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STANBIC IBTC HOLDINGS PLC Q1'22 Earnings Release - Income growth marks strong start to the year

Income growth marks strong start to the year
On Friday, STANBIC released its Q1’22 earnings, reporting 47% y/y jump in Gross Earnings to ₦67 billion, 20% above our estimate of ₦56 billion. This came on the back of a 57% y/y improvement in Interest Income to ₦33 billion (Vetiva: ₦29 billion), as yield on loans and advances for the first quarter improved significantly to 10.4% from 6.9% by our estimate in Q1’21. Furthermore, the bank reported a 39% y/y rise in Non-Interest Revenue to ₦34 billion, thanks to trading revenue gains, specifically from Fixed income securities. Meanwhile, the bank’s interest expense rose by 86% y/y to ₦9.6 billion as interest paid on term deposits went up 4.9x y/y to ₦4.4 billion, caused by the repricing of existing customer deposits. However, despite the steep rise, the bank’s Net Interest Income still improved by 48% y/y to ₦23 billion (Vetiva: ₦21 billion).
Balance sheet improvements bode well for FY’22 earnings In the first quarter, STANBIC managed to grow its balance sheet to ₦3.1 trillion, a 13% improvement from its position as of FY’21. This was mainly due to an 8% rise in Investment and trading securities, while Net loans grew 6% to ₦980 billion. These improvements already beat our modest expectations for FY’22 performance, therefore we have revised our assumptions for both line items, thus increasing our Gross earnings forecast to ₦263 billion (Previous: ₦223 billion). Conversely, the rise in AMCON expense also necessitates an upward revision of our Opex projection, which has been adjusted to follow Q1 run rate, thus we revise the figure to ₦143 billion (Previous: ₦112 billion). However, we maintain our FY’22 profit forecast at ₦69 billion, on the back of weaker loan loss recovery expectations and the higher Opex figure.