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Stanbic IBTC Holdings Plc:Excellent risk management strategy pays off as NPLs Improve

Stanbic IBTC Holdings Plc just released its 2018 audited financial statement that showed there were improvements in key ratios.

The lender has maintained its position as the bank with the strongest return on equity (ROE) in the industry, a stellar performance that shows management and board of directors have deployed the resources of owners in generating higher profit.

Little wonder its price to book was trading at 2.10 times as at April 12, this compares to Guaranty Trust Bank (GTBank) 1.83 times, Zenith Bank,0.78 times; Access Bank , 0.31 times, and United Bank for Africa (UBA), 0.45 times.   

This means equity investors are paying more for each Naira in Stanbic IBTC’s net assets than its peers, which is why its shares have been appreciating on the floor of the bourse.

Stanbic IBTC has an excellent risk management strategy as its Non Performing Loans (NPLs) of 3.90 percent as at December 2018 is not only lower than the 5 percent threshold,  it is the lowest in five years.

The Bank has N3.22 trillion assets under management (AuM) while assets under custody (AuM) stood at N4.89 trillion, and its retirement savings accounts hit 1.69 million as at December 2018.

Stanbic IBTC Holdings continues to drive digital transactions as customers become more comfortable using its alternative channels as reflected in the 24 percent growth in Digital transactions between the first and last quarter (Q1&Q4) and 4.5 percent drop in branch transactions between Q1&Q4.

Steady Growth in Gross Earnings amid declining yield environment

Gross earnings increased by 4.98 percent to N222.36 billion in December 2018 from N212.43 billion in December 2017; the growth in revenue was largely driven by an uptick in noninterest revenue.

However, net interest income was down by 6 peercent as interest income declined by 4 percent to N118.4billionin December 2018 from N122.90 billion as at December 2017, largely due to declining interest rate environment and asset pricing.

Noninterest revenue was up 15.05 percent to N102.60 billion in the period under review from N89.18 billion as at December 2017.

The growth in interest income was largely driven by an 18.15 percent and 7.2 percent increase in fees and commission income and other income to N69.84 billion and N31.31 billion in December 2018 from N59.08 billion and N29.14 billion in December 2017.

Stanbic IBTC said that asset management, custody, brokerage and capital market businesses witnessed improved business patronage which contributed to the growth in non-interest revenue.

Strong growth in profit despite increased operating expenses

Stanbic IBTC Holdings profit before tax increased by 44.12 percent to N88.15 billion in the period under review from N61.16 billion the previous year.

Profit after tax followed the same growth trajectory as it surged by 53.86 percent to N74.44 billion in the period under review from N48.38 billion as at December 2017.

The growth in profit is coming amid rising operating expenses.

Total Operating expenses were up 11.11 percent to N95.60 billion in the period under review from N86.0 billion the previous year.

A breakdown of total expense figure showed staff cost was up 19 percent to N43.02 billion in the period under review due to one-time adjustment to staff salaries to cushion the effect of currency devaluation and inflation.

Other operating expenses increased by 5.67 percent to N49.74 billion due to growths in information technology cost, Asset Management Charge of Nigeria and charges and deposit insurance premium customer deposits.

As a result of growth in operating expenses, cost to income ratio increased to 52.90 percent in the period under review from 49.80 percent in the previous year.

Good asset quality validates risk management strategy

Stanbic IBTC excellent risk management strategy paid off as Non Performing Loans (NPLs) fell to 3.90 percent in December 2018 from 8.90 percent the previous year.

Impairment on financial assets improved by over 100 percent from N25.6 billion charges in full year 2017 due to a write back of N2.9 billion in full years of 2018, thanks to recovery efforts and strategy.

Total loans and advances to customers were up 15.60 percent to N441.25 billion in December 2018 from N381.70 billion as at December 2017; the growth in loans shows the Bank has a voracious appetite for lending as the economy improves.

Stanbic IBTC’s total asset increased by 20.28 percent to N1.66 trillion in the period under review as against N1.38 trillion the previous year while total equity was up 29.40 percent to N239.67 billion in the period under review from N185.21 billion as at December 2017.

Improvement in Key profitability ratio

Stanbic IBTC’s return on equity (ROE) increased to 34.50 percent in December 2018 from 28.90 percent the previous year, thanks to consistent growth in profit.

Return on asset followed the same growth trajectory as it moved to 4.80 percent in the period under review from 3.80 percent as at December 2017, thanks to asset utilization.

About Stanbic IBTC Holdings

Stanbic IBTC Holdings PLC (“Stanbic IBTC”) was incorporated as a Public Limited Liability Company on 14 March 2012. Stanbic IBTC is the holding company for the entire Stanbic IBTC Group and its subsidiaries. The Company was listed on the Floor of The Nigerian Stock Exchange on 23 November 2012, following the delisting of the Group’s erstwhile holding company, Stanbic IBTC Bank PLC (“the Bank”), pursuant to its compliance with the CBN Regulation on Banking and Ancillary Matters No. 3 of 2010.

The Bank on the other hand, was incorporated as Investment Banking and Trust Company Limited (“IBTC”), a private limited liability company, on 2 February 1989. IBTC was granted a merchant banking licence in February 1989 and commenced operations on 1 March 1989. IBTC’s merchant banking licence was converted to a universal banking licence in January 2002, pursuant to the universal banking guidelines of the Central Bank of Nigeria (“CBN”). In 2005, IBTC became a public company and its shares were listed on The Nigerian Stock Exchange (“The NSE” or “The Exchange”).



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