Company Analysis

Stanbic IBTC: Good hope on recovery


Fiscal 2017 looks very much like a year of good hope for Stanbic IBTC Bank for full recovery and attaining a new profit high for the bank. The bank made a substantial progress on its profit recovery journey last year and is presently on the last lap of a strong rebound.

The bank is picking its way back from a 47% crash in net profit in 2015 and its advancing at a new speed this year. Despite an outstanding growth of 59% in 2016, its net profit remained well below the peak record of over N29 billion posted in 2014.

At the end of half-year operations in June 2017, the bank lifted after tax profit by 113%, which has landed it at virtually the profit figure it earned in the whole of 2016. That sets it firmly on the track of another outstanding growth in profit at the end of 2017. It had grown net profit by 59% in 2016.

Growing profit capacity in the current year is founded on growing revenue and moderating cost. Revenue growth stepped up last year to about 12% and a further acceleration is happening this year with a year-on-year leap of 36% at the end of June.

Half year operations ended with gross earnings of N97.20 billion, an increase of 36% year-on-year. The full year outlook indicates gross income in the region of N200 billion for Stanbic IBTC Bank in 2017. That will be an accelerated growth of 28% against an increase of 12% in the preceding year. Revenue growth slowed down continuously as from 2013 before stepping up once more in 2016.

Interest income is leading revenue growth this year at an increase of more than 54% at half year. This is a rebound after a slowdown for the second year saw the lowest increase in interest income in several years in 2016. Interest income, which provided the driving force for revenue growth last year, still maintained a reasonable growth at slightly below 18% at the end of June this year.

Interest cost has been a cost saving line for the bank since last year when it dropped by 24% against a 6% improvement in interest income. Interest expenses grew by 13% at the end of June this year but still moderated relative to earnings. That spurred nearly 80% advance in net interest income to over N41 billion during the period. This is a further improvement from an increase of 32% in net interest income at the end of 2016.

Credit impairment expenses grew by 65% to N13.95 billion at the end of the first half of the year, up from the growth of about 33% last year. The bank is devoting an increasing proportion of earnings to impairment charges on financial assets though the charges aren’t that large, as interest income after impairment charge still grew by close to 39%.

The bank made reasonable cost saving in respect of operating cost, which grew well below revenue at 16% compared to 36% at the end of half year operations. A trend of declining cost margin has been running for the bank since 2012 from 60% in 2011 to 44% in 2016. It declined further to 39% at the end of June.

The strong growth in revenue and cost savings from two major cost lines of the bank – interest and operating expenses, have reinforced the bank’s profit capacity. Net profit margin has stretched out from under 16% in the same period last year to 25% at the end of half year operations. The bank hasn’t seen profit margin that high since the post financial crisis trading.

It closed half year operations with an after tax profit of N24.11 billion, which is a leap of 113% year-on-year and one of the strongest profit advances in the banking sector so far this year. The strong profit growth is expected to be sustained to full year and the bank is likely to close the year with a new peak in profit in the region of N50 billion.

The bank earned N2.30 per share at the end of June 2017, down from N2.42 in the same period last year. It has announced an interim dividend of 60 kobo per share. The bank’s register closed on 7th September while payment date is 27th September 2017.

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