Stanbic IBTC
Stanbic

OKEY ONYENWEAKU

The name Stanbic IBTC no doubt rings a bell in the financial services industry. This would be because, among other reasons, it has achieved many firsts and attained enviable heights. Notably, the group’s share price in the NGX price chart at N36 per share is still the highest valued. The price of any stock, experts agree has a relationship with its performance. If the firm maintains a good value investors most times attribute it to its strong fundamentals which include good performance, but otherwise would also reflect poor stock price.

Experts have noted that, ‘’A company’s stock price reflects investor perception of its ability to earn and grow its profits in the future. If shareholders are happy, and the company is doing well, as reflected by its share price, the management would likely remain and receive increases in compensation.’’

They also assert that, “An increase in stock price is often automatically attributed to management’s value creation performance”,

But the reverse appears to be the case with Stanbic IBTC. The Holdco has recorded huge profit decline in the last three quarters of this year. Yet it’s stock price though dropped from N42.35 per share in November 2020 to N36.00 per share as at December 14, 2021. At the price of N36.00 per share, Stanbic IBTC is still the highest valued in the banking industry. Its value is N11.00 higher than GT Holdco which closed on December 14, at N25.00 per share and N11.25 higher than Zenith Bank, the second and third highest valued banking stocks in the market.

Unfortunately too, the group’s performance has not been all that palatable.

In the results under consideration, Stanbic IBTC Holdings Plc’s profit before tax plunged by 50 per cent to N12.1billion in first quarter (Q1) results for the period ended March 31, 2021; down from the N24.2billion it had reported in the results for the first quarter ended March 31, 2020.

The the Holdco’s audited result and accounts released to the Nigerian Exchange Limited (NGX) recently showed that its profit before tax plummeted by 52.9 per cent to N24.71billion in H1 2021 from N52.41billion reported in H1 2020.
In the third quarter ended September 30, 2021, the Holdco’s Profit before tax declined by 41% to N45.3bn.

Profit after tax also declined by 40% to N39.9bn while Gross Earnings declined by -20% to N146.6bn from N183.3bn in the previous quarter. Its Net Assets declined by -4.8% from N379bn to N360bn.

Despite the poor performance, investors in Stanbic IBTC smiled to their banks when the generous institution paid them N1.00 interim dividend at a time of famine and starvation across the nation. A rare performance indeed. In fact, N1.00 interim dividend is a scarce menu in the history of the Nigerian Exchange Group. But how would a firm be doing this much Christmas in the season of drought?

The loud whispering on Marina and Broad street of Lagos is that 50 per cent decline in profit in three quarters consecutively is not healthy for an organisation’s continued survival.

While mixed feelings have trailed the bank’s performance, the Chief Executive Stanbic IBTC Holdings, 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 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 N40billion 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 20per cent QoQ. In the end, net interest income increased by seven per cent QoQ while noninterest 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 32per cent year-on-year.”

Demola Sogunle assured the bank remains focused on long term value creation for stakeholders, as it launched the Stanbic IBTC Infrastructure Fund under 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-networth 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,” he also said.

The groups helmsman said : “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.”

Put in Perspective

Indeed, there is no doubt that Nigeria’s business environment has not been favourable to businesses recently. Last year, pressures from the outbreak of Covid -19 hampered business activities and setback the economy. Fast spreading insecurity is impeding not only investments but also business activities. The fearful resultant effect of these are still awaited as the new Covid-19 Delta Variant and the latest named Omicron have resurged in Nigeria and other places.

Critically, recent statistics reveal that the rate of unemployment, the second highest in the world is 40%. At the same time, the underemployment rate stood at 22%; even as inflation, which is hitting the roof top at has just eased from 18.17 to 15.40 per cent , though doubted by many who feel otherwise. At the same time, Diaspora remittances inflow fell 27 per cent year on year (YoY) to $17.2billion in 2020 from $23.55billion. It has just increased by 5 per cent to $4.3 billion in the first quarter this year,Q1 2021 from $4.1billion in the preceding quarter Q4 2020. Foreign Direct Investment has also dropped by 61percent to $2.78billion in H1 2021 compared to $7.15 billion received in the corresponding period of 2020.

Before now the name Stanbic IBTC is as popular in the Nigerian financial services arena even as its long acknowledged qualitative services and strong performance have almost always been taken as given.

And with its broader continental and global affiliations, the lender has also earned wider recognition in most corners of Africa and the world for its compactness, focus and consistency in delivering some of the best services in the banking industry.

Indeed, industry feelers reveal that this strong and very service oriented bank has definitely been the envy of its peers in very many respects.

Forced to break into retail banking during the compulsory banking consolidation exercise of 2004-2006, the bank has remained creative, tactful and focused.
Many still believe that its investment banking business is still the best in the industry.

From when it was established in 1989 as a first class investment bank, IBTC had always been deliberate with its operations to achieve both customer satisfaction and greater shareholder value for its owners.

As always, that focus and target have not changed. Its share price has dropped from N44.05 per share in January 4, 2021 to N36.00 per share in November 14, 2021.

The Q3 Numbers

In a sense however, being the highest valued stock in the banking sector at N36.00 per share on the price chart of the Nigerian Stock Exchange (NSE) is the least of what attracts investors to Stanbic IBTC.

Its market capitalization which stood at N466.451 billion as at Friday December 17, 2021 is hardly even close to that of the big names like Gt Bank, Zenith Bank among others.

On the basis of total assets, Stanbic IBTC is also missing in the crowd of the top eight banks in Nigeria.

But nobody doubts that the quality of its services are near superlative and one of the best in the banking industry.

This fact was attested to by the Managing Director of one the best performing banks in Nigeria in an event recently.

Most of its competitors secretly admire the bank’s compact demeanor and envy its character and achievements.

Forced to break into retail banking during the compulsory banking consolidation exercise of 2004-2006, the bank has remained creative, tactful and focused.

Many still believe that its investment banking business is still the best in the industry.

From when it was established in 1989 as a first class investment bank, IBTC had always been deliberate with its operations to achieve both customer satisfaction and greater shareholder value for its owners.

As always, that focus and target have not changed. But this focus may have been betrayed by the unimpressive third quarter results of 2021.

In the third quarter ended September 30, 2021, the Holdco’s Profit before tax declined by 41% to N45.3bn.

Profit after tax also declined by 40% to N39.9bn while Gross Earnings declined by -20% to N146.6bn from N183.3bn in the previous quarter. Its Net Assets declined by -4.8% from N379bn to N360bn.

The holding company moderated its costs marginally as operating expenses dropped from N71.593 billion in 2019 to N70.847 billion in 2020 while net fees and commission revenue also dropped from N53.373 billion in 2019 to N52.955billion in 2020.

At the close of business in September 2020, the banks Net Assets grew by 21% from N366bn to N302bn.

This is not a mean performance by any standards, especially at a time when the head and tail winds were strongest and devastating for businesses not only in Nigeria but also all over the world.

The twin barreled pandemic; that is that of Coronavirus and low price of crude which have disrupted businesses, supply chains and even caused many deaths all over the world seem to have placed a strong knee on the neck of many firms and ‘they can’t breathe’

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