StanbicIBTC’s share ‘good to buy’, says RenCap

The stock of Stanbic IBTC Bank Plc, a unit of Standard Bank Group, has been raised to “buy” from “sell” by Renaissance Capital.

The target price was raised to N26.1 from N15.1, Rencap said in a research paper released on Tuesday.

Against a current price of N21.2, the new target price shows an upside potential of 23 percent, Rencap said.

The “big change” on the stock comes post-splitting up the business and valuing the distinct Bank and Wealth divisions separately, according to Rencap.

“We conclude that the significant premium that Stanbic trades at vs. comparable Nigerian banks lies in the valuation of its Wealth business,” it said.

Rather than valuing Stanbic as one entity, Rencap said the bank is better viewed as a financial groups that could be easily split into the ‘Bank,’ comprising personal and business banking (PBB) and corporate and investment banking; and `Wealth,’ comprising the pension administration business, trusteeship and asset management.

In the Nigerian banking industry within its coverage, Rencap says it saw more upside in other names, but noted that “Stanbic is a different value proposition with the key offering being that it gives you access to a diversified earnings pool with an upside kicker in the banking business where PBB (personal and business banking) appears broadly on track to breaking even”.

It added that other tier-2 banks are pure commercial banking plays with most having relatively weaker NIR (non-interest revenue) generating platforms and are more susceptible to monetary policy risks.

“We therefore reiterate our view that the Bank’s turnaround is not only key to improved future return on equity delivery, but is also valuation-positive,” RenCap said.