October 25, 2021/CSL Research

Stanbic 9M 2021 numbers showed a 10.9% y/y decrease in Interest Income to N73.0bn but Interest Income was up 23.9% 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 8% q/q and were up 31.5% in 9M from December 2020. Interest Expense on the other hand, declined 26.0% y/y to N19.0bn. Q/q however, Interest Expense was up 23.6% due to growth in Customer Deposits within the quarter and an uptick in interest rates. Customer Deposits were up 33.5% in 9M 2021 compared with December 2020. Overall Net Interest Income was down 4.0% y/y but increased 24.1% q/q.

Stanbic IBTC 9M 2021, Nm

Source: Company, CSL Research

Net Fee and Commission was up 15.1% y/y but declined marginally in Q3 compared with Q2, down 4.5%. The y/y growth in the Fees and Commission Income line was supported mainly by growth in Asset Management Fees (Up 16.7%y/y), accounting for 62.5% of total Fee and Commission Income as of 9M 2021. Other Fee lines that showed growth were account transaction fees (up 32.5% y/y), Foreign currency service fees (up 30.8% y/y), Brokerage and financial advisory fees(up 5.0%y/y), electronic banking fees (up 19.6%y/y), and documentation and administration fees (up 53.7%y/y). 

Other Income (Trading Revenue and Other Revenue) declined significantly, down 81.8% y/y mainly due to a decline in Trading Revenue. Q/q however, Other Income was up 62.4% in Q3 compared with Q2. The y/y decline in Trading Income was due to a decline in Income from Fixed Income Instruments and currencies (N9.0bn in 9M 2021 vs N44.4bn in 9M 2020). In Q3 however, Trading revenue growth was due to an increase in volume of trading activities. 

The group reported a write back of N1.4bn in 9M 2021 compared with an Impairment Charge of N7.0bn in 9M 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. Non-performing loans to total loan ratio of 3.4%  was reported compared with (December 2020: 4.0%) 

Operating Expenses grew 12.0% y/y but declined 15.6% q/q. The decline in Q3 was largely to the fact that AMCON levy was not recognised in Q3 2021. The y/y growth in OPEX coupled with the significant y/y decline in Total Operating Income growth          (-20.3% y/y) led to a 1859bps deterioration in Cost to Income Ratio (CIR ex provisions) to 64.4% in 9M 2021 from 45.8% in 9M2020.

The group’s Pre-tax Profit was down 41.0% y/y to N45.3bn in 9M 2021 but grew significantly q/q, up 64.0%. Supported by a lower effective tax rate of 11.8% in 9M 2021 compared with 13.7% in 9M 2020, Net Profit was down 39.6% y/y to N39.9bn, bringing 9M 2021 annualised ROAE to 16.4% compared with FY 2020 ROAE of 24.4%. 

Under segment reporting, the group mentioned during its last results’ conference call, that the Group was transitioning from a product/service focus to a Client Segment led organization effective August 2021. The new segments include Wholesale Clients (formerly known as Corporate and Investment Banking); Consumer and High Net worth Clients (formerly known as Personal Banking (PB) with the inclusion of Wealth and Investment Customers; and Business and Commercial Clients (formerly known as Business Banking). Business & Commercial banking segment reported PBT of N4.4bn compared with a loss of N2.1bn in 2020. Wholesale banking reported a PBT of N15.4bn compared with N55.4bn while the consumer and high net worth segment reported a PBT of N25.5bn compared with N23.6bn in 9M 2020. 

The bank’s total capital adequacy ratio closed at 15.7%, is significantly higher than the 10% minimum regulatory requirement. 

We have a BUY recommendation on Stanbic.