BY Mike 'Uzor
Stanbic IBTC’s earnings report for the third quarter ended September 2016, shows accelerated growth in revenue and a strong recovery in profit after a sharp profit drop last year. The release of its financial reports follows an agreement last November between the bank and Financial Reporting Council of Nigeria on legal issues in contention. The bank has consequently released all its pending financial reports since its third quarter report for 2015.
Stanbic IBTC closed 2015 operations with a slowdown in revenue growth and profit dropped to the lowest figure in three years. The bank looks set to remedy the earnings weakness in its 2016 report going by the strength of its performance at the end of the third quarter last September. Non-interest income is expected to lead revenue growth in the year and a considerable slowdown from an upsurge in credit losses in the preceding year is the driving force of profit recovery in 2016.
The bank closed third quarter trading with gross income of N114.62 billion, an increase of about 10% year-on-year. Fee-based earnings exclusively accounted for the increase in gross earnings, as interest income declined slightly during the period. Based on the growth rate at the end of the third quarter, gross income is estimated at N155 billion for Stanbic IBTC Bank for 2016. That will be an increase of about 11% from the gross earnings of N140 billion the bank posted at the end of 2015. Revenue growth had slowed down sharply to 7% in 2015 while a stronger growth is expected in 2016.
After tax profit amounted to N20.15 billion at the end of the third quarter, an increase of 48.6% year-on-year. Full year estimate indicates after tax profit in the region of N28 billion for Stanbic IBTC for 2016. That will be an increase of 43% and a recovery from the after tax profit of N18.9 billion the bank posted in 2015.
The improved profit performance follows all-round cost moderation for the bank in 2016. Impairment charges, which grew more than four and half times in 2015, slowed down considerably to 22.3% increase year-on-year at the end of the third quarter. A drop of 25.7% in interest expenses remedied a decline of 2.4% in interest income and yielded an increase of 19% in net interest income. Operating expenses grew at par with revenue and that enabled the bank to keep operating cost margin from rising.
Cost saving from impairment charges and interest expenses enabled the bank to improve profit margin and raise profit capacity at the end of the third quarter. Net profit margin improved from 15% in the same period last year and from 11% at the end of 2015 to 17.6% at the end of the third quarter.
The decline in interest income apparently follows a moderate decline in net loans and advances to under N366 billion at the end of September. There was however an outstanding growth of 75% in investment assets during the same period, which compensated for the decline in loans and advances and led an increase of 22% in the size of the balance sheet.
The bank’s asset base of N1.15 trillion at the end of September is built on an equity cushion of about N137 billion. The bank’s management has indicated its intention to increase its capital stock through a rights issue.
It earned N1.73 per share at the end of the third quarter, up from N1.10 in the same period in the preceding year. It is expected to earn N2.28 per share at full year compared to N1.55 at the end of 2015. The bank has announced a final dividend of 5 kobo per share, up on the 90 kobo interim dividend paid for the 2015 financial year. Is register closed on 3rd January, 2017.
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