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Stanbic IBTC Holdings’ faltering performance makes analysts cut earnings forecast

By on May 8, 2015

A weaker-than-expected performance in both Stanbic IBTC Holdings’ bottomlines have led analysts to cut their earnings forecast as the lender recorded drastic fall in profit.

For the first three months through March 2015, Stanbic Holdings net income fell by 39 percent to N4.21 billion from N6.89 billion the same period of the corresponding year (Q1) 2014. This compares with 93 percent growth in net income recorded in the first quarter of 2014.

Earnings per share (EPS) reduced by 44 percent to 35k in 2015 as against 62k the previous year.

“A weaker-than-expected performance in both Stanbic IBTC Holdings’ (Stanbic) revenue lines have led us to cut our 2015-16 EPS forecasts by 16 percent (Q1 2015 PBT missed our forecast by 54%),” said Olubunmi Asaolu, equity research analyst with FBN Capital in an April 29 note to BusinessDay.

“Although the subdued performance in non-interest income may be temporary (pre-election impact), it appears that funding income may take longer to recover because the impact of subtle changes in the way the CBN deducts CRR funds are proving to be more of a drag than we had expected,” said Asaolu.

Nigeria central bank has increased the benchmark interest rate from 12 percent to 13 percent, it said the hike was to control inflation and stabilise the naira that had been receiving one or two punches from slide in oil price.

The slide in oil price by 40 percent also made the apex bank scrap its bi-weekly currency auctions in February 2015, and the market body said it would sell dollars only at N198, a move that amounts to a de facto devaluation of Nigeria’s currency.

Analysts say the curb in foreign currency is a major risk banks are exposed to given the liquidity squeeze fuelled by CBN continued tightening stance.

Stanbic Holdings has succumbed to the headwinds as its net interest income dropped by 9 percent due to a 70 percent spike in interest expense to N9.01 billion in 2015 from N5.29 billion in 2014.

The bank is less aggressive about lending as its loans-to-deposit ratio reduced to 79.55 percent in 2015 from 80.53 percent the previous year.

Loans and advances increased by a single digit 4 percent to N412.77 billion in 2015 from N398.60 billion in 2014, while deposits from customers also grew by a single digit 5 percent to N518.85 billion.

Total assets increased by a mere 2 percent to N960.68 billion in 2015 from N944.54 billion in 2014.

Stanbic IBTC’s share price closed at N29.99 on the floor of the exchange, while market capitalisation was N294.50 billion.

“The negative surprise in pre-provision profit occurred because both funding income and non-interest income missed our forecast by 15 percent and 10 percent, respectively,” said Asaolu.

 

[Business Day]