STANBIC IBTC HOLDINGS PLC Q1'19 - Profits Beat Estimates Occasioned By Write-Back

Profits beat estimates occasioned by write-back                                                  

STANBIC released its Q1’19 results, posting mild growth across key line items with only slight variances from our estimates. Gross Earnings grew marginally to ₦58.1 billion (+1% y/y), 3% below our estimate. The weaker than expected growth in top line was due to a 3% decline in Non-Interest Income to ₦27.0 billion (4% below our estimate) which countered a 5% y/y growth in Interest Income to ₦31.1 billion (2% below our estimate). Net Interest Income came in 3% below our expectation at ₦20.2 billion. Materially, the bank recorded recoveries on previously written off loans, totaling ₦1.4 billion, outperforming our estimated loan loss provision of ₦4.3 billion. We 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%).                    

We have revised our estimates to reflect the slight variations from our forecasts. Due to the lower than expected loan growth observed in Q1’19, we revised our loan growth forecast for FY’18 to 9% (Previous: 10%; Q1’19: 2%). We also made slight downward revisions to our Net Interest Income and Non-Interest Income lines, cutting them to ₦86.5 billion (Previous: ₦85.3 billion) and ₦115.9 billion (Previous: ₦120.1 billion) respectively. We forecast a mild 2% y/y growth (Previous: 3%) in PBT to ₦90.0 billion and PAT of ₦75.3 billion, translating to an EPS of ₦7.35. STANBIC trades at FY’19 P/B: 1.6x and P/E: 5.9x compared to our coverage banks’ average P/B: 0.9x and P/E: 5.9x. Overall, we revise our Target Price (TP) to ₦47.21 (Previous: ₦49.31).