STANBIC IBTC HOLDINGS PLC Q1’18 – PAT Dwarfs Estimate, Buoyed by Loan Loss Write-Back

  • Gross Earnings up 22% y/y – 3% below our estimate
  • Interest Income up 10% y/y despite dwindling loan book
  • IFRS 9 implementation results in one-time charge of ₦10.1 billion.
  • TP revised to ₦42.38 (Previous: ₦39.84)                               

Impressive results to start the new year        

STANBIC released its Q1’18 results posting impressive performances across key line items with Gross Earnings up 22% y/y to ₦57 billion, 3% below our estimate of ₦59 billion. Particularly, the impressive top-line growth was supported by a 38% y/y rise in Non-Interest Income to ₦28 billion (10% ahead of our estimate). Although Interest Income also rose 10% y/y to ₦30 billion, the income line was down 11% q/q and lagged our estimate by 14%. Amidst higher Customer Deposits, Interest Expense rose 34% y/y to ₦10.7 billion – 5% higher than our ₦10.2 billion estimates. Overall, despite a 47% y/y increase in Operating Expense to ₦25.0 billion (Vetiva: ₦25.3 billion), PAT rose by an impressive 44% y/y to ₦23 billion – dwarfing our ₦12 billion estimates. We highlight that following the implementation of IFRS 9, STANBIC took a one-time charge of ₦10.1 billion on its equity – a trend we have seen across other banks in Q1’18.

TP revised to N42.38 (Previous: N39.84) 

We have revised our estimates to reflect the better than expected performance across key line items. In line with the trend observed in Q1’17, we cut our loan growth forecast for FY’18 to 0% (Previous: 10%; Q1’18: -9%). With this and coupled with the lower interest rate environment, we cut our Interest Income estimate to ₦130 billion (Previous: ₦137 billion). However, we revise our expected contribution of Non-Interest Income to Gross Earnings upwards from 42% to 45% as other subsidiaries continue to post impressive numbers. Overall, we forecast a strong 52% y/y growth (Previous: 24%) in PAT to ₦73 billion, translating to an EPS of ₦7.33.  STANBIC trades at FY’18 P/B: 2.2x and P/E: 6.8x vs. our coverage banks’ average P/B: 1.0x and P/E: 4.9x. Overall, we raise our Target Price (TP) to ₦42.38 (Previous: ₦39.84).

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