STANBIC IBTC HOLDINGS PLC 9M'21 Earnings Release - Improvements In Q3 Moderate Y/Y Profit Slide

Improvements in Q3 moderate y/y profit slide Improvements in Q3 moderate y/y profit slide STANBIC released its 9M’21 earnings last week, reporting a 40% y/y decline in Gross Earnings to ₦94 billion. However, Q3 performance was an improvement, with Gross Earnings growing 10% q/q to ₦53 billion thanks to a 24% q/q increase in Interest Income (II) to ₦29 billion, although this was matched by a similar increase in Interest Expense to ₦8 billion. This means that Net Interest Income (NII) came in 24% higher q/q at ₦21 billion. This translated to Interest Income of ₦73 billion for the 9M period, an 1% y/y decline. However, thanks to Interest Expense of ₦19 billion, 26% lower y/y, NII came in only 4% lower y/y at ₦54 billion. Meanwhile, Non-Interest Revenue (NIR) fell by 3% q/q to ₦24 billion, dragged by a 10% decline in fees and commissions, which means that NIR for the 9M period was 28% lower y/y at ₦73 billion. On the other hand, the bank continued to report net writebacks, adding ₦131 million in Q3, 88% down from Q2 for a 9M figure of ₦1.4 billion, while Opex also declined by 19% q/q to ₦25 billion, bringing 9M’21 Opex to ₦83 billion, 13% higher y/y. Ultimately, this led to a 64% q/q rise in PBT to ₦39 billion (9M’21: ₦45 billion), while PAT rose 54% q/q to ₦17 billion (9M’21: ₦40 billion).  " 9M performance drives improved estimatesStanbic’s 9M performance came in slightly ahead of our estimates, with Gross earnings 3% above our forecast of ₦141 billion, thanks to Interest Income of ₦73 billion (Vetiva: ₦67 billion) and (NIR) of ₦73 billion (Vetiva: ₦74 billion). However, it was the slower-than-expected growth in Opex, which came in at ₦83 billion (Vetiva: ₦87 billion), that drove the outperformance. As a result, PBT came in 15% above our projection at ₦45 billion, while PAT printed at ₦40 billion, also 15% above our projection. Based on this, we have adjusted our FY’21 estimates, raising Interest Income to ₦97 billion (Previous: ₦91 billion), while lowering Interest Expense to ₦26 billion (Previous: ₦31 billion), giving us a new NII figure of ₦72 billion (Previous: ₦59 billion). Conversely, we lowered our NIR forecast to ₦98 billion (Previous: ₦100 billion), while raising our writeback estimate to ₦2 billion (Previous, ₦1.5 billion). Finally, we raised our FY Opex expense to ₦111 billion (Previous: ₦108 billion).