Audited results for the period ended 30 June 2013.
Renaissance Capital, an investment bank, has said that it is baffled at the reason given by Stanbic IBTC Holdings, a member of Standard Bank Group, for a slow loan growth recorded in the first half, 2013.
The bank, which announced its six months audited results for the period ended 30 June 2013 earlier in the week, revealed a 4 per cent quarter on quarter growth in net loans, when compared with the 1 per cent achieved in first quarter 2013
“Net loans were up 4% quarter on quarter, modest growth when compared with the 1% achieved in first quarter 2013. Of the Nigerian banks that have reported so far, barring Skye Bank which recorded no growth during the quarter, SIBTC’s growth is the lowest so far. Management attributes this to weak demand for credit at prevailing lending rates, which we find baffling given the experience of its peers over the same period”, Renaissance Capital said.
The firm said from the numbers, it would appear that either the bank is being quite cautious with risk asset creation or there’s just a relatively greater internal focus on driving trading revenues over credit creation in the short term.
“We concede that our financial year 2013 forecasts underestimate the Non-Interest Revenue (NIR) run-rate, which while management acknowledges will slow in second half 2013 on lower trading revenues, is still likely to surpass our current forecast. Having said this, the question we ask is how sustainable the trading revenues are beyond 2013, given that in our view, they’ve come somewhat at the expense of loan growth?”
“From our discussion with management, its loan growth target for the year now looks more like 10% than 15% as previously guided. What we will like to see while the short term focus remains on NIR delivery is continued improvement in the deposit mix while also growing the overall balance, as we think this helps set a more sustainable earnings base going forward” the firm said.
The investment bank also said that at current price of N18.8, the bank’s share price has run too hard.
“We still think the share price has run too hard – now up 71 per cent year to date”.
It said current price, Stanbic IBTC is the second most expensive bank stock in Nigeria on Price to book ratio (P/B terms), the financial ratio usually used to compare a company’s current market price to its book value and the most expensive on Price to Earnings ratio (P/E terms).
Renaissance Capital, however, commended the bank for improved Net Interest Margin, (a performance index that examines how successful a firm’s investment decisions are compared to its debt situations) (NIM)on asset yield recovery; Robust Non- Interest Revenue (NIR); Cost control and improved Cost Income Ratio (CIR), Drop in Non-Performing Loan (NPL) ratio, Improved Return on Equity (RoE) among others.
“Quite a solid performance from SIBTC which was stronger than we expected,” Renaissance Capital said, adding that improved returns were on the back of higher balance sheet leverage, but more importantly, on improved gross yields and cost control. What concerned us was slow loan growth, shrinking deposit market share” it said.
Highlights of Stanbic IBTC’s 2013 half year results
Other highlights of the bank’s results include gross earnings of N54.5 billion, up 30 per cent from N41.9 billion in June 2012, Net interest income of N17.9 billion, up 4 per cent (N17.2 billion June 2012), total operating income of N42.0 billion, an increase of 35 per cent (N31.0 billion June 2012), Credit impairment charges of N2.4 billion, up 84 per cent (N1.3 billion June 2012), Operating expenses of N26.5 billion, up 12 per cent (N23.6 billion June 2012), Profit before tax of N13.1 billion, up 115 per cent (N6.1 billion June 2012), Profit after tax of N10.2 billion, an increase of 104 per cent (N5.0 billion June 2012) among others.
Sola David-Borha, the CEO of Stanbic IBTC Holdings, said the growth in total income of about 37 per cent and the increase in profit after tax by more than 100 per cent was driven by sustained growth in transactional volumes, increased revenue from money and capital market activities.
“Our cost-to-income ratio continued to witness improvement as the ratio stood at 63.1% at the end of the first half of 2013 from 76.1% recorded in the first half of 2012. We expect this improvement in cost-to-income ratio to be sustained as revenues continue to rise at a faster rate than growth in expenses. We will continue to explore all opportunities to grow our business and market share responsibly as we leverage on our growing customer relationships, enhanced by our enlarged delivery channels and our excellent service delivery,” she said.
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