Stanbic IBTC Holdings Q4 2016 Results: Positive Reaction Expected


Wednesday, March 22, 2017 11:59 PM / FBNQuest Research 

Event: Stanbic IBTC Holdings reports Q4 2016 results
Implications: Positive reaction by the market likely
Positives: Strong net interest income y/y growth
Negatives: Non-interest income fell -1% and missed forecast by 15%

Stanbic IBTC’s Q4 2016 results which were released this afternoon showed strong y/y growth across the P&L. Q4 2016 PBT of N11.5bn grew 39% y/y while PAT grew much faster, by 159% y/y to N11.4bn, thanks to a significant other comprehensive income result of N4bn compared with a loss of –N87m a year prior.   

Returning to the PBT, the growth was driven by a marked growth of 72% y/y in net interest income: interest income grew 31% y/y while interest expense fell -17% y/y. This positive result more than compensated for a weak non-interest income outturn (-1% y/y), as well as y/y increases in provisions (+85% y/y) and opex (+15% y/y).  

Sequentially, although the PBT grew only 4% q/q, PAT grew much faster, by 87% q/q because of the OCI gain. Relative to our forecasts, both PBT and PAT were ahead strongly, the latter on the back of the OCI result for which we forecasted zero.  

The better-than-expected PBT result was driven by several factors, of which the most significant was the strong net interest income result. This beat our forecast by 28%. Although non-interest income missed by 15%, the funding income result was strong enough to leave profit before provisions ahead by 4%. Positive surprises in loan loss provisions (19%) and opex (7%) combined to boost the surprise on the PBT line.  

The bank has not hosted a conference call since 2015 due to the delay in the publication of several quarterly results until recently, as a result of a dispute (resolved now) with the Financial Reporting Council of Nigeria which dragged on for months. As such, the market has been flying blind in the absence of any guidance.  

We are glad that the bank is restoring its results presentation and conference call format following the release of these Q4 2016 results. We would expect the market to react positively to these results.  

However, given that the profit before provisions result was only 4% ahead of our estimate, we do not expect a runaway rally in the shares. Q4 accounting adjustments may have benefitted the opex and provisions lines. And there is a limit to which the market is likely to read into the OCI gain also.  

Our estimates are under review. We rate the shares Underperform.

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