Business
IBTC: Poor returns, high yield
By OKEY ONYENWEAKU
Stanbic IBTC appears to command respect among its peers not only in the banking industry alone, but also amongst customers and the financial community. This is not just on account of its size or number of branches, but more because of the seemingly impressive quality of its management, its house style and service culture. In fact, even those who for one reason or the other do not bank with the lender or enjoy its other services appear to admire the lender from a distance. Put in somewhat extravagant terms, Stanbic IBTC is in a class of its own!
In the ranking of banks with qualitative service delivery, the discourse has tended to favour GTBank and Stanbic IBTC before any other lender in the banking industry. The lender seems to believe in taking life, ‘one day at a time’ as that spiritual melody goes. Subtle research shows that the bank believes in doing its own thing rather than dabble into the fray of aggressive competition that pervades the Nigerian banking industry. This is evidenced by the fact that even before the old IBTC was transformed as an outcome of the Chukwuma Soludo-led consolidation exercise; it was arguably the best merchant bank in Nigeria and sometimes achieved the highest profit in the banking industry. It was a brand which had character and class that enabled it magnet high net worth clients to it. At the close of the day, the Professor Chukwuma Soludo-led banking consolidation exercise which took place between 2005 and 2006, finally forced it into a merger with Stanbic Bank of South Africa to the apparent public dismay of its leadership that was then headed by Mr. Peterside Atedo.
Peterside Atedo’s anger was understandable as his bank was a super performer in its category. Though nobody is in the minds of owners of IBTC to know how they feel today, but many industry analysts believe the lender is better off now that it can handle bigger ticket transactions.
However, Peterside’s successor, Sola David Borha, who is also now the Chief Executive Officer, Rest of Africa in the Standard Bank Group had built the strong foundation on which the new management is building.
Nevertheless, industry observers and other stakeholders are still attracted to the financial institution for its culture and character.
‘’We are a large and diverse business and our Code of Ethics is an expression of commitment and integrity. It provides details about how our values apply in the workplace, including guidance on their application in specific situations. It is designed to:
Facilitate greater empowerment and faster decision-making at all levels of our business; and Ensure that, as a significant player in the financial services industry, we adhere to the highest standards of responsible business practice in our interactions with all our stakeholders.’’ Stanbic IBTC management said.
However, some would however argue that this assertion is somewhat contradicted by the fact that Stanbic IBTC was fined about N2 billion for violating the guidelines of the Central Bank of Nigeria, CBN, alongside committing other sundry offences in 2018.
PERFORMANCE
Every discerning financial literate is aware that this is indeed a challenging economy with a snail paced growth. This may have put the lender under pressure and caused it to miss its half year projections for 2019. The bank posted profit in its mid-year audited results for the period ended June 30, 2019 which dropped 15 per cent as it recorded a profit of N36.2 billion after tax. Despite this the Group announced an interim dividend of 100 kobo.
The Group recorded an increase in gross earnings to N117.4 billion, representing a 3% growth. The company also maintained its total operating income of N94 billion.
Profit before tax stood at N44.7 billion, representing 11 per cent drop from last year’s N50.734billion, while profit after tax declined 15.8 percent from N43.084billion to N36.2 billion. Other results reflect an increase in non-interest revenue which stood at N54.9 billion while net-interest income was N39.3 billion. Stanbic IBTC’s balance sheet reflects that the Group’s total assets was N1,619.3 billion while the gross loans and advances was N479.7 billion, an increase of 5%, compared to last year’s figures.
While customers’ deposits was N693.5 billion, a drop by 14 per cent, there was an improvement in current-and-savings-accounts deposits mix which went up to 68.9%. The bank ramped up its loan book by 5.3 per cent, while interest expense rose 15 per cent. Similarly, its interest income dropped 11.4 per cent as operating expense and other operating expense went up 5 per cent and 12.3 per cent respectively. Details show that the bank has grown its profit before tax by 368 per cent from N9.537billion in 2015 to N44.650billion in 2019.
Speaking at the formal announcement of the results at the Stanbic IBTC Holdings PLC Headquarters, Yinka Sanni, Chief Executive, Stanbic IBTC, stated that the Group’s business segments were profitable, despite the challenging business and regulatory environment.
He said: “Our financial results in the first half of 2019 reflected similar trends encountered in the first quarter. The operating environment remained muted, regulatory changes coupled with the highly competitive landscape continued to impact overall returns. Still, our diversified business model continues to set us apart. Our business segments remained profitable and resilient although at a slower pace when compared to the prior year.”
Sanni disclosed that there has been a return to growth in the second quarter, mainly from the communication and oil and gas sectors. He further added that the gross non-performing loans to total loans ratio which was 3.91%, was within acceptable regulatory limits.
Speaking on other areas of the mid-year results in which the Group experienced growth, he noted that assets under custody rose to N7 trillion (representing a 42% growth) while assets under management grew by 8% to N3.5 trillion.
Research shows that Stanbic IBTC shares trading at N39.95 per share as at Wednesday September 18, 2019 has maintained its position as the highest valued banking stock on the daily trading platform of the Nigerian Stock Exchange (NSE). It also recorded $1.765 billion investments, representing 30.34 per cent of the total capital inflow and was trailed by City Bank which recorded $1.017 billion in the second quarter of 2019.
The “Nigerian Capital Importation, Quarter Two, 2019” report released and obtained from the National Bureau of Statistics (NBS) website recently showed that the total value of capital importation into Nigeria in Q2, 2019 was $5.820 billion, representing a decrease of -31.41 per cent compared to the first quarter.
CHALLENGES
The bank is also faced with the same set of industry challenges as other financial institution. Banks are beginning to feel the heat of the volatile regulatory environment. This also comes with the seemingly weakening of the economy which has forced down profit margins to single digit. And Stanbic IBTC is not immune to these challenges. More so, many see the bank as an elitist financial institution which products and services are mainly obtainable in the developed economies and not in an economy without a middle class. In fact, the likes of GT Bank Plc, Zenith Bank Plc among others have shed the elitist toga and are now merchants of retail banking. With 180 branches, it is only digital banking can give an edge over other lenders that are effectively competing with it in every aspect of banking. A Lagos based financial analyst, Olisa Egbunike believes that sustaining the type of Stanbic IBTC’s business in Nigeria requires firm grounding and adequate understanding of the Nigerian banking terrain.
However, Stanbic IBTC is not without the support of its parent company in South Africa whose financial muscle is confidently strong. This notwithstanding, industry analysts believe that the management team is equal to the task of sustaining the successes of the bank.
Global Credit Ratings upgraded the national scale long term rating assigned to Stanbic IBTC Bank PLC to AA(NG) and affirmed the national scale short term rating of A1+(NG); with the outlook accorded as Stable. The ratings are valid until May 2020.
Stanbic IBTC Bank is a member of the leading African banking group, Standard Bank, which is focused on emerging markets globally. It has been a mainstay of South Africa’s financial system for 150 years, and now spans 16 countries across the African continent.
