For year 2021, Stanbic IBTC Bank Plc was adjudged as the top-rated bank in retail and SME segments by KPMG, a leading audit and consultancy firm, in its Nigerian Banking Industry Customer Experience Survey.
This sort of opening gives the inclination of what a truly remarkable year 2021 must have been for the bank, but frankly, that may not be accurate.
As much as plaudits are merited, Stanbic IBTC genuinely deserves feathered caps for their retail and SME segment exploits. But then again, when you consider that revenue and profit reduced in 2021 compared to 2020 (a year famous for the pandemic and its consequent crippling of businesses world-wide), it does leave a sour taste.
What has been responsible for this regression, and how low did they plunge?
Gross earnings went down by 12.2% from N234.4 billion to N205.8 billion, with non-interest revenue plummeting the most.
Profit after tax dropped by 31.5% from N83.2 billion in 2020 to a little below N57 billion in 2021.
Ernst and Young, another leading audit and consultancy firm, advised in a shared article (in year 2020) what banks must do to successfully emerge from COVID-19.
They opined that:
- a. Banks must continue to focus on customers’ needs.
- b. Banks must adapt their operating models to drive efficiency and resilience.
- c. More attention must be given to the more challenged customer segment.
Stanbic IBTC Plc seemed to have taken lessons (a) and (c) to heart, but unfortunately passed over lesson (b).
In the various quarters of the 2020 fiscal year, Stanbic IBTC Plc struggled with its personal and banking segment. It was no surprise to see that this sector received quality attention as customer feedback indicates.
The customer experience survey reports, which had Stanbic IBTC at the pinnacle amongst all commercial banks in Nigeria, exhibited principal focus on customers’ needs as advised. This survey focused on how well the companies were able to demonstrate mastery of the 6 pillars of experience and excellence, and ultimately how the customers’ primary needs were met. Stanbic IBTC again excelled here, in tandem with the advice from Ernst and Young.
In terms of adapting models to drive efficiency and resilience, they struggled. Stanbic IBTC’s expenses increased by large proportions which ultimately stretched profit. Revenue, on the other hand, tumbled. Operating expenses rose by 12.8 percent to more than N106 billion. It also claimed an increased share of gross income from 40.2 percent in 2020 to 51.7 percent in 2021.
Loss of revenue cut across virtually all of its income lines for 2021. The bank lost N29 billion in non-interest earnings. Trading income dropped by N39 billion, the lowest since 2016 and perhaps the major reason for the poor performance in 2021. In addition, other income produced a meagre N566 million from N1.4 billion in 2020.
Insiders will point to the central bank’s policy of CRR debits which sequesters customer deposits from banks affecting their ability to lend more and earn more interest. Last year, Stanbic reported that about N443 billion (2020: N368 billion) out of a cash balance of N665.5 billion is held by the apex bank as restricted cash. Lower interest rate environment and regulations that cut fees earned by banks have also been a challenge.
But StanbicIBTC’s major challenge was its trading income made up of revenues from fixed income and currencies. The bank needs to look inwards for mega-deals that can substitute for its heavy reliance on foreign portfolio inflows which has been taking a hit since the apex bank tightened the screws on forex policies. As we have seen, the CBN under Godwin Emefiele is unlikely to introduce policies that will bring back foreign portfolio investors.
The “models for resilience” discussed by the audit and consultancy firm are what Stanbic IBTC must quickly consider recovering earnings. It needs to adapt to the reality of an apex bank that is bent on having its way regardless of whose ox is gored.
Stanbic IBTC needs to get its mojo back as soon as this quarter (ending March 2022). This is a bank that has delivered for shareholders over the years and we trust it will not disappoint.