Wednesday, October 29, 2014 8:52 PM / FBN Capital Research
Event: Stanbic IBTC Holdings reports Q3 2014 results
Implications: Consensus 2014 PBT forecast of N35bn likely to move up slightly
Positives: Q3 PBT up 46% y/y, though expected
Negatives: No obvious negatives
Stanbic IBTC Holdings’ (Stanbic) Q3 2014 results which have just been published show that the bank was very close to delivering another record quarter of earnings. Q3 PBT of N10.4bn was only 2% shy of the record results which the bank delivered in Q2 2014. The PBT was up 46% y/y, not far from the 50% y/y growth we saw in H1 2014. Q3 2014 PAT grew 15% y/y to N8.2bn. The slower growth on the PAT line can explained by base effects: Q3 2013 saw a positive result on the other comprehensive income line of N1.8bn; in Q3 2014 Stanbic recorded a negative –N400m result.
In terms of drivers behind the strong PBT growth, both income lines contributed, with funding income up 28% y/y while non-interest income grew 19% y/y. As such, profit before provisions grew 23% y/y to N26.5bn. The healthy increase in income more than offset a 7% y/y growth in opex and loan loss provisions increasing by N676m y/y. Sequentially, the picture was subdued, with PBT declining slightly, by 2.3%, while PAT fell by 11%. Both funding income and non-interest income grew by modest single digits.
A 135% q/q increase in loan loss provisions and a 7% q/q increase in opex proved significant this time round, leading to the slight decline in PBT. Relative to our forecasts, PBT was in line while PAT came in ahead of expectations by 8%, mainly due to a lower-than-expected tax rate of 9.9% vs our forecast of 22%.
On the back of these results, we would expect consensus PBT to move up as we suspect that the market’s expectations for Q3 were slightly behind ours. Our published full year PBT forecast of N39.9bn is higher than consensus’ N35bn. We also believe the results put Stanbic on track to beat its 2014 ROE guidance of 25% as we indicated after the Q2 results. Our current published 2014E ROE forecast is 26.2%.
YTD Stanbic shares are among the best performing in the sector and the market as a whole, gaining 36% vs the ASI’s -7.7%. Much of the regulatory headwinds that the sector is facing has a modest impact on Stanbic’s operations because Stanbic derives a disproportionate portion of its earnings – relative to other banks - from its non-corporate/commercial banking units. In the midst of the disappointing results across the market, these results are encouraging. As such, we would expect a slightly positive reaction by the market to this result.
Our estimates are under review. We rate Stanbic shares Neutral.