Most analysts had betted against Nigerian lenders hitting double digit growth in earnings given the tough environment they operate in, but one bank has defied such impression, and that lender is Stanbic IBTC Holding plc.
The Nigerian lender’s 2014 audited financial statement shows profit after tax (PAT) surged by 54 percent to N32.06 billion from N20.77 billion as of December 2013. Profit before tax (PBT) spiked by 63 percent to N40.07 billion in 2014 compared with N24.61 billion in 2013.
Analysts had betted that the tough operating environment caused by the Central Bank Nigeria (CBN) tightening policy and regulatory induced costs such as the Asset Management Corporation of Nigeria (AMCON) charge would slow growth estimates of Stanbic IBTC.
However, Stanbic’s head was above the waters as it recorded a 15 percent growth in interest income supported by impressive loan growth. Net interest income also followed the same growth trajectory as it spiked by 26 percent to N46.65 billion from N37.01 billion in 2013.
The remarkable growth in net interest income was because the bank was able to keep net interest expense flattish, despite the CBN’s tightening stance.
Gross earnings increased by 17 percent to N130.61 billion in 2014 from N111.22 billion in 2013.
Earnings per share increased by 58 percent to 293k in 2014 from 186x in 2013.
“The better-than-expected PBT result was driven by a combination of funding and non-interest income beating our forecasts by single digits, while provisions came in 26 percent below our forecast,”said Olubunmi Asaolu, equity research analyst with FBN Capital, in an April 2 note.
“Consensus forecasts for PBT and PAT were marginally higher than our estimates,” said Asaolu.
Stanbic’s share price has been rising by 53.68 percent in the past one year to close at N31 on the floor of the NSE, based on data compiled by Bloomberg.
With a consistent performance at both the top- and bottom-line level, the bank may have worked its way to recording one the highest return on investment among the tier 2 banks.
Stanbic’s return on average equity (ROAE) of 30.26 percent and a return on average assets of (ROAA) 7.84 percent rank the bank as best performer among the tier 2 lenders.
Despite the regulatory induced costs such as the AMCON charge, Stanbic was efficient as its cost-to- income ratio reduced to 60.47 percent in 2014 from 70.53 percent in 2014. The cost-to-income ratio shows the efficiency of a firm in minimising costs while increasing profits. The lower the cost-to-income ratio, the more efficient the firm is running.
The bank’s net margin, another measure of profitability and efficiency, spiked to 24.54 percent in 2014 as against 11.12 percent in 2013, while operating expenses increased by a single digit 6 percent to N61.31 billion.
It would be recalled that Nigerian lenders were mandated to pay 0.5 percent of their total assets annually as AMCON charge.
Based on BusinessDay analysis, Stanbic will be paying N4.72 billion as AMCON charge out of 2014 total assets.
Stanbic should intensify loans to Small and Medium Enterprises (SMEs), agriculture and other industries as loans to customers increased by a single digit 6.11 percent to N407.41 billion in 2014 from N383.92 billion in 2013.
Loans-to-deposit ratio to reduce to 73.54 percent in 2014, as against 82.02 percent in 2013, which means the lender is less aggressive about lending.
Deposits to customers moved by 18.38 percent in the review period to N554.05 billion in 2014 compared with N468.03 billion in 2013.
Total assets were up by 24 percent to N944.54 billion in 2014 compared with N763.04 billion as of December 2013.
“Stanbic has proposed a final dividend of 15 kobo, below our 20 kobo estimate. This follows an interim dividend of N1.10. We would expect the market’s reaction to these results to be neutral to slightly positive,” said Asaolu.
BALA AUGIE
