Stanbic IBTC Holdings trimmed costs in Q3 2022, enhanced profit to N55b

Stanbic IBTC Holdings sustained progress in trimming critical costs in the third quarter (Q3), which has stretched out profit margin and strengthened the bottom line to N55 billion at the end of Q3 last September.

The Q3 financial report of the N3 trillion financial institution for the period ended September 2022, shows that management has curtailed credit losses after losing grip in the second quarter (Q2).

Loan loss expenses are down from N5 billion incurred in Q2 to less than N2 billion for Q3. The high jump in loan losses in Q2 from N586 million in the first quarter (Q1) posed a constraining factor that left margins squeezed at half year.

With the drop in the quarterly figure for loan impairment expenses in Q3, Stanbic IBTC Holdings has been able to get all three key cost components in check, having earlier trimmed cost of funds and operating expenses.

Nevertheless, loan losses still pressured earnings on a quarter-on-quarter reading that shows a major shift from a net write back of N165 million in the same quarter in 2021 to a net charge of almost N2 billion for Q3 in 2022.

While gross earnings figure stepped up from N67.6 billion in Q2 to over N70 billion in Q3, there was a slowdown in terms of growth. A more rapid slowdown in costs, however, strengthened the bank’s profit capacity in Q3.

Gross earnings slowed down from 45 percent at half year to 41.6 percent to close at N201.5 billion for the nine months of operations at the end of September 2022. Net trading income continues to lead revenue growth at an increase of 176.6 percent to almost N25 billion at the end of Q3.

Despite a strong growth in interest income over the period at 46.6 percent to N107 billion, it was still a slowdown from over 54 percent rise year-on-year at half year. It still remains a strong upturn from two years of decline in interest earnings for the bank and the strongest improvement in interest income in many years.

Cost savings more than compensated for the slowdown in earnings with interest expenses leading the way. Cost of funds continued slowing down from 85 percent rise in Q1 to 57.7 percent growth at half year and further to an increase of 44 percent to over N27 billion at the end of Q3.

The bank is still expected to report the first increase in interest expenses in three years at full year and one of the most rapid increases in cost of funds in many years.

The slowdown in interest expenses strengthened net interest income, which grew by 47.5 percent year-on-year to N79.7 billion at the end of Q3. Total income grew by 41 percent over the same period to N174 billion.

Net credit impairment expenses at the end of Q3 amounted to N7.5 billion compared to a net write back of N1.3 billion in the same period in 2021. The decline in loan impairment charges in Q3 from the hike in Q2 provided a cost saving effect that strengthened the bottom line.

Income after credit impairment expenses grew by 33.8 percent to 166.6 billion at the end of September 2022.

The bank maintained the operating advantage of growing revenue well ahead of operating cost in Q3. Compared to the 41.6 percent increase in gross earnings, operating expenses rose by 23 percent year-on-year to N97.6 billion at the end of the quarter.

The effect of the development is a sustained decline in operating cost margin from 53 percent in Q1 to 50.3 percent at half year and further to 48.5 percent at the end of Q3.

Reinforced cost savings in Q3 enabled the bank to defend profit margin and strengthen its recovery functions. Net profit margin improved from 22.7 percent at half year to 27.4 percent at the end of the third quarter.

After tax profit continued stepping up on the growth track from 34 percent increase in the Q1 to 36 percent growth at half year and further to 38 percent to over N55 billion at the end of the third quarter.

Stanbic IBTC Holdings is expected to show a significant recovery in its 2022 operations from bad earnings records of the preceding financial year when revenue went down by 13 percent to N204.5 billion and profit fell by 31.5 percent to N57 billion.