STANBIC FY2020 Results: Marginal Improvement in Earnings and Significant Rise in Impairment Charges

Proshare

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

  • Gross earnings rose Year-on-Year (Y-o-Y) by +0.27% from N233.81bn in 2019 to N234.45bn in 2020 (fell by -19.22% in USD terms to US$615.34m in 2020).
  • Profit before tax grew marginally Y-o-Y by +4.17% from N90.93bn in 2019 to N94.72bn in 2020 (declined by -16.08% in USD terms to US$296.22m in 2020).
  • Impairment charges on loans climbed Y-o-Y by +508.76% from N1.63bn in 2019 to N9.94bn in 2020 (up by +390.45% in USD terms to US$26.08m in 2020).
  • Marginal Y-o-Y rise of +5.35% in basic and diluted earnings per share from continuing operations from 692kobo in 2019 to 729kobo in 2020.
  • Total loans up Y-o-Y by +18.27% from N535.17bn in 2019 to N632.97bn in 2020.
  • Total deposit rose by +49.49% Y-o-Y from N886.74bn in 2019 to N1.33trn in 2020.
  • Total equity increased Y-o-Y by +25.27% from N302.23bn in 2019 to N378.60bn in 2020 (marginal growth in USD terms, equity grew by +0.92% to US$993.70m in 2020).
  • The total dividend for the year ended December 31, 2020, was 400k0bo per share as against 300kobo per share in 2019.


 Proshare Nigeria Pvt. Ltd.



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

Proshare Nigeria Pvt. Ltd.

Source: NSE, Proshare Research


 

Proshare Nigeria Pvt. Ltd.



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)

Proshare Nigeria Pvt. Ltd.

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)

Proshare Nigeria Pvt. Ltd.

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)

Proshare Nigeria Pvt. Ltd.

Source: Stanbic IBTC's Financial Statement, Proshare Research



Proshare Nigeria Pvt. Ltd.


 

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)

Proshare Nigeria Pvt. Ltd.

Source: Stanbic IBTC's Financial Statement, Proshare Research

 


Proshare Nigeria Pvt. Ltd.



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)

Proshare Nigeria Pvt. Ltd.

Source: Stanbic IBTC's Financial Statement, Proshare Research



 Proshare Nigeria Pvt. Ltd.



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

Proshare Nigeria Pvt. Ltd.

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

Proshare Nigeria Pvt. Ltd.

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

Proshare Nigeria Pvt. Ltd.

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").




Proshare Nigeria Pvt. Ltd.


 

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



Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

READ MORE:
Related News
SCROLL TO TOP