Stanbic IBTC Holdings rebuilds profit to N81b on all-round cost saving

Stanbic IBTC Holdings has recovered from a 31.5 percent profit plunge in 2021 to build an after-tax profit of N81 billion at the end of 2022. The bank’s unaudited accounts for the 2022 full year show a sustained upturn in earnings for the bank in the second half (H2).

An all-round cost saving against strong gains in revenue saw the change in fortune from a four-year profit low of less than N57 billion in the prior financial year to a 42 percent leap in 2022 — the strongest profit advance in four years.

Cost trimming in the third quarter (Q3) progressed further in the final quarter, stretching out profit margin to 32.2 percent in the closing quarter. That strengthened the bottom line with a profit of almost N26 billion in the fourth quarter (Q4) — accounting for 32 percent of the full year figure.

The bank’s management got all costs under control all the way from cost of funds to operating expenses. Interest expenses moderated at an increase of 20 percent to N12 billion in the final quarter as interest income grew more than twice faster at 43.7 percent to N45.6 billion for the quarter.

That resulted in a robust growth of 56.6 percent in net interest income to N33.5 billion for the quarter.

Credit loss expenses were curtailed through the second half from N5 billion incurred in Q2 to less than N2 billion for Q3 and N2.8 billion for the final quarter.

Despite the slowdown, loan losses still pressured earnings in the final quarter and through the year, with a major shift from a net write back of N4.4 billion in the closing quarter in 2021 to a net charge of N2.8 billion for the fourth quarter of 2022.

Operating expenses also moderated in the final quarter at an increase of 18 percent to almost N32 billion. This is against an increase of 31 percent in gross earnings to N80.5 billion for the quarter.

The favourable cost-income combination in the final quarter, lifted net profit margin that powered the impressive final quarter profit delivery.

The summary of Stanbic IBTC Holdings’ earnings story at full year is that revenue grew remarkably and costs moderated to spur the rebound in the bottom line.

The bank closed the 2022 financial year with gross earnings of almost N288 billion, which is an increase of 39.3 percent — the strongest revenue growth the bank has seen since 2010 at least.

Revenue growth was led by interest earnings that advanced by 45.7 percent to N152.7 billion while non-interest income grew by 33 percent to N127.3 billion over the same period.

This is a major upswing from two years of decline in interest earnings for the bank and the strongest improvement in interest income in many years.

Net trading income powered overall revenue growth at an increase of 161 percent to N34.7 billion at the end of the year.

Cost of funds slowed down all the way from an 85 percent rise in the first quarter (Q1) to 57.7 percent growth at half year and from an increase of 44 percent at the end of (Q3) to 34.6 percent at full year.

The slowdown in interest expenses strengthened net interest income, which grew by one-half to N113 billion at full year. Total income grew by 40.5 percent over the same period to N240.5 billion.

Net credit impairment expenses at the end of the year amounted to N10.3 billion compared to a net write back of N1.5 billion in 2021. The slowdown in loan impairment charges in the second half, provided a cost saving effect that strengthened the bottom line.

Income after credit impairment expenses grew by 33.3 percent to over N230 billion at the end of December 2022.

The third angle of the bank’s cost saving advantages in the year, came from operating cost that grew by 21.5 percent to N129.6 billion compared to the 39.3 percent increase in gross earnings.

In effect, operating cost margin went down from 53 percent in Q1 to 50.3 percent at half year, and from to 48.5 percent at the end of Q3 to 45 percent at full year.

The cost savings, particularly in the second half, enabled the bank to gain profit margin and strengthen the bank’s recovery functions. Net profit margin improved from 22.7 percent at half year to 28 percent at full year.

After-tax profit grew by 42.3 percent to N81 billion at the end of the 2022 operations, recovering from a drop of 31.5 percent in 2021.

The bank paid out an interim cash dividend of N1 per share in the course of last year while a final cash dividend is expected with the release of the audited accounts.