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Stanbic IBTC: The SUV is back on the road again



On January 30, 2023, Stanbic IBTC released its 2022 FY results, growing gross earnings by 39.31% year-to-year to N287.871 billion.

Profit after tax grew by 42% year-on-year to N81 billion, and earnings per share were up 44.05% year-on-year to N6.05. The result is a marked turnaround from its 2021 FY results, which saw earnings decline by 32%, the first drop in about three years.

The company is back on the road again, after swerving off in 2021, as several headwinds impacted revenues from its key business segments.

Stanbic IBTC has operated as a holding company for years and is supported by well-established corporate banking, wealth management operations, and a growing retail franchise. The business model ensures income is derived from several banking segments without having to rely heavily on interest income as most banks do.

However, the bank struggled in 2021 as interest income growth plateaued, and income from commission and fees fell by 23%. That year, its income from trading (which includes fixed income and forex-related income) suffered a drop. The bank appeared to have understood the challenges of 2021 and focused on fixing this.

A cursory review of its 2022 unaudited full-year performance reveals trading income rose from N13.2 billion in 2021 to a whopping N34.6 billion. Also supporting this growth is its commission and fees revenue, which also rose to N91.3 billion from N82.8 billion, the same period last year.

The major drivers were its Asset Management and its Brokerage and financial advisory fees businesses, which contributed 64% and 10.9% respectively. According to Stanbic, “increase in fee and commission revenue is mainly attributable to an increase in Asset Management fees coupled with an increase in fees earned on card-related transactions.”

Managers of the bank will be glad to have returned the bank back to profitability growth following the dip recorded in 2021. Critics may be quick to add that it is still lower than the N83.2 billion reported in 2020 when banks, in general, performed well.

For shareholders, this is back to the basics and a welcome return to what the bank is great at doing, making money from all business segments. Stanbic IBTC is one of the pioneers of HoldCo (which several banks are now gravitating towards). It commands a leading market share for juicy businesses such as pension fund asset management, advisory, and forex-related trades.

As of June 2022, Stanbic reported it has N5.4 trillion in assets under management, 1.9 million retirement savings account, 2.7 million clients onboarded across its digital platforms, and 13 mutual funds. These are impressive numbers, especially for a conservative bank. How it milks these value chains of vertically integrated operating segments will determine its position in the future of banking.

The bank’s strategy of Scale (growing scale across its markets), User Experience (enhancing its customer experience), and Velocity (accelerating transaction volumes across its channels), aptly dubbed SUV, is expected to help the bank drive through a bumpy ride that is snagged by hefty competition, regulatory uncertainty, and vastly technologically changing industry. The SUV veered off last year, but shareholders will be glad it is back on track and moving in the right trajectory.

Stanbic IBTC declared an interim dividend of N1.5 per share back in August and is expected to propose a final dividend when its audited accounts are published in March. Last year, total dividends were N3 per share, a drop from the N3.4 it paid in 2020. With profits up 42% this year, shareholders should expect a higher reward for dividends.

We expect Stanbic IBTC to pay out 55-50% of profits as dividends in 2022. This will project its final dividend to at least N2 per share and possibly impact share price positively.