Stanbic IBTC: Non-Banking Income Drives 11% Increase in Profit

Stanbic IBTC Plc. records 11% profit in its unaudited result for 2020, though lender posted flat gross earnings of ₦234 billion, 5% below Vetiva Capital analysts’ estimates.

The holdings solid earnings performance was supported by improvement in its non-banking income line.

This came after interest income worsened by 12% year on year to ₦106 billion, despite a 17% year on year growth in loans and advances.

Analysts said this is as a result of low interest income environment which has reduced margin from lending amidst rising competition to meeting loan target.

Lender’s non-interest income came in 13% stronger year on year at ₦129 billion, but still missed Vetiva’s projection of ₦136 billion.

However, interest expense decreased by 12% year on year to ₦32 billion, leading to net interest Income of ₦74 billion, 5% lower compare to previous year.

Furthermore, the company’s provisions surged 509% to ₦10 billion as expected, while operating expenses grew 4% year on year to ₦98 billion.

This yielded a full year profit before tax of ₦95 billion, a 4% improvement compare to 2019.

Also, the bank’s deferred tax of ₦2 billion in Q4-2020 lifted full-year profits to ₦83 billion, behind ₦85 billion estimated and 11% higher year on year.

This yielded an earnings per share of ₦7.29, return on average equity of 23.8% and return on average assets of 3.7% respectively.

Analysts observed that the result achieved in the fourth quarter hampered overall business performance.

In Q4-2020, the bank reported a 10% quarter on quarter decline in gross earnings to ₦51 billion, as all business lines suffered setbacks.

Then, interest income fell by 11% quarter on quarter to ₦24 billion, while non-interest income moderated 9% to ₦27 billon amid declines in income from trading investment securities.

Surprisingly, provisions also rose sharply in Q4-2020, jumping 394% quarter on quarter to ₦3 billion, while lender’s operating expenses grew 4% to ₦25 billion.

Increased in operating expenses was driven by IT, marketing, and professional fees.

 Meanwhile, the bank’s loan-book grew 11% in the fourth quarter to ₦625 billion, while non-performing loans worsened slightly to 4.6%.

“Looking forward, we expect some mild improvements in non-interest income this year, as interest income lines are likely to remain pressured for the better part of first half 2021 at least”, Vetiva Capital hinted.

Based on the bank’s balance sheet, Vetiva Capital has made some adjustments to its 2021 forecast, as well as earnings estimates.

Analysts adjusted total loans estimate to ₦645 billion from ₦604 billion, signal expectation for an improve performance in 2021.

As well, customers’ deposits has been forecasted to hit ₦901 billion from ₦843 billion, but overall, analysts lower lender’s total assets prediction to ₦2.6 trillion from ₦2.9 trillion.

Furthermore, analysts are expecting profit to come at ₦89 billion amid expectations of weaker net interest income (₦75 billion) from the struggling banking business and lower non-interest income of ₦135 billion.

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Stanbic IBTC: Non-Banking Income Drives 11% Increase in profit