Corporate Results | |
Corporate Results | |
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Thursday March 07, 2019 / 10:40 AM / NSE With Additional Notes From CSL Stockbrokers
Initial Reaction – CSL Stockbrokers
Stanbic FY 2018 results showed a 5% y/y growth in Gross Earnings to
N222.4bn, albeit it came below our 2018 estimate of N234.5bn. Buoyed largely by
the growth of 15% y/y in Non-interest income and write-backs from loans
previously written off, Pre-tax Profit grew 44% y/y to N88.2bn. However on a
q/q basis, gross earnings fell marginally by 2% to N53.5bn on the back of a 13%
q/q decline in Non-interest Revenue which offset the growth of 8% q/q in
Net-Interest Income.
Interest Income declined slightly by 4%
y/y to N118.4bn in FY 2018, on the back of a 14% y/y decline in Interest on
investments during FY 2018 which offset the growth of 5% y/y in Interest on
Loans and Advances (the firm grew its loan book by 14% y/y during FY 2018).
Interest expense rose marginally by 2% y/y
to N40.1bn in FY2018, driven by increase in deposits from customers (+7% y/y).
This coupled with the marginal decline in Interest Income led to a 6% y/y
decline in Net Interest Income to N78.2bn, coming in below our 2018 estimate of
N86.2bn.
The firm sustained growth in Non-Interest Income, up 15% y/y to
N120.6bn on the back of higher Net Fee and Commission Income which grew 18% y/y
to N69.8bn and a growth of 7% y/y to N31.3bn in Trading Income. Similarly,
higher fees from asset management (+21% y/y), brokerage and financial advisory
(+22% y/y) and custody transactions (+30% y/y) buoyed Fee and Commission
Income.
The
bank Capital Adequacy Ratio (CAR) of 21.0% (FY 2017: 20.5%) remains strong
and well above the regulatory requirement of 10%.
The bank
reported positive Impairment charge of N2.9bn compared to negative N25.6bn in
FY 2017 owing to write-backs.
Operating Income grew 5% y/y to N180.8bn, supported largely by the
growth of 15% y/y in Non-Interest Income which partly offset the decline in Net
Interest Income (-6% y/y) and the mild growth of 2% y/y in Interest Expense.
Operating Expenses however grew by 11% y/y to N95.6bn. This, coupled
with a single digit growth of 5% y/y in Operating Income led to a 308bps
expansion in Cost to Income Ratio (CIR ex provisions) to 52.9%, underperforming
our 2018 estimate of 50.5%.
Despite the rise in Operating Expenses, Pre-tax Profit grew remarkably
by 44% y/y to N88.2bn while Profit after tax grew faster by 54% y/y to N74.4bn,
owing to lower effective tax rate of 15.6% compared to 20.9% in FY
2017. Consequently, EPS also grew by 53% y/y to
N7.04 in FY 2018 from N4.60 in FY 2017.
The
company has proposed a final dividend of N1.50/s in 2018 subject to approval at
the AGM. The final dividend represents an increase of 200% from the N0.50/s
declared in 2017. The company had earlier declared an interim dividend of
N1.0/s, bringing the total dividend for 2018 to N2.50/s. Based on its last
closing price of N46.6 on 6 March 2019, the final dividend translates to a
dividend yield of 3.2%.
We have a target price
of N65.7/s for Stanbic (current price: N46.0) with a Buy recommendation.
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