Stanbic IBTC bank is outperforming all other Nigerian lenders on the stock exchange as investors see the firm’s diversified earnings as a shield from current uncertainty. To be sure it has been a miserable past year for Nigerian financials, bogged down by a litany of woes, including the naira devaluation, central bank regulations that crimp fees and commissions and tight monetary policy.
Stanbic IBTC stock has lost -7.78 percent this year, leading to relative outperformance when compared to Sterling Bank (down -8.66 percent), Ecobank (-12.97 percent), Zenith Bank (-15.15 percent), Access Bank (-19.39 percent), FCMB (-19.68 per- cent), Fidelity Bank (-22.84 percent), First Bank (-27.61 percent), UBA (-30.23 per- cent), Skye Bank (-31.58 per- cent), Guaranty Trust Bank (-32.49 percent) and the worst performer as at February 13, 2015 Diamond Bank (-37.29 percent).
The NSE – ASI has lost 20.4 percent this year by comparison. “We recently held extensive discussions with Stanbic management, which re- enforced our view on the strength in diversity of its platform, going into a period of what we see as significant uncertainty for the Nigerian banks,” said Renaissance Capital SSA bank analyst Adesoji Solanke, in a January 23 note.
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In March 2010, the CBN announced plans to dismantle the universal banking model in Nigeria. Banks like Stanbic were a lowed to maintain their non- bank subsidiaries, provided they adopt a holding company model and ring fence capital for subsidiaries operations from the core retail banking capital. The naira fell nearly 14 percent versus the dollar last year as oil prices collapsed to under $50 per barrel, stretching the Central bank’s ability to defend the currency.
RenCap says Stanbic IBTC management sees oil prices of below $40 per barrel as the trigger point for loan restructuring discussions. Oil hit its highest level for the year on Friday with Brent crude rising above $60 a barrel, as euro zone economic growth exceeded expectations and market bulls priced in another drop in the U.S. oil rig count. Brent had collapsed from a high above $115 a barrel in June to a near six-year low under $46 in late January, as fears of a global oil glut rattled the market.
During the 2009 banking crises, the crash in oil prices and subsequent devaluation of the currency led to a significant deterioration in the asset quality of lenders. Analysts believe this time Nigerian banks have learnt a number of lessons from the last crisis and have improved their risk management structures. Lenders are still extending loans to firms with strong balance sheet and good corporate governance even as they retrench from riskier borrowers. Seplat Petroleum Development Co., Nigeria’s largest listed indigenous Exploration and Production firm recently received a $700 million seven year secured term facility with a consortium of lenders comprising First Bank of Nigeria Limited, Stanbic IBTC Bank Plc, United Bank for Africa Plc and Zenith Bank Plc, at a margin of LBOR +8.75% per annum.
Investors are wary of the sector as oil and gas (including solid minerals) now make up the lion’s share of Nigerian banks’ credit, with its proportion doubling to 22 percent in FY13, vs. 11 percent in 1Q08. A rebound in the broader market is unlikely anytime soon without participation from the banks. “Given the risk factors in the economic and financial environment, we envisage sustenance of the current bearish trend witnessed so far in 2015 and anticipate a slight reversal following the general elections,” said Meristem securities analysts in a January 26 note.
