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Stanbic IBTC Holding: Strong fundamentals spur analysts ‘buy’ rating

…as business segments remain profitable, resilient

Last week, Stanbic IBTC Holdings Plc published its financial results for the half-year (H1) period ended June 30, 2019. In the resulted earlier released to the investing public on the Nigerian Stock Exchange (NSE), the management of Stanbic IBTC Holdings Plc recommended an interim dividend of 100 kobo per share, the same amount paid as interim dividend in the halfyear period ended June 30 2018. The proposed interim dividend amounts to N10.241billion.

The H1’2019 financial highlights

The Group’s income statement shows gross earnings of N117.4 billion, representing 3percent increase ( June 2018: N114.2 billion); Net interest income of N39.3 billion, down 2percent (June 2018: N40.2 billion); and non-interest revenue of N54.9 billion, up 2percent (June 2018: N53.8 billion).

Also, its total operating income was relatively flat at N94 billion; profit before tax (PBT) stood at N44.7 billion, down 12percent ( June 2018: N50.7 billion); profit after tax (PAT) of N36.2 billion, down 16percent (June 2018: N43.1 billion). Cost to income ratio was 53.2percent ( June 2018: 51.9percent); return on average equity ( annualised) was 28.5percent, while return on average assets (annualised) stood at the H1’19 period at 4.5percent.

The Group’s total assets decreased by 3percent to N1.619trillion (December 2018: N1.663trillion); gross loans and advances up 5percent to N479.7 billion (December 2018: N458.9 billion); gross non-performing loans increased by 6percent to N18.8 billion (December 2018: N17.7 billion); gross non-performing loan to total loan ratio stood at 3.91percent ( December 2018: 3.9percent); customer deposits decreased by 14percent to N693.5 billion (December 2018: N807.7 billion); while deposit mix improved to 68.9percent (December 2018: 56.8percent) of current-and-savings-accounts deposits to total deposits.

Analyst’s view on the stocks following its H1 scorecard

Joshua Odebisi, equity research analyst at Lagos-based Vetiva rated

as “Buy”, the stock of Stanbic IBTC Holdings Plc as noted in their August 30 report to investors. Vetiva research sets a target price (TP) of N48.36 as against N35 it closed the preceding day. Though the new TP shows slight decline from the N49 per share target the analysts had set earlier.

“We marginally revised some of our estimates to reflect the miss across key line items. Particularly, we note that quarterly earnings run rate moderated marginally following higher impairment charges within the period,” said Vetiva researchers who also maintained their non-interest Income target at N115.9 billion, “with the bank slightly outperforming our expectations for fees and commission and income from investments”. Capital and liquidity

The group maintained adequate level of capital during the period. The group’s total capital adequacy ratio remains strong at 27.3percent (Bank: 21.7percent) which is significantly higher than the 10percent minimum regulatory requirement. The group maintained its strong liquidity position within approved risk appetite and tolerance limits.

The group’s liquidity ratio closed at 81.4percent (December 2018: 89.4percent), while the bank’s liquidity ratio closed at 67.9percent (December 2018: 78.3percent). This is above the regulatory minimum requirement of 30percent and indicates the group’s sound position to continue meeting its liquidity obligations in a timely manner.

CEO’S comment

Yinka Sanni, Chief Executive Officer, Stanbic IBTC Holdings said: “Our financial results in the first half of 2019 reflected similar trends encountered in the first quarter. The operating environment remained muted, regulatory changes coupled with the highly competitive landscape continued to impact overall returns. Still, our diversified business model continues to set us apart. Our business segments remained profitable and resilient although at a slower pace when compared to prior year.”

“We recorded marginal growth across the major revenue lines, but the overall results were largely offset by lower impairment writebacks when compared to prior year. Our continued strategic drive to reduce cost of funds resulted in a further release of expensive deposits in the second quarter leading to low-cost deposits ratio of 68.9percent”, he said.

“Loans and advances returned to growth in the second quarter mainly from the Communication and Oil & Gas sectors. Non-performing loans ratio is still within the acceptable limits. To further drive credit growth, in the retail space, we launched an instant credit solution named EZ cash loan/advance, which gives access to loans in less than a minute to pre-approved customers”, Sanni further stated.

“This among other initiatives will enable us achieve the targeted loan growth for the year. The disciplined execution of our digital strategy has seen customers increasingly adopting and transacting on our digital platforms. The number of transactions performed by customers on our digital channels was up 26percent between H1 2019 and H1 2018. This translated into a year-on-year growth of 71percent in electronic banking fees. Moreover, we instituted a digital academy targeted at equipping staff with digital skills at various levels while also driving collaboration with Fintech players to position us for early adoption of innovative solutions”, he noted.

“Following the launch of the micro pension initiative by the government earlier in the year, we deployed the Retirewell Individual Retirement Savings Account. We have put in place strong agency network in key locations to drive growth in this area and we have made good progress in this regard.

“Assets under custody stood at about N7 trillion (up 42percent on 31 December 2018 position) while assets under management grew by 8percent to N3.5 trillion from the December 2018 position, as we continue to maintain our market leadership in these areas, among others.

“Our liquidity and capital positions remain robust and well above regulatory limits. The Board has declared an interim dividend of 100 kobo in line with our commitment to delivering returns to our shareholders”, the CEO said.

The Group’s outlook

Despite the challenging business environment, Stanbic IBTC Holding intends to continue its proactive search for sustainable opportunities within its various businesses in the second half (H2) of the year. The Group said it will continue to drive accelerated lending to non-cyclical sectors of the economy as economic activities pick up while advancing its cost management initiatives to ensure it delivers decent returns at the end of the year.

Stock trading information

As at the close trading at the Nigerian Stock Exchange on Monday September 2, 2019 the stock closed at N38, heading to its record 52- week high of N53.25 as against a 52-week low of N33. The market capitalization of Stanbic IBTC Holdings plc is N389.14billion on shares outstanding of 10,240,552,945 units.

About Stanbic IBTC Holdings

Stanbic IBTC Holdings is a member of Standard Bank Group. Standard Bank Group is Africa’s largest banking group ranked by assets and earnings and has been in business for over 150 years.

The direct subsidiaries of the company are: Stanbic IBTC Bank, Stanbic IBTC Asset Management Limited, Stanbic IBTC Pension Managers Limited, Stanbic IBTC Insurance Brokers Limited, Stanbic IBTC Trustees Limited, Stanbic IBTC Stockbrokers Limited, Stanbic IBTC Ventures Limited, Stanbic IBTC Investments Limited and Stanbic IBTC Capital Limited. These subsidiaries have their own distinct boards and take account of the particular statutory and regulatory requirements of the businesses they operate.

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