Stanbic IBTC, FBN Holding companies grow gross earnings

STANBIC IBTC Holdings (Stanbic) has announced gross earnings growth of 61.9 percent to N466.3 billion while net interest income grew 54.9 percent to N175.2 billion as recorded in the financial year (FY) 2023 unaudited results.

Also, FBN Holdings gross earnings rose 88.5 percent year-on-year (y/y) to N1.5 trillion, supported by healthy growth in both the interest and non-interest earnings segments of the group’s operations.

Notwithstanding the spike in impairment provision and operating expenses (OPEX) and foreign exchange (FX) loss worth N350.3 billion, FBN Holdings Profit Before Tax (PBT) and Profit After Tax (PAT) surged by 129.4 percent and 127.6 percent, respectively to N362.2 billion and N309.9 billion.

Meanwhile, Stanbic IBTC Holdings released its FY 2023 unaudited results, showcasing pre-tax profit growth of 72.4 percent y/y and net profits climbing by 76.4 percent y/y to N137.58 billion, marking the highest increase over the past five years.

In the fourth quarter (Q4) 2023 alone, the group saw 44.0 percent y/y growth in pre-tax profits and a 29.1 percent y/y increase in net profits to N30.67 billion, though this represented a 24.5 percent decline from Q3’s performance.

Analysts from Coronation Research said the results were significantly influenced by the high-interest rate environment and the liberalisation of the foreign exchange (FX) market, which benefited the group’s earnings from interest income (up by 77.2 percent y/y) and trading revenues (increasing by 80.2 percent y/y).

The group’s non-interest income saw substantial y/y growth of 142.5 percent, largely driven by an 80 percent increase in trading revenues. This significant expansion is attributed to effects of foreign exchange market liberalisation along with a surge in fixed-income and currency trading activities.

Additionally, fees and commissions experienced 21.1 percent y/y growth, bolstered by fees from asset management, electronic banking and brokerage and advisory services.

On the expenditure side, operating expenses grew by 29.4 percent y/y primarily due to rising staff costs, AMCON fees and IT-related expenses.

Despite this rise in expenses, the bank managed to improve its cost-to-income ratio, which fell to 46.8 percent compared with 53.7 percent in the previous year.

While loan impairment charges did go up by 50.2 percent to N15.42 billion, the firm still achieved robust growth in its pre-tax profits, which climbed by 72.4 percent y/y to N172.91 billion.

Non-Performing Loan (NPL) ratio experienced a slight uptick, rising to 2.8 percent from the previous year’s figure of 2.7 percent. Representing a 76.0 percent surge in non-performing loans over the period, the NPL ratio remains comfortably below the regulatory threshold.

Analysts anticipate that interest rates will continue to be high in 2024 compared with 2023, although they may not reach the peak levels seen last year.

Furthermore, considering the latest directive issued by the Central Bank of Nigeria on Net Open Positions in foreign currency, it is unlikely that trading revenues will play substantial a role in boosting earnings this year.

“We therefore think that a rise in interest income is likely in 2024 while a steep rise in trading revenues is unlikely,” the analysts at Coronation Research stated in a note to clients.

For FBN Holdings, interest income rose by 66.3 percent y/y, primarily driven by improved yields on investment securities (10.1 percent y/y, vs 3.6 percent y/y in 2022) which grew by 31.4 percent and a 48.9 percent increase in interest income from loans and advances to customers, which expanded by 68.0 percent during the year. The improvement in market interest rates, particularly in Q3 2023, supported this performance.

Elsewhere, interest expense grew by 105.5 percent driven by a substantial rise (over 100 percent) in interest expense payment on deposits from financial institutions and banks.

Term deposits for the period climbed by 139.7 percent during the period, 102.7 percent more than the growth in Current and Savings Account (CASA) deposits and, as a result, the CASA mix deteriorated to 76.2 percent y/y (versus 84.5 percent in the preceding period).

This decline led the groups’ cost of funds to increase to 3.4 percent. Net interest income, however, grew by 45.9 percent y/y with the NIM adding 10 basis points to 5.4 percent by Coronation Research estimates.

Non-interest income expanded by 149.6 percent y/y to N566.99 billion. This growth was majorly driven by 442.1 percent growth in trading revenues for the period, particularly trading gains from financial assets.

Other incomes for the period grew by 33.0 percent, specifically supported by recoveries from seized assets and sundry income. Operating expenses grew by 46.8 percent y/y propped by maintenance costs, the regulatory levy and advertising and promotion costs for the period.

FBNH cost-to-income ratio improved to 48.7 percent (versus 61.6 percent in FY 22). Pre-provision operating profits grew by 148.4 percent y/y to N562.3 billion.

Loan loss provisions increased by 192.1 percent y/y. Consequently, the cost of risk rose to 3.8 percent vs 2.0 percent in FY 22. Overall, the Group’s net profits rose by 128.4 percent y/y to N307.34 billion.

The NPL ratio as of nine-month 2023 declined to 4.6 percent from 4.3 percent in FY 2022, although below the regulatory limit. “We note that this is a significant improvement following a steady decline from 24.7 percent in 2018,” the analysts stated.

They find the significant increase in customer loans promising. Maintaining this growth momentum, according to them, alongside the marginal uptick in market rates expected in 2024, is expected to favourably impact the Groups’ funded income.