Stanbic IBTC: Going strong for the third year running

Stanbic IBTC Bank has sustained strong profit growth for the third year running to 2018. After tax profit was up 54% at the end of the year to N74.4 billion, up on the 70% advance in 2017 and 59% leap in 2016. The bank has maintained leading growth numbers in a struggling banking industry.

Like the rest of the industry operators, pushing revenue was a herculean task for the bank in the year, as interest earnings – the main income line of banks continued to be constrained by huge credit losses. As expected, there was a sharp slowdown in gross earnings for Stanbic IBTC Bank in 2018, meaning that the strength for the enhanced profit performance in the year did not come from revenue.

Cost saving enabled the bank to convert an increased proportion of each naira of revenue into profit in 2018. The major cost saving came from a shift from a net impairment loss of close to N26 billion in 2017 to a net write back of N2.94 billion in 2018. This enabled the bank to add well over N28 billion in cost savings from loan losses to the bottom line.

Gross earnings amounted to N222.36 billion for Stanbic IBTC Bank at the end of 2018, an increase of 4.7%. This missed slightly our full year revenue forecast of N225 billion for the bank. This is a sharp slowdown in gross earnings from 36% growth in 2017, as interest income, which led earnings growth in the preceding year, suddenly lost the steam.

Interest income, the main revenue line of the bank, declined by 3.7% to N118.4 billion. Its contribution to gross income shrank from 58% to 53% over the period. Non-interest income countered the decline in interest income with an increase of 15% to N102.6 billion. It therefore accounted exclusively for the increase in gross earnings the bank was able to show at the end of the year.

Stanbic IBTC Bank closed the 2018 financial year with an after tax profit of N74.44 billion, an increase of 53.8% year-on-year. This is just 3% shot of the full year forecast profit mark of N77 billion for the bank.

Significant cost moderation, led by write back of loan loss expenses to profit, provided the strength to lift profit that high from the moderate improvement in revenue. Loan loss charges have been slowing down in the preceding two years after a massive growth in 2015.

Significant write backs happened in 2018, which shifted the bank’s position from a net impairment charge of N25.58 billion in 2017 to a net write back of N2.94 billion at the end of 2018. Loan recovery therefore provided stabilizing and growth functions for the bank in the year. With that, Stanbic IBTC has sustained top industry profit growth numbers for the third year running. Its profit figure in 2018 is close to four times the closing figure of under N19 billion in 2015.

The challenge for the bank in the year is the loss of momentum in Interest income that led revenue growth in 2017 with a leap of 40.5%. A decline of 3.7% in 2018 is in spite of over N60 billion or 16% expansion in loans and advances to customers and over 26% growth in investment assets.

Against the decline in interest income, interest expenses went up slightly by 2% to N40.2 billion. The increase led to a 6% drop in net interest income to N78 billion at the end of the year.

Operating cost grew by 11% to N95.6 billion, raising the cost margin from 40.5% at the end of 2017 to 43% at the end of 2018. The impacts of the increases in interest and operating expenses were countered by the complete absence of loan loss expenses. Net profit margin stretched out for the third year running from under 16% at the end of 2016 to 23% in 2017 and further to 33.5% in 2018.

The bank earned N7.04 per share at the end of 2018 against N4.60 in the preceding year. It has declared a final cash dividend of N1.50 per share in addition to an interim of N1 per share with option for scrip in September 2018. The register closes between 21^st and 28^th March and payment date is 20th June 2018.