Stanbic H2 lowering risks appetite, opex, lift earnings

The ability of management of Stanbic IBTC Holdings (SIBTCH) Plc to curb its risk appetite by lowering provisioning and operating expenses, has triggered buoyant market sentiment by cross- section of investment analysts and investors.

Investment Analysts Company, reacting to SIBTCH’s positioning to record rewarding Q4 2017 result, in its recent report, raised its price target growth by 56 per cent to N39.2, to be driven by positive market hearsay and investors commitment to reap from the company’s growth potentials.

FBNQuest in its post result release report pointed that apart from the roll-over effect, the other driver behind the marked uplift, the company pointed, “Is a 17 per cent average increase to our 2017-18E EPS forecasts.”

The report emphasized that, though the bank’s Q2 2017 earnings missed its PBT forecast by 29 per cent and also missed its PAT forecast by 44per cent, earnings upgrade reflects the strength of the pre-provisions and opex result.

Meanwhile, going into H2, management of the Holding company is confident that loan loss provisions will ease because of recoveries from an oil and gas exposure which was classified as a result of its reliance on the Forcados pipeline; the pipeline was out of service for most of last year but is now operational again.

The investment analysts pointed that though its cost of risk estimate of 5.6% for 2017E is closer to the upper end of management’s 4-6 per cent guidance, its changes to revenue estimates and implied run-rate for cost of risk indicates that the H2 quarterly PBT should be better than the N18.6billon the bank delivered in Q1.

“Stanbic should deliver a full year ROAE of around 35%, significantly better than the overly conservative ROE guidance of 18-20%. Given the run the shares have had this year already, they are trading close to our new price target. As such, we retain our Neutral rating” pointed the report.

Negative surprises in provisions and opex weighed on Q2 PBT: Stanbic’s Q2 2017 PBT and PAT grew strongly, by 94 per cent y/y and 169 per cent y/y respectively. The results were driven by a 43 per cent y/y growth in pre-provision profits.

This growth was underpinned by an 80 per cent y/y expansion in funding income and, to a lesser extent, a 17 per cent y/y increase in non-interest income.

The positives on these lines were strong enough to offset increases of 72% y/y and 18% y/y in loan loss provisions and opex respectively.
Further down the P&L, PAT grew by 169% y/y, thanks largely to a 43% y/y reduction on the minorities’ interest line.

 

 

 

 

 

 

Bonny Amadi