Thursday, October 30, 2014 9:21 PM / FBN Capital Research
Event: Skye Bank reports Q3 2014 results
Implications: Slight upward revisions to consensus full year PBT forecast likely
Positives: PBT and PAT both grew 26% y/y; both came in ahead of our forecasts by 17%
Negatives: Provisions and opex surprised negatively
This afternoon Skye Bank (Skye) published its Q3 2014 results which showed that PBT and PAT both grew by 26% y/y to N5.1bn and N4.1bn respectively. Profit before provisions grew by just 5% y/y (due to some reclassification in 2013, we prefer not to comment in detail on y/y movements on the separate income lines) and combined with a 1.7% y/y reduction in opex to more than offset a 17.7% y/y increase in loan loss provisions to drive the double-digit growth in PBT.
Sequentially, PBT and PAT grew by about 33% q/q. driven by funding income which advanced by 30% y/y and offset a -7% q/q decline in non-interest income. The strong q/q growth in funding income led to profit before provisions improving by 20% q/q to N23.6bn. Compared with our estimates, PBT and PAT both surprised positively, by around 17% because net interest income was 22% ahead of our N15.2bn forecast. The latter proved significant, overshadowing negative surprises on the non-interest income and provision lines.
The 9M 2014 PBT of N12.3bn is currently tracking ahead of consensus full year PBT forecast of N15.9bn. However, we note that Q4 results have been notoriously difficult to forecast, and tend to throw up negative surprises. As such, we would expect any upward revisions to consensus PBT forecast for the full year to be modest.
In addition, we still believe management's guidance of a 2014 ROAE of 17% is aggressive; the 9M 2014 results point to an ROAE of around 14%. Despite this set of healthy results, we expect a subdued reaction from the market given that the bank needs to raise tier 1 capital very soon. The shares have shed 41% ytd, worse than the -7.8% decline by the All Share Index.
Our estimates are under review. We rate Skye Bank shares Underperform.
Conference call details: yet to be circulated