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STANBIC IBTC HOLDINGS PLC FY'20 (Unaudited) Earnings Release - Profits up 11% amid Non-Interest Income rise

Non-banking business lines carry bank to the finish line
STANBIC released its unaudited FY’20 earnings, posting flat Gross Earnings of ₦234 billion, 5% below our estimate. This came after Interest Income worsened by 12% y/y to ₦106 billion, despite a 17% y/y growth in loans and advances. Meanwhile, Non-Interest Income came in 13% stronger y/y at ₦129 billion, but still missed our projection of ₦136 billion. However, Interest Expense decreased by 12% y/y to ₦32 billion, leading to Net Interest Income of ₦74 billion, 5% lower y/y.

Furthermore, the company’s provisions surged 509% y/y to ₦10 billion as expected, while Opex grew
4% y/y to ₦98 billion (Vetiva: ₦99 billion). This yielded a FY PBT of ₦95 billion, a 4% y/y improvement. Also, the bank’s deferred tax of ₦2 billion in Q4’20 lifted full-year profits to ₦83 billion, behind our ₦85 billion estimate and 11% higher y/y. This yielded an EPS of ₦7.29, ROAE of 23.8% and ROAA of 3.7% respectively.
Q4 dip hampers overall business performance
In Q4’20, the bank reported a 10% q/q decline in Gross Earnings to ₦51 billion, as all business lines suffered setbacks. Interest Income fell by 11% q/q to ₦24 billion, while Non-Interest Income moderated 9% q/q to ₦27 billon amid declines in income from trading investment securities. Surprisingly, provisions also rose sharply in Q4, jumping 394% q/q to ₦3 billion, while Opex grew 4% q/q to ₦25 billion driven by IT, marketing, and professional fees. Meanwhile, the bank’s loan-book grew 11% q/q to ₦625 billion, while NPLs worsened slightly to 4.6%. Looking forward, we expect some mild improvements in Non-Interest Income this year, as Interest Income lines are likely to remain pressured for the better part of H1 at least.

TP revised to ₦46.89 (Previous ₦47.22)
Based on the bank’s FY balance sheet, we made some adjustments to our 2021 forecast, as well as our earnings estimates. We adjusted our total loans estimate to ₦645 billion (Previous: ₦604 billion) as well as our deposits forecast to ₦901 billion (Previous: ₦843 billion), but overall, we lower our total assets prediction to ₦2.6 trillion (Previous: ₦2.9 trillion). Furthermore, we lowered our FY’21 profit expectation to ₦89 billion (Previous: ₦95 billion) amid expectations of weaker Net Interest Income (₦75 billion) from the struggling banking business and lower Non-Interest Income of ₦135 billion (Previous: ₦142 billion). Our profit expectation yields an EPS of ₦7.82 and DPS of ₦2.81, with ROAE and ROAA of 22.5% and 3.4% respectively.