Full-Year Outlook Indicates Bad Earnings Season For Stanbic IBTC

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The 2021 financial year turned out to be a down year for Stanbic IBTC Holdings Plc with earnings on the downswing through the interims.

The full-year outlook for the bank indicates that the first profit drop in six years is to be expected, as the earnings reporting season draws close.

The holding company may also report the lowest profit figure in four years for its 2021 operations.

Revenue performance weakened further in 2021 from flat growth in 2020, dropping from 25 per cent in the first quarter, 26 per cent at half-year and further by 20 per cent at the end of the third quarter.

After-tax profit also maintained a downward direction at a drop of 45 per cent in the first quarter, 50 per cent plunge at half-year and a further drop by 40 per cent at the end of the third quarter.

Loss of revenue is at the centre of the bank’s challenges in the year. The drop in gross earnings at the end of the third quarter represents a loss of close to N37 billion revenue year-on-year to close the nine months of trading at N146.6 billion.

The revenue losses occurred on both broad lines of interest and non-interest earnings with non-interest income leading the way. Interest income is dropping for the second year at 12 per cent in 2020 and 11 per cent year-on-year to close at N73 billion at the end of the third quarter of 2021.

Non-interest income, which has led revenue performance over the preceding three years, caught the downward fever in the year for the first time in years. It went down by close to 30 per cent year-on-year to close at a little over N69 billion at the end of the third quarter.

Trading income is the key driver of the bank’s revenue losses in the year under review – a sudden change of direction from being the revenue growth driver in the preceding two years.

Trading income took a plunge of roughly 80 per cent or over N35 billion at the end of the third quarter to close at N9 billion. The revenue line had grown by over 43 per cent in the 2020 financial year.

Other income also registered a major disappointing performance, dropping from more than N1 billion in the same period in the preceding year to a loss of N801 million at the end of the third quarter.

The bank’s management engaged in cost-saving initiatives in the face of revenue losses. The effort yielded some fruits in respect of interest and loan impairment expenses.

Interest expenses went down by 26 per cent to N19 billion at the end of the third quarter, the same margin of drop recorded at the end of the preceding financial year. This is well ahead of the 11 per cent drop in interest earnings over the same period.

The bank looks quite good to report the lowest interest expenses since 2013 for its 2021 operations. Yet the cost saved from interest expenses could not remedy the drop in interest income but it reduced the rate of decline in net interest income.

At N54 billion, net interest income went down by 4 per cent at the end of the third quarter, slowing down from a 12 per cent drop at half a year.

The proportion of interest earnings claimed by interest expenses dropped from over 31 per cent in the same period in 2020 and from about 30 per cent at the end of the year to 26 per cent at the end of September 2021.

The second cost-saving area – net loan impairment expenses, made a big turnaround from an upsurge of 509 per cent in 2020 to a net write-back position at the end of the third quarter.

Against a net charge of N7 billion in the same period in the preceding year, the bank recorded a net loan impairment write-back of N1.4 billion at the end of the third quarter.

There was also a big cost saving from tax expenses, which dropped by one-half to N5.4 billion at the end of the review period.

  • insideBusiness

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