Stanbic IBTC Holdings Plc FY’18 Results – Impairment Writebacks; Non-interest Income Uplifts EPS

Culled—Proshare

March 7, 2019/ CardinalStone Research

Stanbic IBTC Holdings Plc (STANBIC) FY’18 results – gross earnings grew by 4.7% YoY to N222.4 billion, in line with our expectation of N225.1 billion (-1.2% deviation). More remarkably, after tax earnings climbed 53.7% YoY to N74.4 billion, within our N76.9 billion projection (-3.2% deviation). 

STANBIC proposed a final dividend of N1.50 per share. This translates to a dividend yield of 3.1% based on the last close price of N48.00

Q4’18 highlights 

  • Interest income rose during the quarter (+9.1% QoQ) to N30.5 billion, supported by growth in interest income from loans (+9.5% QoQ) and interest income from investment securities (+8.4% QoQ). 
  • Fees and commission income improved by 8.7% QoQ. However, this was not enough to offset the impact of a 42.6% QoQ decline in trading income on overall non-interest income (-13.5% QoQ). The slump in trading income largely reflected FX trading losses of N423 million (compared to FX trading gains of N5.3 billion in Q3’18). 
  • Impairment charges for the quarter came in at N1.2 billion (-9.9% QoQ). However, over FY’18, credit impairment charges reflect a net write-back of N2.9 billion, supported by recoveries of over N3.1 billion of previously written off loans. 
  • Operating expenses was flat in Q4’18 at N23.4 billion. However, cost to income ratio inched higher to 55.3% (Q3’18 – 53.7%) due to lower operating income. 
  • Net loans and total assets rose to N433 billion (+16.3% YtD) and N1.9 trillion (+34.4% YtD) respectively. Deposits also grew to N808 billion (+7.2% YtD).

Analyst’s take 

STANBIC’s FY’18 bottom line was supported by 15.0% YoY growth in non-interest income and impairment writebacks of over N3.0 billion (compared to impairment losses of N25.6 billion in FY’17). On a segment basis, we saw improvement in the Personal and Business Banking (PBB) business which returned to profitability (N581 million vs loss of N16.5 billion in FY’17). The Corporate and Investment Banking (CIB) business recorded a 12.0% YoY growth in profit after taxes, supported by trading gains and impairment write-backs, while the Wealth business also reported an 18.2% YoY increase in earnings supported by a 19.0% growth in assets under management (AUM). Overall, return on average equity inched higher to 34.5% (FY’17 – 28.9%), while CAR (21.0%) remains above the regulatory threshold of 10.0%.

Based on our last review, our target price for the counter is N52.29 (HOLD). Following the release of the results, STANBIC gained 3.0% at the close of trading today. We will revise our estimates after discussion with management on the result. 

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