STANBIC IBTC DELIVERS STRONG Q1 TOP,BOTTOM LINES, RAISES HOPE FOR BETTER YEAR-END

Stanbic IBTC Holding management was the first to release its first quarter earnings report ended march 31, 2017 to the investing public ahead of other industry players, as if seeking to make up for last year when regulatory issues with the Financial Reporting Council of Nigeria (FRC) prevented it from presenting its figures in line with post-listing requirements of the Nigerian Stock Exchange.  The investment banking-driven group remains a major player in the nation’s financial markets, along with its subsidiaries, which play big in stock trading, pension management, banking, capital market, advisory services, fund management and other.

The holding company’s investment proficiency and professionalism have reflected on the recent numbers in its full-year 2016 figures and the latest Q1’17 results which were impressive performances across key line items,not minding the low dividend payout in the audited result. Gross Earnings was up by 35% to N47.02 billion from N34.78 billion in 2016 to beat analyst and market expectation as it revealed the impact of high interest regime and the new foreign exchange policy of CBN on the earnings capacity of Nigerian banks. The strong top line performance was propelled by outstanding growth in both Interest and

Non-Interest Income line, as well as revenue from securities trading on the back of FX margins from forward transactions. Despite  a 12% rise in Interest Expense,  net Interest Income remained strong, rising by 79%as the attractive yield environment continues to support top line. 

Furthermore, provision for bad loans for the period grew by 46.70% to N3.33bn from N2.27 billion in 2016, while cost management input boosted its profit margin for the period to 34.18% from 22.4% in the corresponding period of last year. Operating Expense grew by 13.68%,even as tax for same period was also flat at 4.08% to N2.55bn from N2.45bn. 

Profitability level of the group was therefore more than double at N16.07bn from N7.79bn in 2016 representing 106.26% growth to beat market forecast.

3 MONTHS UNAUDITED REPORT
COY	2016	2017
	(N)	(N)	% Chg
Date Released	December, 22, 2016	April 24, 2017
Price as@ Released Date	14.21	21.49	51.23
Gross Earnings	34,780,000,000	47,022,000,000	35.19
Profit After Tax	7,791,000,000	16,074,000,000	106.29
Shareholders' Fund	140,796,000,000	156,048,000,000	10.83
ESTIMATED RATIOS
Earnings Per Share	0.76	1.61	111.84
PE Ratio	4.56	3.18	-30.26
Earnings Yield	5.48	7.85	43.25
Book Value	14.06	15.60	10.93
Price To Book	1.08	1.31	21.30
ROE (%)	5.53	10.30	86.26
Profit Margin	22.40	34.18	52.59
Year End	Dec	Dec

 Source: NSE, Company Report and Investdata Research 

Valuation

It must be noted here that the group’s numbers came with surprises as performance across key line items were impressive. INVESTDATAis optimistic that STANBIC IBTC’s performance in FY’17 and the expected earnings from the Corporate and Investment Banking businesses would continue to support bottom line. Consequently, we project an Earnings Per Share (EPS) of ₦3.95 for FY’17. Therefore, the group is fairly priced at N18.50, with trailing price to earnings of 3.18x and Q1 Price/Book value of 1.31x.

We recommend a HOLD for now. Investors with medium and long-term goal should wait for a pullback before taken position.But the bank’s Book Value reveals an overpriced situation at the current market of N26.00 per share.

Technical View

The bank’s price action for over seven months have been trending up after several attempt to reverse failed, as it formed double tops at the resistance level of N28.89 each, whichsignals a pullback due to profit booking by traders. RSI is reading 74.55 at overbought region and money flow index is looking up to signal that funds are still entering the bank, new positioning should wait to see the level of pullback before taking any position.

STANBIC IBTC HOLDINGS PLC
Share Holding Structure
Stanbic  Africa Holdings (SAHL)	53.20%
First Century International Ltd	7.47%
Nigerian Citizens & Associations	39.33%
Other Statistics
Shares Outstanding (MN)	10,0000,000
Opening Price (2017)	N15.00
Closing Price at May,10,  2017	N26.95
Date Listed	23/11/2012
Year End	31st Dec.

Source: NSE, Company Report and Investdata Research

The management’s prudence and professionalism in its bid to strengthen the world-class brand with steady growth in terms of profitability, dividend payout and impacting the economy, is no doubt paying off. Also, the company has demonstrated its commitment to creating value at all levels of operations through its activities in investment banking and capital development/advisory services that continuous to support and drive profit, following which it ranks among the top banks in Africa and in Nigeria. The relative small number of shares in issue and the holding structure has always supported share price and earnings. More than 50% stake in Stanbic IBTC Holding by the majority owners has kept the share price high.Its performance over the years has reflected in the groups profitability and investment ratios, while price continues to oscillate in the same direction with numbers posted.  Book Value for the period under review has grown in the same direction from N11.43 in 2013 to N14.08 per share, with investor confidence supporting price. Valuation tools placed the bank's stock at N18.50, indicating that at this current price the stock is overpriced but have been supported by the shareholding structure.

                                                                                               

STANBIC IBTC HOLDINGS FOUR YEARS FINANCIAL PERFORMANCE
	2013	2014	2015	2016
Date Released	April 3, 2014	March 31, 2015	Dec, 21, 2016	March 22, 2017
Price @ Released Date	20.50	28.68	14.21	18.50
Gross Earnings	111,226,000,000	130,664,000,000	140,027,000,000	156,425,000,000
Profit After Tax	32,065,000,000	34,457,000,000	18,891,000,000	28,520,000,000
Shareholders' Fund	114,275,000,000	120,244,000,000	128,967000,000	140,798,000,000
Dividend	1.05	1.00	0.95	0.05

Stanbic IBTC Performance (2013-2016)

Looking at the group’s performance in the past four years, the numbers as shown by the attached tables have been consistent, heightened its performance as reflected in its gross earnings  and net asset for the period.

Gross income during the period grew by 40.64% from N111.23bn in 2013 to N156.43bn, while profitability level fell by 11.21% to N28.52bn in 2016 from N32.07bn posted in 2013, after which it hit a high of N34.46bn in 2014. The company’s performance within the period has reflected on its share price movement for same period. But with its recent numbers,Stanbic IBTC Holdings profitability level is turning up which is also likely to better impact price, despite the overpriced situation now. Its earnings per share improved last year,regardless of the over regulation in the industry and the unfriendly economic situation in the country. It however enhanced income from treasury trading with high Monetary Policy Rate (MPR), regardless of the tight liquidity, ascending inflation rate, dwindling discretionary income and falling naira value at the exchange market. 

The EPS dropped from 321 kobo in 2013 to 285 kobo in 2014 but moved up from 189 kobo in 2015 to 285 kobo which is likely to be sustained in up direction going forward as the economy outlook is becoming positive. 

As we have mentioned earlier in this piece, the company’s 2016 full-year EPS of N2.85 beat analysts and market expectations,despite the inherent country risk, as a result of contraction in the economy. The improving Earnings Yield of the company again showed up in its trending numbers after a decline from 15.64% in 2013 to 12.01% in 2014, it has moved to 13.29% in 2015 and in 2016 to 15.42% which attests to its yearly earnings growth.  See the table below for the ratios movement over time.

STANBIC IBTC- ESTIMATED RATIOS
	2013	2014	2015	2016
Earnings Per Share	3.21	3.45	1.89	2.85
PE Ratio(X)	6.39	8.32	7.52	6.49
Earnings Yield (%)	15.64	12.01	13.29	15.42
Book Value	11.43	12.02	12.90	14.08
ROE (%)	28.06	28.66	14.65	20.26
Profit Margin (%)	28.83	26.37	13.49	20 26
Year End	Dec	Dec	Dec	Dec