Stanbic IBTC Holdings Plc suffered a 25 percent drop in revenue in the first quarter that led to a drop of 45 per cent in profit. The bank is facing a worse revenue scenario this year than the flat position it closed in 2020.
Last year was the first time in a decade that the bank was unable to improve gross earnings. The earnings weakness that began in the final quarter of last year has extended to the current year with greater force, marking the first time the bank will record a loss of revenue in many years.
An 11 per cent drop in gross earnings was reported by the bank in the final quarter of 2020. The drop was however countered by a 4 per cent improvement in revenue at the end of the third quarter – which turned the full year position to flat.
The bank’s management didn’t find room for cost-saving big enough to grow profit out of revenue weakness as it did last year. Last year, it was able to push up profit a clear 11 per cent through cost-saving to close the year at N83 billion.
The bank’s cost-cutting mood remains aggressive this year but quite insufficient to remedy the loss of almost N16 billion in gross earnings in the first quarter.
Both interest and non-interest earnings accounted for the revenue drop in the first quarter. Interest income is going down for the second year after dropping by 12 per cent at the end of 2020. The drop accelerated to 23 per cent in the first quarter to stand at N21 billion at the end of March 2021.
Non-interest income has lost outright the strength of last year when it grew by close to 15 per cent. It fell by more than 29 per cent to N23 billion at the end of the first quarter. The collapse follows a change of direction in trading income from a leading growth of over 43 per cent last year to leading a drop in the first quarter. Trading income dropped by 77.6 per cent at the end of the first quarter.
Despite the sharp fall in non-interest income, it still contributed 50 per cent of gross earnings. Last year, non-interest earnings accounted for 53 per cent of gross earnings – beating interest income – the principal income line for the first time.
Cost-saving that enabled management to grow profit from flat revenue last year isn’t able to do so this time around. Interest expenses remain the cost-saving centre for the bank – which is dropping for the second year. From a 26 per cent drop last year, interest expenses were slashed by 42 per cent to N5 billion in the first quarter.
The cost saved from interest expenses was insufficient to remedy the drop in interest income. Net interest income, therefore, dropped by 14 per cent to close at below N16 billion for the first quarter. The margin of the drop has widened from less the 5 per cent at the end of last year.
The proportion of interest earnings claimed by interest expenses dropped from 32.6 per cent in the first quarter of last year and from less than 30 per cent at the end of 2020 to 24.5 per cent at the end of March 2021.
Total income closed 24 per cent down at almost N39 billion. However an upsurge in credit loss expenses experienced last year dried up suddenly in the first quarter. The bank shifted to a net write-back of credit losses to the tune of N155 million from a net expense of almost N2 billion in the same period in 2020.
The bank’s management could not maintain the tight rein on operating cost that kept it flat last year. Operating expenses increased by 8.8 per cent to N27 billion and claimed an increased share of gross income at 59 per cent compared to 40 per cent in the same period last year. This is the highest operating cost margin seen among listed banks so far this year.
A drop of 27.6 per cent in income tax expenses produced the 11 per cent growth in after-tax profit last year. Tax expenses went down by roughly 77 per cent in the first quarter to N888 million but could not save profit.
The bank closed the first quarter operations with an after-tax profit of N11 billion, which is a drop of 45 per cent year-on-year. The bank lost a significant profit margin during the period from 33.5 per cent in the first quarter of last year and 34.5 per cent at the end of the 2020 financial year to 24.6 per cent at the end of the first quarter.
Stanbic IBTC Holdings closed the first quarter operations with earnings per share of 96 kobo, which is a drop from N1.91 per share in the same period in 2020.
[…] terms and conditions of the various license categories. These, he said, will include licensing fee, as well as identification of the limitations of the various license categories, with a view to […]