Stanbic IBTC Earnings Sustained by Growth in Non Interest Income

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Stanbic IBTC’s YLS: Business Leaders Guide Youth On Turning Passion Into Profit-Brand Spur NIgeria
Stanbic IBTC’s YLS: Business Leaders Guide Youth On Turning Passion Into Profit

Stanbic IBTC published its full-year 2019 unaudited financials for the period ended 31st December 2019 to the Nigerian stock exchange. The bank’s gross earnings increased in the period under review by 5.15% from NGN 222.36Billion FY 2018 to N233.80Billion in FY 2019 driven by growth in Non-interest income.

Net Interest Income declined marginally by 0.48% to NGN 77.83Billion from NGN 78.20Billion. The drop in net interest income was as a result of a 5.99% increase in interest expense from NGN 40.17Billion in FY 2018 to N42.58Billion in the current period, driven by interest paid on borrowed funds and interbank deposits which grew by 54.07% and 48.93% respectively. However, interest income advanced slightly by 1.71% to 120.41Billion from N118.41Billion in FY 2018 driven by the interest received on loans granted to customers and the interest on investment by 3.81% and 0.01% respectively, the rise was unable to move Net interest income upwards due to the 5.99% expansion in interest expense.

Non-Interest Revenue grew by 5.99% from N102.60Billion in FY 2018 to N108.75Billion in FY, 2019 driven by the growth in fees and commission (0.78%), trading revenue (16.04%) and other income (40.19%). The slight rise in income from fees and commission is attributable to income from its electronic banking fees and brokerage and advisory fees.

Also, the increase in trading revenue was driven by income from fixed income securities which grew by 49.35%. Operating expenses declined by 1.64% to N94.02Billion from N95.60Billion in FY, 2018 as a result of 5.60% drop in staff cost. Furthermore, the cost-to-income ratio stood at 50.39% moderating from 52.87% in FY 2018.

Profit before tax (PBT) stood at N90.92Billion indicating an advancement of 3.15% from N88.15Billion recorded in FY 2018.

Profit after tax in the FY 2019 record improved slightly higher by 0.80% to N75.03Billion from 74.44Billion at the end of the corresponding period of 2018.

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Asset Quality; Net Loans and advances rose by 21.28% to N535.17Billion from N441.26Billion in FY 2018 driven by loans and advances granted by the PBB and CIB division by 29.79% and 28.11% respectively, coupled with the reduction in impairment charges on loans which also dropped by 7.52%. Loan to deposit ratio stood at 60.35% when compared with full-year 2018 which settled at 45.58%. However, the bank is still unable to meet the requirement for the Loan to deposit ratio fixed by the CBN at 65%. Also, Total deposit declined by 8.39% from N967.96Billion in FY 2018 to N886.74Billion at the end of full-year 2019 which is associated to the decline in deposit from current account(6.43%), call deposits (58.67%) and term deposits (44.11).

However, deposit from savings accounts increased by 29.79%.

Our forward P/E x ratio of 5.61x. We recommend HOLD at the current price of NGN41.50. With our revised blended target price of NGN 46.19. A 10.15% upside from today’s price.

Stanbic IBTC Earnings Sustained by Growth in Non Interest Income - Brand Spur
Source: Company Filings, Greenwich Research