Monday, April 24, 2017 1:08 PM /FBNQuest Research
Event: Stanbic IBTC Holdings reports Q1 2017 results
Implications: Positive reaction by the market likely
Positives: Strong double-digit y/y growth on both revenue lines
Negatives: NPL ratio doubled between December 2016 and March 2017 (NPL ratio at 10.5%)
Stanbic IBTC’s Q1 2017 results which were released this afternoon were very strong. PBT came in at N18.6bn and grew by 78% y/y while PAT of N16.4bn was up by 185% y/y. Both income lines contributed to the strong results.
Net interest income increased by 79% y/y while non-interest income grew by 19% y/y to leave profit before provisions up 42% y/y at N39bn. Looking at the y/y changes, it would appear that trading income was the main driver behind the robust non-interest income performance. It grew from N2.6bn to N6.7bn.
It is not clear at this stage which asset class was the main driver behind this performance. Net fees and commission revenue was down slightly y/y. The profit before provisions result was strong enough to offset marked y/y increases of 47% and 16% in both loan loss provisions and operating expenses respectively, hence the 78% y/y growth in PBT.
Sequentially, it is the non-interest income performance that stood out: a growth of 31% q/q (funding income was flat). Compared with our estimates, Stanbic’s results were well ahead.
PBT beat by 67% while PAT was more than double our forecast, thanks to a combination of positive surprises on taxes, other comprehensive income and minorities. Returning to the top of the P&L, both revenue lines were better than we had forecast – net interest income by 26%, non-interest income by 13%.
As such, profit before provisions came in 19% ahead of our expectations. With loans and advances down from December levels, we suspect the strong performance in funding income was likely driven by margins and/or the fixed income portfolio in general. Although loan loss provisions negatively surprised by 11%, it was overshadowed by a positive surprise in operating expenses.
The results leave Stanbic with an annualised ROAE of over 40% compared with guidance of 18-20% for the full year. While we expect interim dividends to reduce the ROAE as we move through the year, the Q1 results are so strong that the bank is on course to beat the guidance it has given.
As such, we expect consensus FY2017 PBT estimate of N47bn to move up, subject to reassurance from management that the doubling in non-performing loans between December and March to N38bn will not jeopardise the outlook for the balance of the year.
Our estimates are under review. We rate Stanbic shares Neutral.