By Olabode Jegede
It was another impressive year for Stanbic IBTC Holdings as the management leveraged on its subsidiaries to increase fee and commission income that eventually impacted on profits and dividend payout to shareholders.
The group that is into commercial banking, capital banking, pension managers, investment, Asset Management, Ventures, Trustees, among others recorded increased performance for full year ended December 31, 2018 result and accounts.
With about five per cent increase in gross earnings, the group recorded 53 per cent and 54per cent in Earnings Per Share (EPS) and profit after tax respectively.
The growth in profit drive a final dividend of N1.50 per ordinary share of 50 kobo each, that is, N15.36 billion paid to shareholders who investment in the company.
Coupled with increase in profitability, the group key financial ratios were stable last year.
Specifically, the group Return On Equity closed 2018 at 34.5per cent from 28.9 per cent recorded in 2017 while non-Performing Loan (NPL) closed the year under review at 3.9per cent, below the Central Bank of Nigeria (CBN) five per cent threshold.
The Commercial banking business strengthened its competitive position with reorganization and recapitalisation in key markets to increase the contribution of international subsidiaries
The Commercial Bank reaffirmed its leadership in banking setting innovations with effective coverage of the country.
The financial institution expected to continuously increase the number of customers leveraging on its agency banking network now located across the country.
Drop in Impairment charges drive profits
For the 2018 financial year, Stanbic IBTC Holdings reported five per cent decline in gross earnings to N222.4 billion from N212.4 billion reported in 2017.
Net interest income was down by six per cent as interest income declined by four per cent to N118.4 billion in 2018 from N122.9 billion in 2017, largely due to declining interest rate environment and asset pricing as well as two per cent growth in interest expenses.
Interest expenses moved from N39.3 billion in 2017 to N40.17 billion in 2018.
Consequently, net interest margin declined to N78.21 billion in 2018 from N83.6billion in 2017, as a result of net interest income decline and growth in total assets. Cost of funds decline year-on-year as the management continue the drive to replace expensive term deposit with cheaper deposit liabilities.
Non-interest revenue grew by 15 per cent to N69.8 billion in 2018 from N59.1 billion in 2017, driven by a seven per cent increase in trading income to N31.3 billion from N29.15 billion in 2017 and 18 per cent growth in net fees and commission to N71.22billion from N59.43billion reported in 2017.
Asset management, custody, brokerage and capital market businesses witnessed improved business patronage which contributed to the growth in non-interest revenue.
Credit impairment charges improved by over 100 per cent from N25billion in 2017 to a write back of N2.9billion in 2018 due to the bank’s recovery efforts and strategy. Credit loss ratio improved to 0.7 per cent due to recoveries from previously impaired loans.
Total operating expenses increased by 11 per cent year-on-year to N95.6 billion from N86.03 billion reported in 2017. Staff cost was up by 19 per cent to one-time adjustment to staff salaries to cushion the effect of currency devaluation and inflation. Other operating expenses increased by six per cent to N52.57 billion in 2018 from 49.7billion in 2017, mainly as a result of growth in information technology cost, AMCON charges and deposit insurance premium on customer deposits.
Consequently, cost to income ratio rose to 52.9 per cent from 49.8 per cent recorded in prior year. Effective tax rate declined to 15.6 per cent from 20.9 per cent in financial year of 2017.
Cost drivers can be attributed to the inflationary pressures as well as the Group’s ongoing transformation related expenses expected to enhance revenue generating capacity, improve operational efficiencies and enhance risk governance.
In all, profit before tax increased to N88.15 billion in 2018 from N61.2 billion in 2017. The group Income tax expense for the year was N13.7 billion from N12.79 billion reported in 2017 to drive 53.86 per cent increase in profit after tax to N74.44 billion in 2018 from N48.38 billion recorded in 2017.
Meanwhile, the group with growth in profit drives Earnings per share increased by 53per cent to N7.04 as against N4.60 reported in 2017 financial year.
The Group remains focused on growing its non-interest income as shown in the improving contribution of the non-commercial banking business to the group revenue and profitability.
Crosses N1.6trn in total assets
Stanbic IBTC Holdings total assets increased by 20 per cent to N1.66 trillion in 2018 from N1.39 trillion reported in 2017 driven by 28per cent increase in loans & advances to customers. Loans to banks & customers grew by seven per cent to N807.7 billion in 2018 from N753.6billion in 2017. Total customer deposits grew by 16per cent to N432.7billion in 2018 from N372.1.14billion reported in 2017.
Shareholders’ Funds closed at N239.6 billion, an increase of 29.4 per cent from N185 billion in 2017.
Personal & Business Banking
Personal & Business Banking (PBB) loan book grew by 20 per cent and Commercial & Investment Banking loan book grew by 9.6per cent. Local currency book grew by 11.7 per cent and Foreign currency book grew by 15.9per cent. Gross loans portfolio has grown by 14 per cent year-on-year due to the management improved lending appetite as the economy recovers.
Corporate & Investment Banking
Corporate & Investment Banking (CIB) showed performance from capital markets, advisory, custody, brokerage, foreign exchange trading and trade finance businesses in 2018, despite the headwinds from margin compression. Credit impairments improved due to write back of previously impaired loans in the earlier part of the year.
So, Cost-to-income ratio deteriorated as a result of a 20 per cent increase in other operating expenses. Loan book growth was driven by opportunities to expand trade finance, overdrafts and term loans.
The continued healthy growth in the face of heightened competition underscores the confidence reposed in the Group by the public, the strength of our franchise as a time-tested financial institution.
The Holdings this year is planning to grow quality loans and advances with focus on the more resilient sectors of the nation’s economy; grow trade finance market share; grow foreign currency trading market share; grow deposits with focus on transactional low cost deposits and focus on winning mandates on capital market businesses.