risk: Changes in interest rates can impact the profitability of banks.
9. Dilution Risk (Rights Issue): Participating in the rights issue may dilute your ownership if new shares are issued.

Remember to consult a financial advisor and assess your risk tolerance before making any investment decisions!

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Conclusion

Fidelity Bank Nigeria PLC's public offer and rights issue represent significant opportunities for both existing and new investors. By raising additional capital through these financial instruments, the bank aims to strengthen its market position, expand its operations, and deliver greater value to its shareholders. Investors who participate in these offers stand to benefit from potential capital appreciation, dividend income, and the opportunity to acquire shares at a discounted price.

For those looking to invest in one of Nigeria's leading financial institutions, this is a prime opportunity to become part of Fidelity Bank's growth story and contribute to its continued success.

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Disclaimer!!!

No part(s) of this article should be considered financial advice. It is only meant for your information, education and entertainment.  Do your due diligence and consult a financial adviser if need be before making any investment decisions, and ensure the investment aligns with your immediate and long-term investment plans.

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FAQs

What is a Public Offer?

A public offer is a method through which a company raises capital by offering its shares to the general public for the first time. This process is often referred to as an Initial Public Offering (IPO) when the company is being listed on a stock exchange for the first time. However, in the case of Fidelity Bank, this public offer is part of a broader strategy to increase its capital base by issuing new shares to existing and new investors.

What is a Rights Issue?

A rights issue, on the other hand, is a way for companies to raise additional capital by offering existing shareholders the opportunity to purchase additional shares at a discounted price, usually in proportion to their existing holdings. This approach is often used by companies to quickly raise capital while giving priority to their current shareholders.

Can I apply for both the rights issue and public offer?

You can apply for both the rights issue and the public offer. Here’s how: Rights Issue: If you’re an existing shareholder, you can participate in the rights issue. Contact your stockbroker to express your interest and follow their instructions. The rights issue allows you to buy additional shares at the specified price (₦9.25 per share). Public Offer: As a member of the general investing public, you can also apply for shares in the public offer. Reach out to your stockbroker, fill out the application form, and make the payment (₦9.75 per share).

What risks should I be aware of before investing?

Before investing in Fidelity Bank Nigeria Plc’s public shares offer and rights issue, consider the following risks: Market Risk: Stock prices can be volatile due to market fluctuations. The value of your investment may rise or fall based on broader economic conditions. Sector-Specific Risks: The banking sector faces unique challenges, such as regulatory changes, credit risk, and interest rate fluctuations. Be aware of these factors. Company-Specific Risks: Credit Risk: Fidelity Bank’s loan portfolio could be exposed to defaults by borrowers. Operational Risk: Issues related to internal processes, technology, or fraud can impact the bank’s performance. Liquidity Risk: If the bank faces liquidity shortages, it may affect its ability to meet obligations. Currency Risk: If you’re not investing in Naira (₦), currency fluctuations can impact returns. Political and Economic Environment: Nigeria’s political stability and economic policies can affect the banking sector. Stay informed about local developments. Interest Rate Risk: Changes in interest rates can impact the profitability of banks. Dilution Risk (Rights Issue): Participating in the rights issue may dilute your ownership if new shares are issued. Remember to consult a financial advisor and assess your risk tolerance before making any investment decisions!

What is Fidelity Bank Nigeria PLC's Market Capitalization?

Fidelity Bank Nigeria PLC's Market Capitalization Currently stands at approximately ₦352 billion.