Friday, May 03 2019 02:15 PM / Vetiva Research
• Gross Earnings up 1% y/y – 3% below our estimate
• Interest Income up 5% y/y despite shrinking loan book
• Loan loss write-back boosts PBT, albeit 12% lower y/y
• TP revised to ₦47.21(Previous: ₦49.31) HOLD
Gross earnings dragged by contraction in loan book
released its Q1’19 results, posting mild growth across key line items with only
slight variances from our estimates. Gross Earnings grew marginally to ₦58.1 billion (+1% y/y),
3% below our estimate.
The weaker than expected growth in top line was due to a 3% decline in Non-Interest Income to ₦27.0 billion (4% below our estimate) which countered a 5% y/y growth in Interest Income to ₦31.1 billion (2% below our estimate). Net Interest Income came in 3% below our expectation at ₦20.2 billion.
Materially, the bank recorded recoveries on previously written off loans, totaling ₦1.4 billion, outperforming our estimated loan loss provision of ₦4.3 billion. We also note that the bank’s NPL ratio deteriorated to 4.4% q/q, a likely reason for the slowdown in Loan growth (Q1’19: 2%).
However, Operating Profit outperformed our estimate by 8%, rising 3% y/y to ₦22.1 billion. Nonetheless, this was not enough to boost PBT y/y, as write-backs totaling ₦5.1 billion in Q1’18 had boosted PBT to ₦26.7 billion. Overall, this meant that, although PAT outperformed our estimate by 14% at ₦19.2 billion, it was down 17% y/y (Q1’18: ₦23.1 billion).
TP revised to N47.21 (Previous: N49.31)
have revised our estimates to reflect the slight variations from our forecasts.
Due to the lower than expected loan growth observed in Q1’19, we revised our
loan growth forecast for FY’18 to 9% (Previous: 10%; Q1’19: 2%).
We also made slight downward revisions to our Net Interest Income and Non-Interest Income lines, cutting them to ₦86.5 billion (Previous: ₦85.3 billion) and ₦115.9 billion (Previous: ₦120.1 billion) respectively. Also, following the write back recorded in Q1’19, we revised our loan loss provision estimate to ₦12.8 billion (Previous: ₦17.9 billion).
We also retain our Operating Expense estimate at ₦99.6 billion. We forecast a mild 2% y/y growth (Previous: 3%) in PBT to ₦90.0 billion and PAT of ₦75.3 billion, translating to an EPS of ₦7.35. STANBIC trades at FY’19 P/B: 1.6x and P/E: 5.9x compared to our coverage banks’ average P/B: 0.9x and P/E: 5.9x. Overall, we revise our Target Price (TP) to ₦47.21 (Previous: ₦49.31).
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