Stanbic Bank employed revenue improvements and an all-round cost reduction in 2013 to achieve an outstanding growth in profit in a year of general earnings slowdown in the banking sector. Profit more than doubled in the year after a strong growth in the preceding year. The ability to shield earnings from the volatility of the operating environment is what Stanbic Bank demonstrated in 2013. This enabled it to move against the general trend in the banking industry in 2013.
The bank has maintained stable and continuing growth in revenue since 2011 though there was a slowdown in 2013. A favourable general cost behaviour enabled the bank to achieve accelerated growth in profit against the revenue slow down. It is the only bank so far that improved net profit margin in fiscal 2013 when banks generally lost profit margins under the regulatory strain the industry faced in the year.
Stanbic Bank closed the 2013 financial year with a gross income of N111.23 billion, an increase of 21% over the revenue figure in the preceding year. This is a slowdown from the revenue growth rate of 44.9% the bank recorded in 2012. The full year gross income of the bank is virtually at par with our forecast revenue of N112.1 billion for Stanbic Bank in 2013.
The bank has maintained a strong growth in revenue for the third year running since a sustained recovery began for it in 2011. Non-interest income provided the spur for revenue growth in 2013. Trading income advanced by 84% to N14.89 billion and net fee and commission income grew by 29% to N32.9 billion. Interest income improved by 8% to N62.58 billion and therefore dragged down the stronger growth rate of non-interest income.
After tax profit rose by 105% to N20.77 billion in 2013, accelerating from the growth of 79.2% in the preceding year. The actual profit figure for the year is 5.2% below our forecast profit figure of N21.9 billion for Stanbic Bank in 2013.
The bank’s profit growth record defies the general industry pattern in 2013. GTB recorded a slowdown in profit growth from 77% in 2012 to 9.0% 2013. Zenith Bank showed a decline of 6.0% in net profit against a rise of 107% in the preceding year. UBA had a drop of 14.9% in net profit compared with a massive recovery and growth it achieved in 2012. Access Bank saw a decline of 8.0% in after tax profit in 2013 against a leap of over 148% in profit in 2012.
Accelerated growth in profit for Stanbic Bank reflects a major gain in profit margin in 2013. In 2012, the bank recorded one of the lowest profit margins in the banking industry at 9.6%. In 2013, it raised net profit margin to 16.7%. This remains well below the best industry records in the banking sector but nevertheless a big improvement in a year of a general decline in profit margins.
GTB, the industry’s leader on profit margin, recorded a decline in net profit margin from 39% in 2012 to 36.9% in 2013. The same happened to Zenith Bank, which lost net profit margin from 32.5% in 2012 to 26.9% in 2013. UBA’s net profit margin went down from 24.9% in 2012 to 17.6% in 2013. Access Bank’s net profit margin declined slightly from 19% to 17.5% over the same period.
Stanbic Bank’s defiant leap in profit happened more because of cost moderation than revenue improvement. There was an all-round cost moderation for the bank in 2013, which enabled it to grow profit well ahead of revenue. A drop of 61% in loan loss impairment charges led the cost moderation.
Net charge for the year came to N2.67 billion on a net credit portfolio of about N384 billion. This is an indication of a major improvement in the overall credit quality standard of the bank. The loans and advances portfolio had expanded by 32% in the year led by lending to other banks, which rose by 283%.
Interest expenses also moderated at an increase of 5.4% to N25.57 billion compared to the increase of 8.2% in interest income. Hence the bank was able to improve net interest income at 10.3% within the tight growth in interest income. Interest expenses therefore claimed reduced proportions of both interest income and gross earnings of the bank in 2013.
The bank’s deposit portfolio grew well ahead of interest expenses at 22.5% compared to 5.4%, which means that the average cost of the naira of deposits declined in the year. The bank closed last year’s operations with a total deposit portfolio of N468.04 billion. Reduced average cost of funds enabled it to improve net interest margin.
There was also a slight moderation in operating cost, which grew at 18% to N57.95 billion against the 21% growth in gross earnings. The bank’s operating cost margin declined slightly from 53.4% in 2012 to 52.1% in 2013. This remains well above the best industry ratios for the year, which also explains the bank’s comparatively low profit margin.
Stanbic Bank earned N1.86 per share in 2013, up from N0.88 in the preceding year. Net assets per share has also improved from N8.56 in 2012 to N9.76 in 2013. The bank has proposed a final dividend of 10 kobo per share in addition to an interim of 70 kobo it paid in the course of last year. Its total dividend of 80 kobo per share represents a yield of about 4.0%. Its books are scheduled to close on 17th April 2014 and payment date is yet to be advised.
