Stanbic IBTC: Recovery and growth accomplished

Stanbic IBTC Bank has successfully picked its way up from a 47% drop in profit in 2015 and returned to the path of growth in 2017. Profit has crossed the 2014 mark and climbed to a new peak in line with forecast. A massive growth in loan loss expenses had caused the profit fall in 2015 and a slowdown for the second year in the loan loss charges was the strength for the profit recovery and growth for the bank in 2017.

The bank closed 2017 operations with an after tax profit of N48.4 billion – just marginally short of our N50 billion projection. Profit growth accelerated from 59% in the prior year to 70% in 2017 – the strongest profit advance since 2013.

There was a new strength in revenue as well with gross earnings amounting to N212.43 billion for the bank – beating our full year projection of N200 billion by 6%. That was an outstanding growth of 36% – the level of growth the bank has not seen since 2012. Revenue had grown by 12% in 2016.

Interest income was the revenue growth driver in 2017, growing by 40.5% to N122.91 billion at the end of the year. This is a rebound after a slowdown for the second year saw the lowest increase in interest income in many years in 2016. A further build up of investments by 25% after a 55% growth in the preceding year provided the spur for interest income in the year. There was only a slight increase in loans and advances, leaving the credit portfolio still well below the figure at the end of 2014.

Non-interest income, which provided the driving force for revenue growth in 2016, accelerated from 20% to 31% over the review period. That is the highest growth rate in four years.

Costs moderated generally relative to revenue during the year, which permitted increased profit capacity for the bank. Despite a sharp growth of 32% in interest cost compared to a drop of 24% in the previous year, interest expenses still moderated relative to earnings. That spurred a 44.5% increase in net interest income to over N83 billion.

Loan impairment expenses slowed down for the second year from 33% in 2016 to 29% in 2017 after a massive growth of 364% in 2015. The proportion of earnings claimed by impairment charges on financial assets declined, which enabled the bank to improve profit margin.

The bank achieved a reasonable cost saving in respect of operating cost, which grew well below revenue at 25% compared to 36%. A trend of declining cost margin has been running for the bank since 2012 from 60% in 2011 to 44% in 2016. It declined further to 40.5% at the end of 2017.

The strong growth in revenue and all round cost moderation reinforced the bank’s profit capacity in 2017. Net profit margin stretched out for the second year from under 16% in 2016 to 23% in 2017.

The bank earned N4.60 per share at the end 2017, up from N2.46 in the preceding year. It has announced a final dividend of 50 kobo per share – up on the interim of 60 kobo paid in the course of last year. The bank’s register closed on 29th March while payment date is 20th June 2018.