Wednesday, September 15,
2021 / 12:27 AM / by FBNQuest Research / Header Image Credit: Stanbic IBTC
5% reduction to our price target
Excluding net credit writebacks of c.NGN1.1bn, Stanbic's Q2 '21 results showed marked declines y/y across all key headline items. Relative to our forecast, PBT missed by c. -30%.With respect to the revenue lines, funding income surprised negatively (-7%) due to a 50bp y/y contraction in net interest margin (NIM) to 2.7% over H1 '21, following a marked reduction in interest income from investment securities.
Non-interest income fared worse, missing our forecast by -18%. Despite a more positive outlook for H2 due to asset repricing and a slight improvement in the yield environment compared to Q1, management does not expect earnings to be as strong as it had initially anticipated. As such, FY '21 ROAE guidance has been revised down to a range of 15-20% from 20%-25% previously. Following the results, we have cut our funding income and non-funding income forecasts by around 4% and 13% on average over the FY '21-22f period. These downward revisions underpin the -28% average reduction to our FY '21-22 EPS forecasts.
Despite the downgrades to our earnings forecast, our new price target of NGN35.8 is only around -5% lower because we have rolled forward our DDM valuation to FY '22. The bank trades on a '21f P/B multiple of 1.2x for an ROAE of 17.4% in FY '22f. These compare with an average multiple of 0.6x for an ROAE of 15.5% that our universe of bank stocks is trading on. Having shed -11.7% this year, compared with the ASI's -3.4%, our new price target implies a potential downside of -8% from current levels. As such, we reiterate our Underperform.
Weak Q2 '21 results; PBT down -54% y/y
Q2 PBT and PAT fell by between -54% and -55% y/y to NGN12.6bn and NGN11.3bn respectively. The steep drop in earnings was driven by a -29% y/y reduction in pre-provision profit, and a 20% y/y rise in opex. With respect to revenue, non-interest income which was down -39% y/y was the bigger drag on earnings. The y/y decline in non-interest income was mainly underpinned by an -84% y/y reduction in trading income, mostly from fixed income and currency trading over H1 '21.
Funding income also fell by 11% y/y, due to lower asset yields. Further down the P&L, total comprehensive income fell -92% y/y because of a negative result of -NGN7.8bn in OCI vs. +NGN12.9bn in Q2 '20.