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Stanbic IBTC Holdings Reports Q3 2017 Results – Shares Outperform the Index

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Thursday, October 26, 2017 /5:34PM / FBNQuest Research 

Event: Stanbic IBTC Holdings reports Q3 2017 results

Implications: Consensus full year estimates likely to remain unchanged

Positives: Profit before provisions up 32% y/y, though expected

Negatives: Limited to earnings missing our forecasts 

Stanbic’s Q3 2017 results which have just been published show 65% y/y growth in PBT and 165% y/y growth in PAT. The latter was boosted by base effects: Stanbic reported a loss of –N2.8bn in OCI in Q3 2016 compared with N323m in Q3 2017. PBT growth was driven by both revenue lines growing by strong double digits, and outpacing opex growth of 27% y/y. A -7% y/y decline in loan loss provisions also helped.   

Relative to Q2, the picture was also healthy: PBT grew 56% q/q while PAT grew 104% q/q. However, the drivers were mixed. While non-interest income increased by 19% q/q, funding income was down by -1% q/q. Thankfully, loan loss provisions fell -40% q/q and, combined with the strength in non-interest income, more than offset a 9% q/q increase in opex. 

We had been expecting a reversal in loan loss provisions on an O&G asset that led to a spike in provisions in Q2, ending up at N10.6bn vs N3.3bn in Q1. The q/q reduction in provisions to N6.4bn was less than we had anticipated. Along with a negative surprise in opex (we were looking for N20bn vs the N23bn reported), these two lines led to the 23% negative surprise in PBT compared with our estimate. 

It is possible that we see further declines in provisions in Q4 vs Q3 such that the negative surprise relative to our forecast is normalised when the bank reports its full year results. It would appear that consensus is discounting management’s comments/guidance regarding this O&G asset because the results are closer to the market’s expectations if we work backwards from a full year consensus PBT estimate of N65bn. We await management’s comments on this point as well as the explanation of the q/q increase in opex. 

Setting aside our expectations, the results show strong y/y and q/q growth in earnings, though probably not enough to impress the market. As such, given the run the shares have seen ytd (+194%, an outperformance of 158% vs the index), we could see some profit-taking. We would be buyers into any such sell-off. Our estimates are under review. We rate Stanbic Neutral. 

Stanbic IBTC Holdings Q
3 2017 results vs. FBNQuest estimates 
Proshare Nigeria Pvt. Ltd.
Source: Company data, FBNQuest Research estimates
  

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