EUR 55.40 For Business Accounts Only

STANBIC IBTC HOLDING PLC FY'15 EARNINGS REPORT - Long overdue earnings beat estimates

• STANBIC finally released its FY’15 results showing a modest 7% y/y rise in Gross Earnings to ₦140 billion – 3% ahead of our estimate. The decent top line growth was buoyed by an impressive 15% y/y rise in Interest Income amidst a relatively flat Non-Interest Income. With the interest cost pressure persisting all through the year, Interest Expense raced farther north (up 52% y/y to ₦39 billion - 3% ahead of our estimate), resulting in a 6% y/y decline in Net Interest Income. Against our expectation and the general market trend, loan loss expense moderated in the last quarter of the year – down 47% to ₦2.4 billion, translating to a cumulative ₦14.9 billion for FY’15 (better than our ₦18.1 billion estimate). With Operating Expense up 7% y/y – just in line with our ₦62 billion estimate, PAT came in at ₦18.9 billion – down 45% y/y following the high base from a record profit reported in FY’14. The bottom line however came in 19% ahead of our ₦15.9 billion estimate. The Board of Directors proposed ₦0.05 final dividend, making a cumulative ₦0.95 dividend for FY’15.

• We have updated our model and revised our forecast. Whilst we raise our top line estimate for FY’16 and FY’17 to ₦161 billion and ₦165 billion respectively (Previous: ₦142 billion and ₦156 billion), we also revise our loan loss provision higher to FY’16: ₦24.2 billion (Previous: ₦10.1 billion) and FY’17: ₦21.6 billion (Previous: ₦9.1 billion).Also, we raise our loan growth forecast for FY’16 to 25% (Previous: 3%) – supported by the currency devaluation within the period. With top line growth outpacing our expense growth estimate, we expect the pressure on efficiency to moderate in FY’16 and forecast a CIR of 61%. Consequently, we value the stock at a 12-months Target Price (TP) of ₦15.09. STANBIC trades at a premium to peers with 2016E P/E and P/B of 7.5x and 1.1x compared to our coverage banks’ averages of 3.5x and 0.4x respectively.