STANBIC IBTC HOLDINGS PLC H1'20 Earnings Release - Non-core banking delivers record half-year profits

Non-core banking delivers record half-year profits                                                                      

Non-Interest Income saves the day

STANBIC released its audited H1’20 results yesterday, posting an 8% y/y increase in Gross Earnings to ₦126.6 billion (Vetiva estimate: ₦124.5 billion). This was due to a significant improvement in Non-Interest Income (+26% y/y) as a result of trading gains on foreign currency and fixed income securities, which went up 95% y/y to ₦34.3 billion. Meanwhile, Interest Income fell as expected by 9% y/y to ₦55.1 billion (Vetiva estimate: ₦55.6 billion). This was the result of a 22% y/y decline in interest from investment securities to ₦21.6 billion. However, Interest Expense also declined 18% y/y to ₦17.6 billion (Vetiva estimate: ₦18.9 billion), mainly due to a decline in interest paid on term deposits and current accounts. This led to a 4% y/y decline in Net Interest Income to ₦37.5 billion (Vetiva estimate: ₦36.7 billion.                                                               

Strong second quarter contrasts with interim dividend downgrade

Interestingly, despite the record half-year profits, the bank declared a ₦0.40 interim dividend. This is likely a move to shore up retained earnings and build a larger buffer against further pandemic-induced shocks. However, in the midst of the lockdown in Q2, the bank posted a 3% q/q gain in Net Interest Income to ₦19.0 billion and 10% q/q rise in Non-Interest Income to ₦37.5 billion. Therefore, based on its Q2 performance, we still expect the bank to improve in the second half of the year. Thus, we raise our Net Interest Income forecast to ₦75.0 billion (Previous: ₦72.8 billion). As expected, non-core banking operations were the largest contributor to profits and outperformed our expectations in Q2 (+11%) and H1 (+5%); thus we raise our Non-Interest Income forecast to ₦141.8 billion (Previous: ₦130.4 billion).