Stanbic IBTC Holdings (STANBIC) has released its FY 23 unaudited results, showcasing Pre-tax profit growth of 72.4% y/y, and Net profits climbing by 76.4% y/y to N137.58bn, marking the highest increase over the past five years. In Q4 23 alone, the group saw 44.0% y/y growth in Pre-tax profits and a 29.1% y/y increase in Net profits to N30.67bn, though this represented a 24.5% decline from Q3’s performance.
The results were significantly influenced by the high-interest rate environment and the liberalisation of the foreign exchange (FX) market, which greatly benefited the group’s earnings from interest income (up by 77.2% y/y) and trading revenues (increasing by 80.2% y/y). It is noteworthy that a considerable portion of the FX gains occurred in Q3 23.
The stock is down 6.7% ytd and we expect mild reactions to the results.
Loan expansion props NIM
Net interest income saw a substantial year-on-year increase of 54.9%, reaching N175.19bn. This growth was primarily driven by a 68.7% expansion in net loans to customers. The Net Interest Margin (NIM) of the group improved, rising from 6.2% in the preceding period to 7.7%. This expansion in interest income was largely attributable to loan repricing.
Positive effects of FX on NIR
The group’s non-interest income saw substantial y/y growth of 142.5%, largely driven by an 80% increase in trading revenues. This significant expansion is attributed to effects of foreign exchange market liberalisation, along with a surge in fixed-income and currency trading activities. Additionally, fees and commissions experienced 21.1% y/y growth, bolstered by fees from asset management, electronic banking, and brokerage and advisory services.
On the expenditure side, operating expenses grew by 29.4% y/y primarily due to rising staff costs, AMCON fees, and IT-related expenses. Despite this rise in expenses, the bank managed to improve its Cost to income ratio, which fell to 46.8% compared with 53.7% in the previous year. Pre-provision operating profits soared by 70.4%.
While loan impairment charges did go up by 50.2% to N15.42bn, the firm still achieved robust growth in its pre-tax profits, which climbed by 72.4% y/y to N172.91bn.
Asset quality remains strong
The Non-Performing Loan (NPL) ratio experienced a slight uptick, rising to 2.8% from the previous year’s figure of 2.7%. Representing a 76.0% surge in non-performing loans over the period, the NPL ratio remains comfortably below the regulatory threshold. Cost of Risk was maintained at 0.9%, while the Capital Adequacy Ratio (CAR) ended the year at 17.7% for the group and 14.6% for the bank, above the minimum requirements set by Basel III regulations.
Conclusion
We anticipate that interest rates will continue to be high in 2024 compared with 2023, although they may not reach the peak levels seen last year. Furthermore, considering the latest directive issued by the Central Bank of Nigeria on Net Open Positions in foreign currency, it is unlikely that trading revenues will play substantial a role in boosting earnings this year. We therefore think that a rise in interest income is likely in 2024f, while a steep rise in trading revenues is unlikely.
