Analysts Project 10% Profit Growth for Stanbic IBTC Holdings

Goddy Egene

Analysts at FBN Quest have projected 10 per cent average growth in profit before tax (PBT) over the 2017 and 2018 financial years for Stanbic Holdings Plc. However, they said they expect a fast growth in profit after tax (PAT) of 31 per cent in 2017.

After delay due to dispute with the Financial Reporting Council of Nigeria (FRC), Stanbic IBTC last month released its 2015 full year and 2016 nine months results. While it recorded a decline in 2015, the financial institution recorded a growth in its nine months to September 30, 2016.

Reviewing the performance of the company, FBN Quest said following the recent publication of Stanbic IBTC Holdings’ Q4 2015 – Q3 2016 results, they have updated their forecasts. According to them, the delay in the publication of the results made their previous forecasts redundant.

“The increase to our forecasts is significant. We have increased our 2016-17E PBT forecasts by an average of 61 per cent and our price target by 56 pper cent to N14.7 (having rolled over to 2017). The most significant positive is that Stanbic has drawn a line under the saga with the FRC). The bank’s underlying results improved markedly in 2016 (based on the nine months 2016 results)…. Looking forward, we forecast 10 per cent average growth in PBT per annum over the 2017-18E period, with both revenue lines contributing. We expect loan loss provisions to moderate and offset rising operating expenditure(opex). We forecast faster PAT growth (31 per cent in 2017E) due to favourable base effects (zero forecast for other comprehensive income vs –N4.4 billion as of 9M 2016). Our forecasts imply Return on average equity(ROAE) improving from 14.4 per cent in 2015 to over 16 per cent in 2017E. Given the shares are trading above our price target, we retain our Underperform rating,” they said.

They explained that the 2015 results had been held back by a flattish revenue performance as well as a surge in loan loss provisions to almost N15 billion from N3.2 billion in the prior year.

“Stannbic’s 9M 2016 PBT of N25.7 billion compares with N15.4 billion in the prior year or a 67 per cent increase. Both net interest income and non-interest income contributed to the growth – 19 per cent and 28 per cent respectively. Although loan loss provisions (+22 per cent) and opex (+10 per cent) grew also, the revenue growth was stronger, leading to the stellar PBT growth. The revenue growth follows a tepid 2015 during which net interest income fell -6 per cent and non-interest income was down -3 per cent,” FBN Quest said.