Stanbic stocks post biggest weekly gain as FRC headwind fades

The stocks of Nigerian lender, Stanbic IBTC Holdings, topped the list of banking stocks with the highest gains on the Nigerian Stock Exchange (NSE) on Friday, after it resolved a fall-out with the Financial Reporting Council (FRC) which lasted two years.

The FRC had suspended the Chairman of Stanbic IBTC, Atedo Peterside and three directors of the company from signing any financial statement, over allegations of improper discloses in the financial statement of the bank for 2013 and 2014. This meant Stanbic was unable to publish its financial results since then.

In an indication that Stanbic has now resolved its longstanding squabble with the FRC, the lender released its financial results for the full year ended 2015 as well as its third quarter report for 2016.

Reported after tax earnings grew markedly by 48.6% to N20.2 billion in the nine months ended September, 2016, from N13.5 billion in the same period of 2015, while Earnings per Share (EPS) jumped 57.2 percent to N1.73 in 9M’16 from N1.10 in 9M’15.

“We have reached a satisfactory settlement with the FRC and the allegations levelled against us have been clarified,” Shuaib Audu, an executive director at Stanbic IBTC, told BusinessDay by phone. “This means our financial results can go public again and because investors are seeing that we are very profitable, it is rubbing off on our stocks,” Audu added.

Stanbic IBTC’s stocks rose in tandem with Thursday’s financial disclosure which showed that its bottom line grew 49 per cent to N20 billion in the third quarter of 2016, from N13.5 billion for the same period in 2015.

The bank’s stellar performance has indeed boosted investor confidence in its stocks and is the reason for the rally in stock price, Tajudeen Ibrahim, head of equity research at investment bank, Chapel Hill Denham, agrees.

“The increase in EPS means that shareholders earned 173 kobo for every 100 kobo invested in the business in 2016, compared to 110 kobo earned the previous year,” Ibrahim added.

Stanbic’s stock posted its biggest weekly gain on Friday, rising 5 percent to N14.92, from a close of N14.29 on Thursday, according to Bloomberg data.

It outperformed peers like UBA, First Bank Holdings, Access and Diamond Banks which saw declines in their share price on Friday.

Asked whether Stanbic’s stock performance may be a one-off, Audu said the expectation is that it ensues beyond 2016 as the bank consolidates gains made this year.

The bank’s top line also grew 10 percent to N115 billion for the 9 months ended September 2016 (Q3 2016) compared to N104 billion for the corresponding period in 2015.

Analysts at investment bank, Cardinal Stone say the bank’s profit outperformed their expectations.

“Compared to our estimates, whilst gross earnings were largely in line, after tax earnings outperformed our expectations by 5.6%,” analysts at Cardinal Stone said in a note to investors on Thursday, December 22.

The profit growth was driven by the wealth group, which is made up of the company’s subsidiaries, whose activities involve investment management, portfolio management, unit trust/funds management, and trusteeship, as profit from the group comprised 54 per cent of the overall profit.

The Bank grew its deposit base 14 per cent from year ended 2015; total deposits notched up 14 per cent from N589 billion in 2015 to N669 billion as at September 30,

However, the bank remained conservative in loan creation given that the loan-to-deposit ratio dropped from 64 per cent as at year ended December 31, 2015 to 59 per cent for the period ended September 31, 2016 despite growing its portfolio of loans and advances by 3.45 per cent.

The non-performing loan ratio of the bank remained fundamentally unchanged, increasing marginally from 7 per cent in 2015 to 8 per cent in 2016.

Return on equity (ROE) for the period rose to 13.92 per cent from the 10.52 per cent earned in 2015, while return on assets (ROA) rose by 0.31 percentage points from 1.45 per cent in 2015 to 1.76 per cent in 2016.

Similarly, Stanbic boosted its profit margin from 12.99 per cent in 2015 to 17.58 per cent in 2016 as net interest income grew 19 per cent, from N33 billion in 2015 to N39 billion in Q3 2016; while its efficiency ratio was unchanged at 44 per cent from 2015 to 2016.