Skye Bank released its Q2 earnings and gladly did not disappoint. The bank kept up with impressive results recently released by Diamond Bank, UBA growing is Gross Revenue by 22% to N59.66b. The Bank also managed to increase its Interest Income by 26%, from N38b to N47.88b. However, total operating income only grew by a paltry 0.92% from N32.8b to N33.11b.
The Banks Profit After Tax at the end of the period was N8.19b a 39% increase from the N5.86b earned in the same period last year.
The Banks seemingly impressive profits after tax when compared to the same period last year, boils down to cost cutting. The Bank was able to save over N2b in operating expenses over the N25b spent in the previous year. This is commendable as most banks have realized the need to drill down on cost amidst a highly inflationary economy and strife competition. The Banks profits may even had been better, had they been able to lower interest expense, which increased 59% to N24.75b. This resulted in an Gross Interest Income Margin of 48%, lower than the 57.8% margin obtained in the prior period. However, we bank profits not margins so a N23m net interest income, 2% over the prior year is welcomed. The bank has basically remained profitable via a combination of growth in revenue and a mix efficiency in operations.
On the balance sheet side, it does seem the banks is stretched in terms of loan to customer deposits. The Bank has lent out about 81% of its total deposits. Its Loans is also more than 5 times its Net Assets, still acceptable by CBN standards. However, the banks needs to increase its deposit base to about N1b if it is to remain very competitive amongst its peers.
According to the Meristem Research below, the Bank currently has a Price Earnings Ratio of 5.4X, making it relatively cheap. Its market price of N3.07 (as at time of this report) is 38.9% of the Book Value Pershare, meaning that the market price is way less than the Book Value. These are indicators of a cheap stock by any standards.
This results get a black ink for its profitability.