STANBIC IBTC HOLDING PLC FY'16 - Earnings beat consensus – PAT up 51% y/y

Maintaining the strong earnings performance recorded in earlier quarters, STANBIC posted impressive FY’16 results – beating most of our estimates across major line items. Whilst Gross Earnings came just in line with our ₦156 billion estimate (12% rise y/y), PAT trumped our forecast (29% better). Against our expectation of a relatively weaker Q4’16 performance, the last quarter came in stronger than anticipated. Notably, amidst a 7% q/q rise in Interest Income, Interest Expense moderated 9% q/q (supported by moderation in Term Deposit) to spur a 16% q/q rise in Net-Interest Income. Also, in line with historical trend, we had anticipated a relatively higher loan loss provisioning in Q4’16. However, the bank reported a significantly more contained provision of ₦4.5 billion for Q4’16 (Q3’16: ₦8.2 billion) vs. our ₦10.5 billion estimate.

We note that the FY’16 performance beat our estimates across most of the line items. We are impressed with the moderation in CoF observed in FY’16 and expect this to continue to drive earnings going forward. With our loan growth forecast of 8% amidst relatively flat Non-Interest Income, we estimate a modest 5% growth in Gross Earnings for FY’17. Also, we estimate a loan loss provision of ₦19.6 billion – translating to a Cost of Risk of 5.3% (FY’16: 5.6%). Overall, we raise our Target Price (TP) to ₦18.93 (Previous: ₦17.90). STANBIC trades at FY’17 P/B: 1.1x and P/E: 5.6x.