Stanbic IBTC Holdings builds N109bn profit in Q3 — strongest growth since 2014

Stanbic IBTC Holdings Plc built an after-tax profit of N109.2 billion at the end of the third quarter (Q3), nearly double the profit figure of N55.2 billion in the same period last year and marking the strongest profit advance since 2014.

The profit figure for the nine months of operations is already well above the full-year profit of N80.8 billion in 2022.

The bank’s Q3 interim financial report at the end of September 2023, however, shows a slowdown in profit improvement from 121 percent to N67.9 billion at half-year.

While quarterly profit improved from N39 billion in the second quarter (Q2) to N41.3 billion in the third, the year-on-year growth went down to 68.5 percent for the third quarter (Q3).

The slowdown reflects the rising cost of funds that claimed a good part of the increase in interest earnings in the third quarter.

While interest income grew by 91.5 percent to N74.3 billion in Q3, interest expenses rose by 179 percent to N26.5 billion over the same period. These are much accelerated increases from 61.6 percent and 110 percent in interest income and expenses respectively at half-year.

The cost of funds claimed 35.7 percent of interest income in the quarter, rising from 24.5 percent in the same period last year.

Net interest income grew by 63.2 percent to N47.8 billion in Q3, which is an improvement from the growth of 44.3 percent at half-year.

The incursion of interest expenses was largely contained by sustained high growth in earnings largely driven by trading revenue.

A further strong growth in trading revenue in Q3 lifted the income line by 140 percent year-on-year to N59.7 billion at the end of the quarter.

Trading revenue propelled non-interest earnings, which grew by 50.4 percent to about N142 billion at the end of the third quarter.

Gross earnings kept accelerating from 45.4 percent growth in the first quarter (Q1) to 59.4 percent at half-year and further to 63.9 percent to close at N330.5 billion at the end of September 2023.

Revenue improvement was, again, accompanied by a gain in profit margin with net profit margin stepping up from 31.8 percent at half-year to 33 percent at the end of Q3. It is a strong improvement from the net profit margin of 27.4 percent the bank recorded in the same period last year.

The bank has maintained a favourable combination of growing revenue and improving profit margin — which is the high point of the good earnings story going for it so far this year.

The firm has achieved full recovery and resumed positive growth with its Q3 profit figure after a drop of 31.5 percent in after-tax profit to under N57 billion in 2021.

Stanbic IBTC Holdings’ full-year earnings outlook remains quite positive with projected after-tax profit of N130 billion likely to be exceeded.

The bank’s main revenue line — interest income — keeps accelerating from 52.8 percent growth in Q1 to 61.6 percent at half-year and further to 72.4 percent rise to close at N184.6 billion at the end of the Q3.

However, growth in the cost of funds has beaten the increase in interest earnings for the last two quarters. At N64 billion at the end of September, the cost of funds rose by 133.9 percent year-on-year, speeding up from 46.8 percent increase in Q1 and 110 percent leap at half-year.

The net interest earnings still grew strong enough at 51.3 percent to N120.5 billion at the end of Q3.

The net income before impairment loss on financial assets maintained a strong pace of growth at 50.8 percent to N262.5 billion.

The net credit loss expenses almost doubled in Q3, which pushed the nine-month position from less than N6 billion at half-year to roughly N10 billion. This is a strong acceleration from an increase of 9.4 percent at half-year to 33.5 percent advance at the end of the third quarter.

The net income, after net loan impairment charges, grew by 51.6 percent to N252.5 billion, which was further pressured by operating expenses. At N123 billion at the end of September, the total operating cost accelerated from 21.3 percent increase at half-year to 26 percent.

The outlook for the final quarter retains good hopes of sustaining the strong growth in earnings alongside the rapid growth in cost of funds, however. Credit loss expenses may gain further speed in the final quarter, though not strong enough to break the high speed of the advancing profit for the year.