September 7, 2021/CSL Research

Stanbic H1 2021 AUDITED numbers showed a 19.8y/y decrease in Interest Income to N44.2bn but Interest Income was up 10.5% q/q. The q/q growth was due to an increase in customer loans and an uptick in yields within the quarter. Net Loans to customers were up 21.5% in H1 from December 2020 (including the impact of devaluation). Interest Expense on the other hand, declined 35.4% y/y to N11.4bn while Interest Bearing Liabilities were down 11.1% y/y. Q/q however, Interest Expense was up 20.2% due to an uptick in interest rates within the quarter. Customer Deposits were up 16.9% in H1 2021 compared with December 2020. Overall Net Interest Income was down 12.4% y/y but increased 7.3% q/q. 

Stanbic IBTC H1 2021, Nm

Source: Company, CSL Research 

Net Fee and Commission was up 17.9% y/y but declined marginally in Q2 compared with Q1. The Fees and Commission Income line was supported mainly by growth in Asset Management Fees (Up 19.6%y/y), accounting for 61% of total Fee and Commission Income as of H1 2021. Other Fee lines that showed growth were account transaction fees (up 39.8% y/y), Foreign currency service fees (up 47.8% y/y), Brokerage and financial advisory fees, Card based commission, Documentation and administration fees, electronic banking and Insurance commission and premium income. 

Other Income (Trading Revenue and Other Revenue) declined significantly, down 86.8% y/y. The decline in Trading Income was due to a decline in Income from Fixed Income Instruments and Currencies (N5.5bn in H1 2021 vs N34.3bn in H1 2020). Management had noted earlier in 2020 that this was due to gains from arbitrage income on T-bill positions sold in the NTB market to take profit as yield in that market segment continued to trend lower. Having booked significant gains on its long positions earlier in 2020, we began to see a slower momentum in trading Income in subsequent quarters.  

The group reported a write back of N1.3bn in H1 2021 compared with an Impairment Charge of N6.4bn in H1 2020. The bank’s management noted an improvement in the quality of COVID-19 restructured loans, as many of the customers are sticking to the new payment terms. 

Operating Expenses grew 14.1% y/y and 5.4% q/q. The y/y growth in OPEX coupled with the significant decline in Total Operating Income growth (-26.6% y/y) led to a 2506bps deterioration in Cost to Income Ratio (CIR ex provisions) to 70.3% in H1 2021 from 45.2% in H1 2020.

The group’s Pre-tax Profit was down 52.9% y/y to N24.7bn in H1 2021 but grew marginally q/q, up 3.5%. Supported by a lower effective tax rate of 8.8% in H1 2021 compared with 13.7% in H1 2020, Net Profit was down 50.1% y/y to N22.5bn, bringing H1 2021 annualised ROAE to 12.4% compared with FY 2020 ROAE of 24.4%.  

Under segment reporting, Personal and Business Banking reported a loss before direct tax of N3.97bn compared with a pre-tax loss of N2.97bn in June 2020 while Corporate and Investment Banking reported Pre-tax profit of N6.6bn compared with N36.9bn in June 2020. The Wealth business reported Pre-tax profit of N22.1bn compared with N18.5bn in June 2020. 

The bank’s total capital adequacy ratio closed at 17.1%, is significantly higher than the 10% minimum regulatory requirement.  

Management proposed an interim dividend of N1.00/s. 

We have a BUY recommendation on Stanbic. Our estimates are under review.