Stanbic IBTC suffers decline performance in H1
By Kayode Tokede
Stanbic IBTC Holdings Plc suffered a further loss of earnings in the second quarter with gross earnings down by over a quarter at half-year and profit dropping by as much as one-half.
The bank’s audited accounts for the half-year ended June 30, 2021 shows a further weakening of earnings performance from the first quarter records of a 25 per cent decrease in revenue and a 45 per cent drop in profit.
The drop in gross earnings amounts to as much as N33 billion, which is accounted for by both interest and non-interest earnings. Interest income went down by about 20 per cent to N44 billion over the period, accelerating from a drop of 12 per cent at the end of 2020.
Non-interest income continued to lead to revenue drop in the year at a decrease of 34 per cent to less than N46 billion at the half year. This is an accelerated drop from about 29 per cent in the first quarter. This compares with an increase of 15 per cent in non-interest earnings last year.
Trading income remains the critical factor in the revenue weakness of the bank this year. It increased its pace of decline from 77.6 per cent at the end of the first quarter to 84 per cent at half a year to close at N5.5 billion at the end of June 2021.
For the bank, it is a major downturn from a leading growth of over 43 per cent in trading income last year.
The bank’s management made reasonable cost savings from interest and loan impairment expenses over the review period. This was however quite insufficient to remedy the huge loss in revenue.
Interest expenses went down by over 35 per cent to N11 billion at half a year, which is further to a drop of 26 per cent last year. This is ahead of the 20 per cent drop in interest earnings over the same period.
While the cost saved from interest expenses could not remedy the drop in interest income, it reduced the rate of decline in net interest income. At roughly N33 billion, net interest income decreased by 12 per cent at half a year, slowing down from a 14 per cent drop in the first quarter.
The proportion of interest earnings claimed by interest expenses dropped from 32 per cent in the same period last year and from about 30 per cent at the end of 2020 to 25.7 per cent at the end of June 2021.
Total income closed 26.6 per cent down at almost N79 billion at half-year, but the good news of loan recoveries and writebacks received in the first quarter was maintained in the second.
The bank shifted from a net loan impairment loss of N6.4 billion in the same period last year to a net write-back of credit losses of N1.3 billion at half a year. This topped up net income after the impairment charge to N80 billion at the end of June 2021. That still represents a drop of close to 21 per cent year-on-year.
The bank’s management could not prevent operating expenses from growing despite declining revenue. Operating expenses increased the rate of growth from 8.8 per cent in the first quarter to 14 per cent at half-year to close at N55 billion at half-year.
The proportion of gross earnings devoted to operating cost, therefore, grew from 38 per cent in the same period in 2020 to 59 per cent in the half year. This is the highest operating cost margin seen among listed banks so far this year – which reflects the bank’s huge revenue losses.
Tax expenses maintained the declining pattern that has been on since last year. Tax expenses went down by 70 per cent year-on-year to N2 billion at half-year against a 77 per cent drop in the first quarter and 27.6 per cent cut last year.
The bank closed the half-year operations with an after-tax profit of N22.5 billion, which is a drop of 50 per cent year-on-year. Profit margin declined from 35.7 per cent in the same period last year and 34.5 per cent at the end of the 2020 financial year to 24 per cent at the end of half-year operations.
Stanbic IBTC Holdings closed the half-year operations with earnings per share of N1.92, which is a drop from N4.19 per share in the same period in 2020. The bank is paying an interim cash dividend of N1 per share to shareholders.
Modest performance in total assets
The Holdings, thus, recorded 21 per cent increase in gross loans & advances to N790.6billion as at June 30, 2021 from N655.3billion on the heels of driving the Central Bank of Nigeria (CBN) lending to real sector. Personal & Business banking and Corporate & investment banking loans & advances grew by 36 per cent and 12 per cent respectively in the period.
Local currency (LCY) and foreign exchange (FCY) Personal & Business banking loans & advances as at June 30, 2021 was N328.3billion as against N241billion in full year ended December 31, 2020 while Corporate & Investment Banking loans and advances as at June 30, 2021 was N462.3billion from N414.3billion reported in 2020.
LCY book grew by 12.2 per cent and FCY book grew by 29.6 per cent in the period under review. The combined gross loans portfolio grew by 21 per cent as the group continued to support clients businesses and aspirations.
Loans-to-deposit ratio for H1 2021 averaged at 71.08 per cent.
Also from the balance sheet, Customer deposits increased by 17 per cent to N958.4 billion (December 2020: N819.9 billion). Deposit mix deteriorated to 73.4 per cent (December 2020: 82.8per cent) of current-and-savings-accounts deposits to total deposits.
Average shareholders’ equity grew by six per cent to close at N354.7 billion in H1 2021 from N333.7 billion achieved in 2020 financial year.
In all, Stanbic IBTC Holdings’s Total assets decreased by two per cent to N2.43 trillion as at June 30, 2021 from N2.48 trillion recorded in 2020 full year results.
Chief Executive Stanbic IBTC, Dr Demola Sogunle in a statement said: “The private sector activities improved during the first half of 2021 following the easing of restrictions in the later part of last year. The Stanbic IBTC Purchasing Managers’ Index remained above the 50.0 mark throughout the period, indicating expansion in business activities. We also saw interest rates improve significantly in the second quarter, which drove activities in the fixed income market. That said, headline inflation remained high, constraining consumer purchasing power.
The improvement in business activities positively impacted our performance in the second quarter. This improvement meant that we optimized opportunities to support our customers through lending. We empowered over 130,000 customers through our digital lending, with N40bn loans disbursed.
“We recorded an improvement in the quality of COVID-19 restructured loans, as we saw majority of the affected customers make good on their loan repayment commitments. The increase in customer loans coupled with the uptick in yields translated into the 10% quarter-on-quarter (QoQ) growth in interest income. On the flipside, the uptick in interest rates caused interest expense to rise by 20% QoQ. In the end, net interest income increased by 7% QoQ while non-interest revenue moderated slightly QoQ. Our loan recovery efforts yielded further impairment write-back in the second quarter.
“Our Corporate and Investment Banking business recorded improved business activities in the second quarter relative to the first quarter of 2021, while both the Personal and Business Banking and Wealth’s profitability moderated QoQ due to increased expenses associated with accelerated activities during the period as against muted activities in prior year. AMCON charges grew by 32% year-on-year.
“We remain focused on long term value creation for our stakeholders, so we launched the Stanbic IBTC Infrastructure Fund, under our asset management business. The Fund is a close-ended unit trust scheme that is designed for institutional investors such as Pension Fund Administrators, insurance companies, asset managers and high-net-worth individuals. In addition to that, we added a new feature – OnePass, to our Super App. This feature allows our customers access our variety of financial services with one single password, in line with our passion to enhance convenience for our customers.
“We declared 100 kobo interim dividend in line with our commitment to rewarding our shareholders. We also continued to invest in the communities that we serve in the form of donations, grants, and Corporate Social Investments during H1 2021. This included donation towards the renovation of damaged police stations, grants for the refurbishment of some businesses that were impacted by the #ENDSARS Unrest; donations toward other causes such as the Lagos MSME Recovery Fund and the Abuja Disabled Peoples Home, amongst others. We remain committed to supporting our stakeholders and the wider communities.
“We recognize that the domestic economic environment remains challenging given that the country is currently facing a third wave of the pandemic. As a responsible institution, we are observing the relevant safety protocols to protect our employees, clients, and communities at large. We have activated the third level of our business continuity plans as part of our immediate response measures.
Over the rest of the year, we are focused on serving the needs of our customers in an innovative manner as well as creating and implementing strategic initiatives that would further enhance long term value creation for our shareholders.”
