Stanbic IBTC Holdings Cost-to-Income Ratio in 2021 FY Hits 8-year High

Kayode Tokede 

Stanbic IBTC Holdings Plc in 2021 hit an eight- year high cost-to-income ratio amid hike in operating expenses due to inflation rate and lower income.

The group in 2021 reported a 62.30 per cent cost-to-income ratio from 47.40 per cent in 2020 financial year. 

The insurance subsidiary, Stanbic IBTC Insurance Limited closed 2021 with 83.8 per cent cost-to-income ratio, while the banking subsidiary, Stanbic IBTC Bank hits 78.6 per cent cost-to-income ratio in 2021.

The reported cost-to-income ratio was due to 14 per cent drop in operating income to N171.1 billion, in 2021 from N198.9 billion in 2020, while total operating expenses rose by 14.14 per cent to N106.65billion in 2021 from N93.43billion in 2020. 

As gathered by THISDAY, Stanbic IBTC Holdings had 68per cent cost-to-income in 2013 and the all-time high cost-to-ratio was 72.80 per cent in 2012.

The ratio gives a clear view of how efficiently the bank is being run – the lower the ratio, the more profitable the bank. Changes in the ratio also highlight potential problems – if the ratio rises from one period to the next, it means that costs are rising at a higher rate than income.

The group in a statement explained that inflation was a major economic factor that drives cost growth in the group. 

The National Bureau of Statistics (NBS) announced that Nigeria’s inflation rate closed 2021 at 15.63 per cent from 16.47 per cent reported in January 2021.  The bureau had disclosed that the country’s inflation rate hits all-time high in March 2021 to 18.17 per cent, while all items (12 Months Avg. Change) closed 2021 at 16.73 per cent.

The group in a statement said: “Operating expenses increased by 14per cent to N106.6 billion in 2021. The increase in operating costs coupled with lower revenue resulted in the deterioration of the cost-to-income ratio to 62.3 per cent from 47per cent in prior year.

“Staff costs were relatively flat year-on-year. Other operating expenses, however, increased by 26per cent due to growth in regulatory induced costs including AMCON and deposit insurance premium following growth in total assets and value of total qualifying deposits, respectively. That said, we achieved cost savings from energy efficiency initiatives and new ways of working.”

Meanwhile, the Non-Performing Loans (NPLs) portfolio of the bank has dropped by 23 per cent to N280.3 billion in 2021 as against N26.5 billion recorded during the period under review.

According to the group’s audited results for the period ended, its NPL to total loan ratio stood at 2.1 per cent as against four per cent recorded in the corresponding year of 2020.