Snapshot

• Gross Earnings up 1% y/y – 3% below analyst's estimate 

• Interest Income up 5% y/y despite shrinking loan book 

• Loan loss write-back boosts PBT, albeit 12% lower y/y 

• TP revised to N47.21(Previous: N49.31) HOLD 

Gross earnings dragged by contraction in loan book 

03 May 2019 : STANBIC released its Q1’19 results, posting mild growth across key line items with only slight variances from analyst's estimates. Gross Earnings grew marginally to N58.1 billion (+1% y/y), 3% below analyst's estimate. The weaker than expected growth in top line was due to a 3% decline in Non-Interest Income to N27.0 billion (4% below analyst's estimate) which countered a 5% y/y growth in Interest Income to N31.1 billion (2% below analyst's estimate). Net Interest Income came in 3% below analyst's expectation at N20.2 billion. Materially, the bank recorded recoveries on previously written off loans, totaling N1.4 billion, outperforming analyst's estimated loan loss provision of N4.3 billion. 

Analysts also note that the bank’s NPL ratio deteriorated to 4.4% q/q, a likely reason for the slowdown in Loan growth (Q1’19: 2%). However, Operating Profit outperformed analyst's estimate by 8%, rising 3% y/y to N22.1 billion. Nonetheless, this was not enough to boost PBT y/y, as write-backs totaling N5.1 billion in Q1’18 had boosted PBT to N26.7 billion. Overall, this meant that, although PAT outperformed analyst's estimate by 14% at N19.2 billion, it was down 17% y/y (Q1’18: N23.1 billion). 

TP revised to N47.21 (Previous: N49.31) 

Analysts have revised their estimates to reflect the slight variations from their forecasts. Due to the lower than expected loan growth observed in Q1’19, analysts revised their loan growth forecast for FY’18 to 9% (Previous: 10%; Q1’19: 2%). Analysts also made slight downward revisions to their Net Interest Income and Non-Interest Income lines, cutting them to N86.5 billion (Previous: N85.3 billion) and N115.9 billion (Previous: N120.1 billion) respectively. Also, following the write back recorded in Q1’19, analysts revised their loan loss provision estimate to N12.8 billion (Previous: N17.9 billion). 

Analysts also retain their Operating Expense estimate at N99.6 billion. Analysts forecast a mild 2% y/y growth (Previous: 3%) in PBT to N90.0 billion and PAT of N75.3 billion, translating to an EPS of N7.35. STANBIC trades at FY’19 P/B: 1.6x and P/E: 5.9x compared to their coverage banks’ average P/B: 0.9x and P/E: 5.9x. Overall, analysts revise their Target Price (TP) to N47.21 (Previous: N49.31). 

Business Description 

Stanbic IBTC Holdings is a member of Standard Bank Group. Standard Bank Group is Africa’s largest banking group ranked by assets and earnings and has been in business for over 150 years. With a controlling stake of 63.2% in Stanbic IBTC Holdings PLC, Standard Bank employs over 52,000 people worldwide; operates in 18 African countries including South Africa and 12 countries outside Africa including key financial centres like Europe, United States and Asia.

Reporting for EasyKobo on Friday , 03 May 2019 in Lagos, Nigeria

Source: Joshua Odebisi from Vetiva Capital Management Limited