In 2023, Stanbic IBTC experienced significant growth, with gross earnings increasing by 62% due to rising interest and non-interest income.
This robust performance continued into 2024, as the company’s pre-tax profits surged by 80.4% to N84.2 billion for the first quarter ending June 2024—marking the highest quarterly pre-tax profit in the company’s history.
For the half-year period ending June 30, 2024, Stanbic IBTC reported a pre-tax profit of N147 billion, more than doubling the N82.9 billion earned during the same period in 2023.
This figure represents about 83% of the total pre-tax profit achieved in 2023.
Dr. Demola Sogunle, Chief Executive of Stanbic IBTC, acknowledged the challenging operating environment in the first half of the year, characterized by high inflation and subdued demand, which led to a drop in the Stanbic IBTC Bank Purchasing Manager Index (PMI) to a seven-month low of 50.1 points in June 2024.
Despite these hurdles, the economy showed resilience, and Stanbic IBTC achieved notable growth.
The company’s profitability increased by 71% year-on-year (YoY), driven by improvements across revenue streams.
Interest income more than doubled YoY, thanks to higher yields and greater volumes of loans and investments. Net fees and commission income rose by 62% YoY, buoyed by digital banking transactions and investment banking fees.
Operating expenses grew by 58% due to persistent inflation and increased staff costs from enhanced employee incentives. Nonetheless, the cost-to-income ratio improved from 48.1% to 42.8%.
Reflecting its strong financial performance, the board has recommended an interim dividend of 200 kobo per share for the period ending June 30, 2024, up from 150 kobo per share in 2023. This dividend increase highlights the company’s robust earnings growth and commitment to rewarding shareholders.
Despite this impressive performance, Stanbic IBTC’s stock has experienced a 15% year-to-date (YtD) decline as of September 4, 2024, though this is an improvement from the 19% dip observed in August 2024.
Related News:
- Economic Activities in Nigeria show positive turn the first time in over 1 year-CBNGT Bank:
- World Bank makes recommendations for FCTA on housing
- Takes 60 bank Executives to court over N17bn Debt.
This recent recovery may suggest stabilizing investor sentiment, potentially providing a buying opportunity.
The stock had previously surged by 108% YtD last year, indicating its potential for substantial gains.
The recent downturn and partial recovery might reflect broader market adjustments rather than any fundamental issues with the company.
Looking ahead, Stanbic IBTC appears well-positioned to navigate current banking sector challenges, with its strong earnings and pre-tax profits suggesting solid fundamentals.
Analysts are generally optimistic about the company’s ability to leverage its performance for future growth, despite recent sector underperformance.
According to NGX brokers’ recommendations from September 2-6, 2024, the stock ratings vary:
Bancorp Securities advises a “Hold,” Afriinvest suggests “Accumulate,” and Meristen provides a “Buy” rating. These varied recommendations reflect differing perspectives on the stock’s potential.
Overall, the ratings suggest a generally positive outlook for Stanbic IBTC, with analysts recognizing its strong financial performance and growth prospects.
The “Buy” rating from Meristen indicates high confidence in the stock’s future performance, while the “Accumulate” and “Hold” ratings suggest a more cautious but still favorable view.
In addition, Stanbic IBTC retained its Fitch AAA (nga) rating, affirming its status as the only financial services provider in Nigeria with the highest rating from a global agency for over two decades.
Trading activity over the past three months (June 5 – September 4, 2024) shows that Stanbic IBTC Holdings was the 49th most traded stock on the Nigerian Stock Exchange, with a volume of 98.9 million shares traded across 3,230 deals, valued at N5.25 billion.
This trading volume indicates strong investor interest and activity, often associated with increased volatility.
Despite the inherent risks of volatility, the stock’s low beta of 0.362 suggests lower volatility compared to the overall market.
This lower beta may provide some reassurance, as it indicates the stock is less likely to experience large price swings relative to market movements.
Stanbic IBTC’s success can be attributed to several key factors:
Diverse Revenue Streams: The bank saw significant growth in both interest and non-interest income. Interest income grew by over 100% year-on-year (YoY), driven by higher yields and volumes of loans and investments.
Stanbic IBTC’s diverse revenue streams have been pivotal to its financial success. The bank’s interest income, which includes earnings from loans and investments, has seen significant growth due to higher yields and increased volumes. This has been a major contributor to the bank’s overall revenue.
In addition to interest income, Stanbic IBTC has also benefited from strong non-interest income. This includes fees and commissions from various services, with digital banking and investment banking playing crucial roles. The bank reported a 62% year-on-year increase in net fees and commission income, driven by digital banking transactions and investment banking fees.
The Corporate and Investment Banking (CIB) segment has been a significant revenue driver, contributing 47% of the total revenue in 2023. This segment includes services such as corporate loans, trade finance, and investment banking, which have been essential to the bank’s growth.
Wealth management and insurance services have also contributed to the bank’s revenue. These services include asset management and life insurance, providing additional income streams that help diversify the bank’s earnings.
Furthermore, Stanbic IBTC has leveraged digital channels to increase transactional volumes, positively impacting non-interest revenue. This includes returns from assets under management (AuM) and improved foreign exchange flows from trades with corporate clients.
Operational Efficiency: Despite a 58% increase in operating expenses due to inflation and higher staff costs, the cost-to-income ratio improved from 48.1% to 42.8%. This indicates better efficiency in managing costs relative to income.
Strong Financial Performance: Stanbic IBTC has reported a record pre-tax profit of N84.2 billion for the first quarter of 2024, marking an 80.4% increase from the previous year.
This achievement represents the highest pre-tax profit ever recorded by the bank in any quarter. For the first half of 2024, the bank’s pre-tax profit rose to N147 billion, significantly higher than the N82.9 billion reported for the same period in 2023. This amount represents about 83% of the total pre-tax profit achieved in 2023.
The bank’s gross earnings surged by 62% in 2023, driven by increases in both interest and non-interest income. This strong momentum continued into 2024, with substantial growth across various revenue streams.
Interest income grew by more than 100% year-on-year, mainly due to higher yields and volumes of loans and investments. Net fees and commission income increased by 62% year-on-year, supported by digital banking transactions and investment banking fees.
Despite a 58% increase in operating expenses due to persistent inflation and growth in staff costs, the bank’s cost-to-income ratio improved from 48.1% to 42.8%, indicating better efficiency in managing costs relative to income.
The strong financial performance has enabled the board to recommend an interim dividend of 200 kobo per share for the period ending June 30, 2024, up from 150 kobo per share for the same period in 2023. This increase reflects the company’s robust earnings growth and its commitment to rewarding shareholders.
Despite the impressive financial performance, Stanbic IBTC’s stock has seen a 15% year-to-date decline as of September 4, 2024. However, this is an improvement from the 19% dip recorded in August 2024, suggesting that investor sentiment may be stabilizing.
Strategic Management: Under the leadership of Dr. Demola Sogunle, the bank navigated a challenging economic environment marked by inflationary pressures and subdued demand. The management’s strategic decisions helped stabilize and grow the bank’s operations.
Dividend Policy: Stanbic IBTC’s dividend policy underscores its commitment to rewarding shareholders while maintaining a strong financial position. The bank has a history of paying regular dividends, demonstrating stable earnings and financial health. Typically, Stanbic IBTC pays both interim and final dividends.
For the period ending June 30, 2024, the board recommended an interim dividend of 200 kobo per share, up from 150 kobo per share for the same period in 2023, reflecting robust earnings growth.
The bank has shown a pattern of increasing dividends over time, aligning with its growing profitability. The recent increase in interim dividends is a testament to this trend.
Stanbic IBTC aims to maintain a balanced payout ratio, ensuring that a significant portion of profits is returned to shareholders while retaining enough earnings to support future growth and investment opportunities.
The dividend policy is designed to enhance shareholder value. By consistently paying and increasing dividends, Stanbic IBTC aims to attract and retain investors, thereby supporting its stock price and market capitalization.
Despite challenges such as inflationary pressures and subdued demand, the bank has managed to maintain and grow its dividend payouts, showcasing its resilience and effective management.
Market Adaptation: The bank’s ability to adapt to government policies aimed at stabilizing the economy and attracting foreign investment played a crucial role in its success.
Given Stanbic IBTC’s strong financial fundamentals and recent signs of stabilization, the current dip might present a favorable buying opportunity.
The stock, currently trading below its 52-week high of N80 achieved on October 13, 2023, has potential for future gains as market conditions improve.
