Stanbic IBTC rebuilds profit, steps up revenue

Stanbic IBTC’s earnings report for the 2016 operations shows a rebound in profit performance and an accelerated growth in revenue. As projected, the bank has remedied the slacken earnings performance in the preceding year with revenue and profit right on target. Revenue growth had slowed down in 2015 and profit dropped to the lowest figure in three years. The bank raised its after tax profit by more than one-half in 2016, as cost moderation improved profit margin in the year. 

Gross earnings grew by close to 12% to N156.42 billion in the year, an accelerated growth from the increase of 7% in 2015. Gross earnings came slightly ahead of the projected figure of N155 billion for the bank in 2016. As expected, non-interest income provided the spur for the revenue growth for the bank – rising by 20% to N68.19 billion at the end of the year.

Interest income improved by less than 6% to N87.47 billion and therefore diluted the overall revenue growth rate in the year. The slow growth in interest income reflects a moderate decline in the bank’s net credit portfolio as well as rising credit losses. Net loans and advances went down by 3.2% to N368.23 billion. Investment assets however compensated for the decline with a major growth of over 55% to N252.82 billion. The increase provided the force for an increase of over 12% in the size of the balance sheet at the end of last year.

The inability to grow interest income was more than compensated by a drop of nearly 24% in interest expenses, which came to N29.61 billion. This was the most significant development on the bank’s income statement in 2016 that produced the profit rebound in the year. It lifted net interest income by about 32% to N57.86 billion at the end of the year. The drop in interest expenses is against an increase of 4.4% in total deposit liabilities, indicating a significant decline in the bank’s average cost of funds.

The cost saving from interest expenses also enabled the bank to absorb an increase of close to 33% in loan impairment charges and still permitted an increase of as much as 24% in earnings net of impairment charges at N106.25 billion.

Rising impairment charges remains a challenge for the bank and the banking industry generally and has been a major drag on banks’ profit performance in recent years. At N19.80 billion in 2016, impairment charges claimed more than 34% of Stanbic IBTC’s net interest income.

Operating expenses grew virtually at par with gross earnings in the year at 11.2% to N69 billion. That left operating cost margin unchanged at 44% and permitted the cost saved from interest expenses to flow all the way down into the bottom line.

After tax profit grew by 51% to N28.52 billion at the end of the 2016, virtually at par with our projected figure of N28 billion. This is a big rebound from 2015 when the bank’s after tax profit dropped to N18.9 billion – the lowest profit figure in three years. The profit figure remains slightly below the bank’s peak after tax profit of over N32 billion in 2014.

The ability to convert revenue into profit improved in 2016 with net profit margin increasing from 11% in 2015 to about 16% in 2016. The bank earned N2.46 per share, rising from N1.55 per share in 2015. It has announced a final dividend of 5 kobo per share, which closes on 4th April while payment date will be advised later.

The bank’s asset base of N1.05 trillion at the end of 2016 is built on an equity cushion of over N140 billion. The bank’s management has earlier indicated its intention to increase its capital stock through a rights issue.