Amidst the policy shift in 2023, Stanbic IBTC has demonstrated notable growth. Gross earnings surged by 62% in 2023, driven by increases in both interest and non-interest income.
This strong momentum has continued into 2024, with pre-tax profits soaring by 80.4% to N84.2 billion in the first quarter ending June 2024.
This jump in pre-tax profits marks the highest ever recorded in any quarter in the company’s history, according to data from Nairametrics.
Stanbic IBTC’s half-year pre-tax profit has now risen to N147 billion, significantly higher than the N82.9 billion reported for the same period in 2023.
This amount represents about 83% of the total pre-tax profit achieved in 2023.
Commenting on the results, Dr. Demola Sogunle, Chief Executive of Stanbic IBTC, said: “The operating environment in the first half of the year was challenging, as evidenced by intensified inflationary pressures and subdued demand, which caused the Stanbic IBTC Bank Purchasing Manager Index (PMI) to drop to a seven-month low of 50.1 points in June 2024.
The government also implemented policies to stabilize the economy and attract foreign investment. Amidst these diverse factors, the economy showed resilience.
Stanbic IBTC reported growth in key income lines during the period under review.
The Group’s profitability increased by 71% year-on-year (YoY), driven by growth across revenue streams. Interest income grew by more than 100% YoY, mainly due to higher yields and volumes of loans and investments, aligning with efforts to support clients through loan offerings and investment opportunities.
Net fees and commission income increased by 62% YoY, supported by digital banking transactions and investment banking fees.
Operating expenses, on the other hand, increased by 58% due to persistent inflation and growth in staff costs following an upward review of employee incentives. Despite this, the cost-to-income ratio improved from 48.1% in the prior year to 42.8%.”
The strong financial performance and improved efficiency have enabled the board to recommend an interim dividend of 200 kobo per share for the period ending June 30, 2024, up from 150 kobo per share for the same period in 2023. This dividend increase reflects the company’s robust earnings growth and its commitment to rewarding shareholders.
Despite the impressive financial performance of Stanbic IBTC, its stock has seen a 15% year-to-date (YtD) decline as of September 4, 2024, though this is an improvement from the 19% dip recorded in August 2024. This recent recovery suggests that investor sentiment may be stabilizing, providing a potential opportunity for those considering buying the dip.
The significant improvement from August’s dip indicates a positive shift, which could signal a rebound in investor confidence. For context, the stock had previously surged by 108% YtD last year, highlighting its potential for substantial gains.
This recent downturn and subsequent partial recovery may reflect broader market adjustments rather than underlying issues with the company itself.
Looking ahead, Stanbic IBTC’s strong financial performance suggests it is positioned well to navigate the current challenges facing the banking sector. The company’s strong growth in earnings and pre-tax profits suggests it has solid fundamentals.
Analysts remain optimistic about Stanbic IBTC’s ability to leverage its strong performance to drive future growth, despite the sector’s recent underperformance.
According to the NGX’s brokers’ recommendations of September 2-6, 2024, the ratings vary: Bancorp Securities advises a “Hold,” Afriinvest suggests “Accumulate,” and Meristen provides a “Buy” rating. This range of recommendations reflects differing perspectives on the stock’s potential.
Overall, the ratings suggest a generally positive outlook for Stanbic IBTC, with analysts recognizing its strong financial performance and growth potential. The “Buy” rating from Meristen signifies high confidence in the stock’s future performance, while the “Accumulate” and “Hold” ratings reflect a more cautious but still favourable view.
Similarly, Stanbic IBTC’s first half of 2024 earnings release reinforced its strong position with a notable statement: “Stanbic IBTC retained its Fitch AAA (nga) rating, reaffirming our position as the only financial services provider in Nigeria with the highest rating from a global rating agency for over two decades.”
In addition to these strong ratings, it is essential to consider the stock’s trading activity and volatility. Over the past three months (June 5 – September 4, 2024),
Stanbic IBTC Holdings has been the 49th most traded stock on the Nigerian Stock Exchange, with a total volume of 98.9 million shares traded across 3,230 deals, valued at N5.25 billion. This trading volume indicates good investor interest and activity, which often correlates with increased volatility.
While volatility can create opportunities to buy at lower prices, it also introduces risk. However, the stock’s low beta of 0.362 may provide reassurance, as it suggests lower volatility compared to the overall market.
This indicates that the stock is less likely to experience large price swings relative to market movements. Consequently, the lower beta can be a sign of stability, potentially mitigating some of the inherent risks associated with the stock’s volatility.
Overall, given Stanbic IBTC’s strong financial fundamentals and recent signs of stabilization, the current dip might present a favourable buying opportunity.
The stock is currently trading below its 52-week high of N80, achieved on October 13, 2023, suggesting potential for future gains as market conditions improve.
