Stanbic IBTC Holdings Plc lost weight on asset size in the third quarter with the balance sheet slimming down from N3 trillion at half-year to N2.5 trillion at the end of the third quarter in September 2020. The bank’s leading growth rate of 61 per cent in asset base at the end of June rolled back to 37 per cent at the end of September. That remains one of the most rapid asset expansions the bank has seen in this decade.
Cash and bank balances are still leading asset expansion but the figure has dropped from N1.1 trillion at half-year to N930 billion at the end of the third quarter. The year-on-year growth has slowed down from 142 per cent to 103 per cent over the period but the cash-based assets still occupy over 36 per cent of balance sheet space.
Trading assets that doubled to nearly N500 billion at half-year have also dropped to roughly N326 billion. Other assets have dropped from N340 billion to N136 billion over the same period.
Management also trimmed loans and advances from N579 billion to about N572 billion, slowing the year-on-year growth slightly from 8 per cent to less than 7 per cent over the period. Lending caution continues to reflect the effect of the Covid-19-induced economic strain with rising credit losses.
At N288 billion, the bank’s investment portfolio deviated from the asset downsizing in the third quarter. It rather accelerated from 65 per cent growth at half year to 85 per cent advance year-on-year at the end of the third quarter.
The cut down in assets stemmed from drops in the financing liabilities in the third quarter. Total liabilities shrank from N2.7 trillion at half-year to N2.2 trillion in September with trading liabilities leading the drop. The bank also lost customer deposits in the third quarter but made it up with the increase in due to banks.
Stanbic IBTC Bank’s interim report for the third quarter ended September 2020 shows a slowdown in gross earnings about 8 per cent at half-year to 4 per cent year-on-year to close at over N183 billion. A downward trend in interest earnings that has been on since the first quarter was maintained in the third, dropping by 10 per cent year-on-year to almost N82 billion at the end of September 2020.
Non-interest income remained the revenue driver at an increase of 20 per cent at the end of the third quarter to over N98 billion, decelerating however from a 27 per cent increase at the end of half-year. It continues to account exclusively for the improvement in gross earnings as well as profit the bank reported at the end of the third quarter operations. Non-interest revenue has displaced the principal income line of interest earnings, accounting for almost 54 per cent of gross earnings at the end of the third quarter.
The bank’s management maintained the position where the cost of funds is dropping well ahead of interest income. Interest expenses went down by more than 20 per cent to N25.7 billion at the end of the third quarter.
The drop is more than twice the decrease in interest income over the same period. Yet net interest income went down by 4 per cent to close at N56 billion.
The drop in the cost of funds is against the increase of 43.5 per cent in total deposits at the end of the third quarter. A major drop in the average cost of funds for the bank was therefore maintained during the review period. The proportion of interest earnings claimed by interest expenses declined further from about 32 per cent at the end of June to 31 per cent at the end of September 2020.
Credit loss expenses slowed down drastically in the third quarter, showing the least quarterly figure so far in the year. Compared to a net loan impairment expense of about N2 billion in the first quarter and over N4 billion in the second, only N594 million was incurred in the third quarter.
At N7 billion at the end of the third quarter, net loan impairment expense has already multiplied more than four times the N1.6 billion the bank recorded in all of the 2019 financial year. A net write-back of N90 million was recorded in the same period last year.
Stanbic IBTC Holdings ended the third quarter of the 2020 financial year with an after-tax profit of N66 billion, which is a year-on-year growth of 19 per cent but a slowdown from 25 per cent growth at half-year. The ability to keep profit up well ahead of revenue is a key strength of the bank this year.
The ability to convert revenue into profit has continued to get better for the bank. Net profit margin is up from 31.5 per cent in the same period last year to 36 per cent at the end of the third quarter. This is a continuing improvement from 33.5 per cent in the first quarter and 35.7 per cent at half-year. This is the highest profit margin that Stanbic IBTC Holdings has seen in a decade and one of the highest in the banking industry.
The gain in profit margin came from the drop in interest expenses against the improvement in gross earnings. A little support also came from a marginal decline in operating expenses to N70.8 billion at the end of September, which limited the operating cost margin at 38.6 per cent.
The bank earned N5.80 per share at the end of the third quarter operations, improving from N5.13 per share in the same period in 2019.
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