Stanbic IBTC Holdings Q4 2017 Results Review -Strong Balance Sheet Growth to Support Future Earnings


• Earnings in line with estimates, EPS up 69% y/y
• FY’17 DPS of N1.10 (cumulative) vs. Vetiva estimate of 1.04
• Impressive loan and deposit growth, up 5% and 34% y/y respective/y
• TP revised upward to #39.84, SELL rating maintained

Top and bottom line beat estimates, significantly higher y/y

STANBIC released its FY’17 results earlier with most line items coming in largely in line with our estimates. Maintaining earlier quarters’ run rate, Gross Earnings rose 2% q/q, leading to a 36% y/y growth for the FY’17 period – 3% ahead of our estimate. The impressive top line performance was supported by robust growth in both Interest and Non-Interest Income – up 41% and 31% y/y respectively. We note that whilst Personal & Business Banking and Corporate & Investment Banking segments continue to account for a bulk of Interest Income, earnings from the Wealth business and other non-banking subsidiaries remain supportive of Non-interest income. Importantly, we highlight the strong deposit growth recorded over the year, with Customer Deposits up 34% y/y – a trend we expect to support credit growth in 2018. Consequently, Interest Expense rose 33% y/y to 39.3 billion, coming marginally ahead of our 38.3 billion estimate.

With this, Net Interest Income was up 44% y/y to
83.6 billion – in line with our estimate. Deviating from the trend observed across most of the banks’ that have released FY’17 results so far, loan loss provision moderated 18% q/q in Q4’17 to bring FY’17 provision to 25.6 billion – 11% better than we had expected. Consequently, Operating Income was up 39% y/y to 147 billion, beating our 139 billion estimate. However, with Operating Expense up 25% y/y to 86 billion – following an 8% q/q rise in Q4’17, PAT came in marginally ahead of our estimate at 48.4 billion – up 70% y/y. The Board of Directors proposed a final dividend of 0.50 – taking FY dividend to
1.10 and translating to a dividend payout ratio of 23% and a yield of 2%.

TP revised higher, Sell rating maintained
We have updated our model and revised our forecasts to reflect the positive result and mild deviation around a few line items. We believe the impressive balance sheet growth in FY’17 presents a strong platform for growth in 2018. Consequently, we forecast loan growth of 10% for FY’18 amidst improving risk environment. Also, we expect earnings from the market-leading subsidiaries to continue to support top line with Non-Interest Income contributing 42% to Gross Earnings. Despite our expectation of moderating interest rate in the near to medium term, we estimate a mild 3% y/y rise in Interest Expense due to accretion in customer deposits.

We remain wary of the bank’s asset quality and estimate a loan loss provision of
23.7 billion for FY’18 – translating to a Cost of Risk of 6.1%. With OPEX growth expected to match Income growth, we expect efficiency to stay stable with a Cost to Income ratio of 50%. Overall, we forecast a strong 24% y/y growth in PAT to 59.8 billion, translating to an EPS of
5.95. With this, our earnings forecast translates to average ROE and ROA of 27.8% and 4.1% respectively. STANBIC trades at FY’18 P/B: 2.2x and P/E: 8.2x vs. our coverage banks’ average P/B: 0.9x and P/E: 4.9x.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


Source: Vetiva Research 

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.


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