FBNQuest research analysts said in a March 10 note to investors that they have upgraded their rating on the shares of Stanbic IBTC Holdings Plc to “outperform” from “neutral”.
Stanbic opened for trading on Monday March 9 at N35 per share but the historic global market rout driven by oil price pushed its stock to N31.50 per share, its 52-week low.
“Having shed -23.2percent year-to-date (Ytd) versus -4.4 percent return recorded by NSE ASI, Stanbic’s shares imply a potential upside of 63percent from current levels”, FBNQuest research analysts further added.
“Our new price target of N51.2 is also circa 11percent higher”, according to the analysts. The stock had reached a corresponding 52 week high of N48.50 per share.
“At current levels, the shares are trading on a 2020E price-to-book (P/B) ratio multiple of 0.98x for 21.8percent return on average equity (ROAE) in 2021E or a significant premium of 102percent to the 0.49x 2020E multiple for 16.8percent ROAE that our universe of banks is trading on,” the analysts stated further.
The analysts’ new rating follows the Holding Company (HoldCo) financial institution’s recently released financials. Stanbic IBTC Holdings Plc, a member of Standard Bank Group recently released its audited results for the full year ended December 31, 2019. The group declared a profit after tax (PAT) of N75billion. This represents an increase over its year end 2018 profit after tax which was N74.4 billion. Profit before tax for the year 2019 was N90.9 billion, representing a 3 percent increase over 2018 figures which stood at N88.2billion.
Stanbic IBTC proposed N2 final dividend payable to shareholders on June 18, 2020, which will be brought to shareholders for approval at its annual general meeting (AGM) on June 17.
The company’s non-interest revenue also grew by 6 percent to N108.8 billion in 2019, from N102.6 billion which it recorded in 2018. Stanbic IBTC Holdings also reported growth in its total operating income, from N180.8 billion in 2018, to N186.6 billion in 2019, representing a 3 percent increase.
As at December 31, 2019, the total assets of the Stanbic IBTC Group stood at N1.876trillion. This reflects a 13 percent increase, when compared to the value of the assets which was N1.663trillion as at December 2018.
“With an average oil price assumption of less than $35/barrel for its oil and gas loan book and a largely hedged position, management is optimistic that the subdued pricing environment for crude oil will have very limited impact on asset quality for its oil and gas exposures which account for circa 30percent of its total loan book. In line with guidance, we have maintained our 2020E loan growth forecast at 15percent”, FBNQuest research stated in their recent note.
While speaking on the full year audited group results, Yinka Sanni, Chief Executive, Stanbic IBTC Holdings Plc said: “Our financial results were largely in line with market guidance. We achieved double digit growth in both assets under management (AuM) and loans. Loan-to-deposit ratio was 67.5 percent, above the regulatory minimum of 65 percent as at 31 December 2019. Non-performing loans ratio was 3.9 percent, similar level with prior year and within acceptable limit of 5 percent.”
Highlighting some of the growth areas in the full year audited group results, he noted: “The Group’s total assets grew by 13 per cent aided by the growth in loans and financial investments portfolio. Our Personal & Business Banking division contributed to profit yet again with a significant improvement in profit after tax year-on-year.
Cost of risk was 0.2 percent compared to the write-back in prior year due to a nonoccurrence of a significant recovery, however it is still well below our guidance of 3 percent. Our sustained focus on cost containment coupled with revenue growth during the year yielded an improvement in cost-to-income ratio of 50.4 percent from 52.9 percent in 2018.”
While acknowledging that the regulatory and economic environment could sometimes be challenging, he stated that the company remained resolute in its target to emerge as Nigeria’s leading end-to-end financial solutions provider. He stated: “While we look to 2020 with great optimism, we are fully aware of the challenging macro-economic and regulatory headwinds that we must contend with as we enter a new decade. Nonetheless, our strategic journey towards becoming the leading end-to-end financial solutions provider by 2023 continues as we leverage our universal capabilities whilst focusing on cost management, digitisation and client centricity in accelerating growth in 2020.”
Stanbic IBTC continues to benefit from its adoption of a digital strategy as well as operating a Holdings company structure which enables subsidiaries to cross-sell and also leverage expertise within the Group.
