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Monday, April
05, 2021, /07:30 AM / by Adaeze Nwachukwu, Proshare Research / Header
Image Credit: Stanbic IBTC Plc
The earnings of Stanbic
IBTC Holdings over the last five years have been
increasing at a decreasing rate, the coronavirus pandemic in 2020 worsened the
lenders already slow relative growth rate.
However, the credit provider was able to grow its total deposit, taking
advantage of the low-cost pf deposit mobilization over the period, total
deposit grew by +49.49%
Y-o-Y. The banks loans and advances, however, grew at a slower rate of +18.27% Y-o-Y. This led to a fall in the lender's loan-to-deposit
ratio (LDR), which fell from 60.35% in 2019 to 47.75% in 2020.
The bank's non-performing loans (NPL) saw a marginal increase reflecting
COVID-19-induced economic challenge in 2020. Stanbic IBTC's NPL rose from 3.9%
in 2019 to 4.0% in 2020 or 1% lower than the statutory threshold of 5%.
Key Highlights/Takeaways
Share Price & Volume Movement-Choppy Waters
Stanbic IBTC
holding's share price movement in 2020 was choppy responding to economic
uncertainties associated with the year. However, the share price closed higher
than pre-pandemic levels, closing +10.13%
higher. The financiers price fell to its lowest level in March 2020 while its price
was at its highest in October. Considering year-to-date (YTD) performance, the
share price rolled along a bullish track in 2021. Although there was a dip
between January and February 2021, this was because of adverse market sentiment
towards after announcing the discontinuation of its BDC subsidiary. The share
price closed at +16.35% higher as of 31
March 2021.
A
Matter of Traded Volume
The volume
of shares traded in 2020 was also volatile with spikes seen in the first and
fourth quarters. The groups volume traded fell closing -96.95%
lower, with the highest volume traded was seen in January while the lowest
volume traded was in July 2020. However, traders got to see a rebound in volume
traded in 2021, traded volume rose by +332.08%
as of 31 March 2021 (see chart 1 below).
Chart 1: Stanbic IBTC's Share
Price and Volume Traded
Source: NSE, Proshare Research
Profitability
The gross
earnings of the HoldCo in the last five has risen at a decreasing rate. In
FY2020 audited result, gross earnings grew marginally by +0.27% from N233.81bn in 2019 to N234.45bn in
2020. The marginal rise in gross earnings was on the back of a +14.67% increase in non-interest income while net
interest income dipped by -4.65%. The major driver
of the growth in non-interest income was the +43.43%
rise in trading income.
The 2020
result showed the lowest percentage growth in gross earnings of the group in
the last half-decade while 2017 saw the highest percentage growth in earnings
of +35.81%.
The
devaluation of the domestic currency, which slipped twice in 2020 punched down
the revenue of Stanbic IBTC. Gross earnings fell by -19.22%
from US$761.71m in 2019 to US$615.34m in 2020 using the official CBN rate (I
& E FX Window) at the different periods of translation (see chart 2
below).
Chart 2: Stanbic IBTC's Gross
Earnings 2016 - 2020 (N'bn)
Source: Stanbic IBTC's Financial Statement,
Proshare Research
There was
also a slight rise in profit before tax (PBT), which rose Y-o-Y by +4.17% from N90.93bn in 2019 to N94.72bn in 2020.
The banking
group saw its highest percentage PBT growth of +64.38%
in 2017 while 2019 recorded the lowest percentage rise in PBT by +3.15%.
The lender's
marginal growth in PBT in Naira terms in 2020 was upturned in US dollars, PBT fell
by -16.08% in US dollar terms from US$296.22m in
2019 to US$248.60m in 2020 (see chart 3 below).
Chart 3: Stanbic IBTC's Profit
Before Tax 2016 - 2020 (N'bn)
Source: Stanbic IBTC's Financial Statement,
Proshare Research
Impairment Charges
Credit impairment
on financial assets was N9.94bn in 2020 against N1.63bn in 2019 representing a +508.76% increase in impairment charges and the
highest percentage growth in impairment charges for the past five years. This
was driven by deterioration in the macroeconomic condition in 2020 (see chart 4
below).
Chart 4: Stanbic IBTC's Impairment
Charges 2016 - 2020 (N'bn)
Source: Stanbic IBTC's Financial Statement,
Proshare Research
Total Asset-Climbing
Uphill Strongly
There was a
significant upsurge in total assets of the group in 2020, total assets grew
Y-o-Y by +32.50% from N1.88trn in 2019 to
N2.49trn. Major drivers of the growth in total assets were the cash and bank
balances and financial investment. They both grew Y-o-Y by +37.41% and +294.18%
respectively.
A breakdown
of the financial investment shows a significant move from risky asset classes
to non-risky asset classes especially treasury bills. Investment in treasury
bills grew remarkably by +481.19% in 2020.
The trend of
total assets of the group has been steady with 2020 recording the highest
percentage growth while 2019 records the lowest percentage growth of +12.79% change in total assets.
In US dollar
terms, total assets grew less than the growth in Naira terms, total assets
increased Yo-Y by +6.75% from US$6.11bn in
2019 to US$6.53bn in 2020 (see chart 5 below).
Chart 5: Stanbic IBTC's Total
Assets 2016 - 2020 (N'trn)
Source: Stanbic IBTC's Financial Statement,
Proshare Research
Total Equity-Scaling New Heights
The total
equity base grew Y-o-Y by +25.27% from
N302.23bn in 2019 to N378.60bn in 2020. The share premium and reserves segment
of the total equity were the drivers of the growth, they both grew Y-o-Y by +16.56% and +29.49%
respectively.
Although
total equity has been growing, its growth is at a decreasing rate as shown by the
results from the past five years. The highest percentage growth of +31.55% was recorded in 2017 while 2020 had the
lowest percentage growth.
Converting
to US dollar terms, total equity grew slightly by +0.92%
which is a lot slower than the growth in domestic terms, from US$984.62bn in
2019 to US$993.70bn in 2020 (see chart 6 below).
Chart 6: Stanbic IBTC's Total
Equity 2016 - 2020 (N'bn)
Source: Stanbic IBTC's Financial Statement,
Proshare Research
Cost- A Bump Up the Curve
The slight rise
in operating cost against the rise in operating income caused the cost-to-income
ratio to dip a blip. The lender's CIR fell from 50.39% in 2019 to 47.39% in
2020. However, operating cost rose Y-o-Y by +0.26%
while operating income bumped forward by +6.61%
in 2020.
The CIR for
2020 was the lowest in five years with 2016 posting the highest CIR in the last
half-decade (see chart 7 below).
Chart 7: Stanbic IBTC's
Cost-to-Income Ratio 2016 - 2020
Source: Stanbic IBTC's Financial Statement,
Proshare Research
Investor Returns- Getting A Little Subdued
Return on
equity (Pre-tax) declined to 25.02% in 2020 from 30.08% in 2019. This was also
the lowest return on equity (ROE) in five years while 2018 had the highest ROE
of the group in five years.
The group
met its guidance on ROE for 2020 which was set between 25% and 30%, its guidance
for 2021 was between 20% and 25% which was lower than the previous. (see chart 8
below).
Chart 8: Stanbic IBTC's Return on
Equity 2016 - 2020
Source: Stanbic IBTC's Financial Statement,
Proshare Research
Return on
assets (Pre-tax) also declined in 2020, from 4.85% in 2019 to 3.81%. The lender
witnessed its highest ROA in 2018 and its lowest in 2016 (see chart 9
below).
Chart 9: Stanbic IBTC's Return on
Assets 2016 - 2020
Source: Stanbic IBTC's Financial Statement,
Proshare Research
The coronavirus
pandemic took a toll on the group's earnings, especially its quarterly
performance. The banking group recorded its highest gross earnings of N65.15bn in
Q2 2020 also, PBT was also at its highest in Q2 2020. The impact of the
pandemic was felt most in Q4 2020 as earnings were at their lowest. However,
the FY2020 performance was slightly better than FY2019 which showed some
operational resilience by the lender.
In 2020, the
group announced that it had obtained
all required regulatory approvals as well as a License from the National
Insurance Commission to establish a wholly- owned Life Insurance subsidiary to
be known as Stanbic IBTC Insurance Limited ("SIIL").
Related News
1. STANBIC Declares N83bn PAT in 2020 Audited Results,
Proposed 360K Final Dividend; (SP: N44.05k)
2.
Brandishing Stanbic
IBTC's Impressive Gender Equity Scorecard...
3. STANBIC Announces Executive
Appointments across the Group
4. Stanbic IBTC Holdings Plc Announces
the Establishment of its wholly owned Life Insurance Subsidiary
5. Stanbic IBTC Bank to Reward Customers
that Reactivate their Dormant Accounts
6. Stanbic IBTC YTD Sept 2020: A Rebound
in Earnings
7. Banks in H1 2020: Deconstructing
Banks' H1 2020 Individual Performances - Stanbic IBTC Bank
8. Takeaways from Stanbic IBTC Bank H1
2020 Investors' Conference Call
9. Stanbic IBTC Q2 2020 Results Review:
Solid Q2; on Track to Deliver >25% ROE in 2020
10. Stanbic IBTC Holdings Plc to
Establish a Wholly owned Life Insurance Subsidiary
11.
Stanbic IBTC Q1 2020 Results Review:
Shares Attractively Priced Post Sell-off
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