By Okey Onyenweaku
Investors in Stanbic IBTC are in an excited mood at the moment as they will evidently be smiling to the banks soon. Of course, who wouldnt be when the overly generous institution is paying N1.00 dividend per share to them at a time of famine and starvation across the nation. A rare performance indeed.
In fact, the N1.00 interim dividend is a scarce menu in the history of the Nigerian Exchange Group.
However, and on a closer look, this sense of elation may be short-lived. This is because the Holdco has, for two consecutive times now, posted a profit decline of 50 to 52 per cent. First was in the first quarter 2021. Second, it repeated that feat and posted 52 per cent decline in second quarter 2021.
Thus analysts are wont to believe that something not too palatable may be brewing in the future.
Details show that in the first quarter 2021, the banks profit before tax plunged by 50 per cent to N12.1billion. This was down from the N24.2billion it had reported in the results for the first quarter ended March 31, 2020.
And in its more recent posting, the Holdco has once again repeated that poor showing.
This time, the Holdcos audited result and accounts released to the Nigerian Exchange Limited (NGX) show that its profit before tax plummeted by 52.9 per cent to N24.71billion in H1 2021 from the N52.41billion reported in H1 2020.
However, despite the poor profit, the bank paid an interim dividend of N1.00 per ordinary share of 50kobo each, that is, a total of N12.96billion. Shareholders are of course quite happy over this dividends fallout but they seem to be holding their breath.
Unimpressively too, the groups gross earnings also dropped by 26 per cent to N93.59billion in H1 2021, down from N126.57billion in H1 2020.
The groups total assets also fell by two per cent to N2.43 trillion as at June 30, 2021 from N2.49 trillion reported in its full year ended December 31, 2020 disclosure.
On the more bullish side, Stanbic IBTCs gross loans & advances increased 21 per cent to N790.6 billion as at June 30, 2021, up from N655.3 billion at the final year end 2020. Similarly, customer deposits was up by an even more notable 17 per cent to N958.4 billion from the N819.9 billion posted in its 2020 end of year outcome.
However, the groups Non-performing loans dropped by four per cent to N25.5 billion (December 2020: N26.5 billion) to drag Non-performing loans to a total loan ratio of 3.2 per cent from four per cent reported in 2020 year end.
Overall then, the fairly loud whispers on Marina and Broad streets of Lagos is that a 50 per cent decline in profit is clearly not very healthy for an organisations continued survival.
While mixed feelings have trailed the banks 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 a 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 non-interest 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 Wealths profitability moderated QoQ due to increased expenses associated with accelerated activities during the period as against muted activities in the prior year. AMCON charges grew by 32per cent year-on-year.
Continuing, Sogunle assured that the bank remains focused on long term value creation for stakeholders, as it had also 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.
The group in a statement revealed that its total Capital Adequacy Ratio closed at 22.5 per cent in H1 2021 (Bank: 17.1per cent) which is significantly higher than the 10 per cent minimum regulatory requirement.
The Groups liquidity ratio was above the regulatory minimum requirement of 30per cent , which indicates the Groups sound position to continue meeting its liquidity obligations in a timely manner.
There is no doubt that Nigerias business environment has not been favourable to businesses recently. Last year, pressures from the out break 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 resurges 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 17.33 per cent ,highest point in the last seven years. 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 had been quite 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 has evidently not changed. Its share price has however dropped from N44.05 per share in January 4, 2021 to N38.80 per share as at September 10, 2021. Signs of the times you would say.