August 29, 2023/CSL Research

Stanbic’s H1 2023 audited numbers showed a 61.6%y/y increase in Interest Income to N110.3bn driven by improved yields on risk assets. Q/q (Q2 2023 compared with Q1 2023), Interest Income was up 18.7%. Net Loans to customers was up 37.4% in H1 2023 from December 2022 (inclusive of the impact of the devluation on foreign currency loans). Interest Expense also grew strongly, up 110% y/y to N37.6bn. Q/q, Interest Expense was up 67.7%. Customers Deposits were up 31.5% in H1 2023 (also inclusive of the impact of devaluation) compared with December 2022. Overall, Net Interest Income grew 44.3% y/y to N72.7bn in H1 2023.

Net Fee and Commission was up 12.3% y/y and 5.2% q/q mainly driven by growth in asset management fees (Up 17.9%y/y) to N33.4bn in H1 2023.

Other Income (Income from life insurance activities, trading Revenue and Other Revenue) grew significantly, up 172.9% y/y and 41.2%q/q.  The growth in Other Income was due to a 174.0% y/y growth in trading revenue on fixed income and currencies to N44.7bn

The group reported Impairment Charge of N5.98bn in H1 2023, 9.4% higher than N5.47bn reported in H1 2022 bringing H1 2023 annualised Cost of Risk (COR) to 0.8%. Non performing loan ratio was 2.34% in H1 2023 compared with 2.38% in December 2022

Operating Expenses grew moderately, up 21.3% y/y but declined marginally in Q2 2023 compared with Q1.. The moderate y/y growth in OPEX compared with the strong growth in Total Operating Income (+51.2% y/y) led to an improvement in Cost to Income Ratio (CIR ex provisions) to 48.1% in H1 2023 from 59.9% in H1 2022.

The group’s Pre-tax Profit was up 107.6% y/y to N83.0bn in H1 2023 while Net Profit grew higher by 121.5% y/y to N67.92bn, bringing H1 2023 annualised ROAE to 31.6%.

Under segment reporting, Business and Commercial banking reported a Pre-tax profit of N9.9bn in H1 2023 compared with Pre-tax profit of N4.1bn in H1 2022 while Corporate and Investment Banking reported Pre-tax profit of N48.4bn in H1 2023 compared with N21.2bn in H1 2022. The Consumer & High Net Worth business reported Pre-tax profit of N24.6bn in H1 2023 compared with N14.6bn in H1 2022.

The Group’s total Basel 2 capital adequacy ratio closed at 18.2% in H1 2023 which is significantly higher than the 11% minimum regulatory requirement.

The management proposed an interim dividend of N1.50/s.

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