STANBIC Reports Q1 2018 Results – Operating Expenses Up by 47%

Proshare

Monday, April 23, 2018 /11:07 AM / FBNQuest Research

Event
: Stanbic IBTC reports Q1 2018 results
Implications: Positive reaction from the market likely
Positives: Double-digit PBT and PAT y/y growth; write-back of N5.1bn
Negatives: Operating expenses up 47%; NPL balance up 17% q/q to N37bn 


Last week Friday afternoon, Stanbic IBTC (Stanbic) published its Q1 2018 results. PBT of N27bn grew 43% y/y. Revenue growth was mixed: funding income came in flattish y/y while non-interest income grew 38% y/y. Notwithstanding, total revenues grew by a healthy 20% y/y and helped to offset a 47% y/y rise in opex. A write-back of N5.1bn also helped, compared with a provisions charge of –N3.3bn a year earlier. PAT grew slower than PBT (by 24% y/y) because of a loss of –N2.2bn on the other comprehensive income, mainly due to the mark-to-market losses on financial assets. 

The bank’s earnings were ahead our forecasts by 34%. The variance was driven mainly by the write-back indicated above. We had expected a loan loss provisions charge of -N3.6bn. On a q/q basis, profit before provisions was only slightly up, as relatively weaker funding income was offset by the growth on the non-interest line. On the balance sheet, a -9% q/q decline in the loan book follows the trend seen in the results of tier 1 banks: Zenith (-16% q/q) and GTB (-7% q/q). On the flip side, deposits grew by 6% q/q. 

On the back of these results, we expect consensus estimates to be adjusted upwards (FY2018 PBT of N75bn vs our published estimate prior to the Q1 2018 results release of N80.6bn). We expect the market’s reaction to be positive, albeit tempered by our view that the positive surprise with the write-backs is most likely factored into the bank’s full year cost-of-risk guidance of <5% already. In addition, we note the marked rise (17% q/q) in the NPL balance between December and March. Notwithstanding, given the strength of these results, all things being equal, we continue to see the bank’s 2018E ROE target of 25-30% as realistic. Our estimates are under review. We rate Stanbic shares Underperform. 

Stanbic IBTC Q1 2018 results: actual vs. FBNQuest Capital Research estimates (N millions
)
Proshare Nigeria Pvt. Ltd.
Source: NSE; FBNQuest Capital Estimates

Proshare Nigeria Pvt. Ltd.

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