Stanbic IBTC Q4 2020 and Q1 2021 Results Review: Moving to Underperform Post Weak Q1 Results

Proshare

Wednesday, May 05, 2021 / 10:50 AM / by FBNQuest Research/ Header Image Credit: Stanbic IBTC

 

29% cut to our price target

We lower our recommendation on Stanbic IBTC (Stanbic) to Underperform from Outperform and cut our price target by 29% to NGN37.7 following a significantly weaker-than-expected Q1'21 set of results. Relative to our forecasts, the variance in earnings was due to negative surprises in funding and non-interest income as well as a negative result of-NGN6.3bn in other comprehensive income (OCI) vs our nil estimate. The negative surprise in funding income was underpinned by lower yields on earning assets, particularly from investment securities. Non-interest income declined by double-digits y/y due to a -78% y/y reduction in trading income from fixed income and currencies.

 

With respect to the operating segments, Wealth Management PBT grew 30% y/y. However, this performance was not enough to offset an -84% y/y decline in PBT by the corporate and investment banking business, and a pre-tax loss of -NGN1.8bn (vs. NGN880m Q1'20) by the Personal and Business Banking division. Consequently, we have cut our funding income and non-interest income forecast by -7% and -11% on average over the '21-22f forecast period. These cuts underpin the -20% average reduction to our '21-22f EPS forecasts.

 

However, our new price target of NGN37.7 is -29% lower because we have increased the risk-free rate driving our DDM valuation by 150bps to 12.5% to reflect the uptick in government bond yields. Following higher interest rate expectations, looking ahead (particularly in H2 '21), we expect funding income to start to benefit from loan repricing and higher asset yields. Our new forecasts imply a '21f ROAE of 18.5%, slightly lower than management's FY '21 guidance of 20-25%. Our new price target of NGN37.7 implies a potential downside of -25% from current levels.

 

Q1 '21 and Q4 '20 PAT (after OCI) down by -75% y/y and -34% y/y respectively

Q1 PBT and PAT (from continuing operations) fell -50% y/y and -45% y/y respectively. The main drivers were a -24% y/y reduction in pre-provision profits and a 9% rise in opex. While funding income declined -14% y/y, non-interest income fell by a wider margin of -29% y/y.

 

Following a negative result of -NGN6.3bn in other comprehensive income (OCI) (vs -NGN2.2bn Q1 '20), PAT (after OCI) fell by -75% y/y to NGN4.5bn. In Q4'20, Stanbic's PBT declined 18%, mostly because of a 71% y/y spike in loan loss provisions. PAT fell by a wider margin of -34% y/y because of a negative result of -NGN4.2bn in OCI (vs. -N119bn Q4 '19).


Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.


Related News

  1. STANBIC Declares N11.3bn PAT in Q1 2021 Unaudited Results,(SP:N50.00k)
  2. STANBIC FY2020 Results: Marginal Improvement in Earnings and Significant Rise in Impairment Charges
  3. STANBIC Declares N83bn PAT in 2020 Audited Results, Proposed 360K Final Dividend; (SP:N44.05k)
  4. STANBIC Announces Executive Appointments across the Group
  5. STANBIC Declares N83bn PAT in Q4 2020 Unaudited Results, (SP:N45.00k)
  6. STANBIC Discontinues the Operation of its Bureau De Change Subsidiary
  7. STANBIC Notifies of Board Meeting Date and Commencement of Closed Period
  8. Stanbic IBTC Holdings Plc Announces the Establishment of its wholly-owned Life Insurance Subsidiary
  9. Stanbic IBTC Bank to Reward Customers that Reactivate their Dormant Accounts
  10. STANBIC Declares N66.2bn PAT in Q3 2020 Unaudited Results, (SP:N44.00k)

 

Proshare Nigeria Pvt. Ltd.

 

READ MORE:
Related News
SCROLL TO TOP