Tepid performance from corporate & investment banking subdivision drove low earnings
Directors proposed N12.96bn in interim half-year dividends to shareholders
A drop of 26.1 percent in gross earnings for the first half of 2021 has seen Stanbic IBTC Holdings continue its tepid performance as contained in its recently published interim financial statement filed to the Nigerian Exchange Limited (NGX).
Gross earnings fell to N93.59 billion at the end of June from N126.57 billion posted in the same period a year ago. And with gross earnings down, profit before tax also took a hit falling by 52.85 percent to N24.71 billion, while profit after tax was down 50.13 percent to N22.54 billion for the period.
The lukewarm performance can be attributed to the mixed financial performance of the various segments of the banking group during the second quarter of 2021.
The financial statement showed that in the personal & business banking segment, total income grew by 15.7 percent year on year to N10.9 billion, while its net loss came in at N1.5 billion in Q2 of 2021 versus a loss of N4 billion in the second quarter of 2020. Also, the corporate & investment banking segment continues to be the worst performer, with net income dropping by 57.5 percent year on year to N14.8 billion and net profit declining 75.2 percent year on year to N5.5 billion in Q2 of 2021.
However, the wealth subdivision of the banking group continues to shine brightly, reporting a 15.4 percent year on year growth in total income to N14.6 billion and a 12.4 percent jump in net profit to N7.3 billion in the review period.
A breakdown of Stanbic IBTC’s financial statement further revealed that the group’s total income sank 29.1 percent year on year to N39.8 billion in Q2 resulting from a 38.6 percent year on year fall in non-interest revenue to N22.8 billion, coupled with a 10. 6 percent year on year drop in net interest income to N17 billion in the second three months of 2021.
Consequently, interest income declined by 16.1 percent year on year to N23.2 billion. Just like last year, non-interest revenue fell sharply in Q2 2021 to N22.8 billion, a 38.6 percent year on year drag. The non-interest revenue was primarily subdued due to an 88.7 percent year on year drop in trading revenue to N2.2 billion at the end of June 2021. The trading revenue, which is almost entirely made up of fixed income and currencies, continues to underperform even in the just ended quarter.
Elsewhere, interest expense declined by 28.3 percent year on year to N6.2 billion, resulting in a 10.6 percent decline in net interest income to N17.0 billion, with the decreased interest expenses helping to douse the impact of the contraction in interest income.
On interest income, interest on investments was severely impacted in the second quarter, falling 55.3 percent year on year to N9.6 billion, offset by a 5.1 percent year on year increase in interest on loans and advances to customers to N34.2 billion. Similarly, net fee and commission was the only positive aspect for the bank in Q2, as it grew 19.7 percent year on year to N20.5 billion. Stanbic reported a write-back in net impairments on financial assets of N1.1 billion as against an impairment loss of N4.4 billion in the prior-year quarter.
Additionally, the bank recorded an all-round increase in gross loans and advances to customers that stood at N790.6 billion in Q2, a 20.7 percent swell, driven primarily by a 36.2 percent jump in the personal and business banking segment to N328.3 billion, supported by an 11.6 percent year on year growth in corporate and investment banking segment to N462.3 billion in the reported period.
In the consolidated and interim financial statement, Stanbic Holdings’ operating expenses grew 19.6 percent year on year to N28.4 billion, as other operating expenses jumped 28.5 percent year on year to N17.7 billion, while staff cost also increased by 7.3 percent year on year to N10.7 billion in June 2021. The bank reported a decline in the effective tax rate to 10.2 percent in Q2 of 2021 from 12.1 percent in the prior-year quarter due to the banking subsidiary’s change in tax basis.
The bank reported a 54.1 percent year on year decline in net profit to N11.3 billion, basic earnings per share stood at N0.96 as against the N2.28 in the corresponding period of 2020, and diluted earnings per share stood at N0.96 in comparison to N2.16 for the same period in 2020. Meanwhile, the directors’ recommended the approval of an interim dividend of N1.00 per share for the period ended 30 June 2021.