Focus for the week: STANBIC IBTC HOLDINGS PLC FY’24 Earnings-Strong finish, earnings beat estimates

Strong finish, earnings beat estimates

STANBIC recently released its full-year earnings for 2024, reporting a 78% y/y jump in Gross Earnings to ₦802.9 billion, above our estimate of ₦730.4 billion. The impressive growth was the result of a 109% y/y increase in Interest Income to ₦566.5 billion (Vetiva: ₦460.5 billion), as the bank saw

yield on asset for the period improve to 12.9% from 8.2% in FY’24, while its loans & advances rose by 16% y/y. Non-Interest Revenue (NIR) also supported the impressive growth, with the bank reporting a 31% y/y increase to ₦236 billion; this was driven by significant improvements in fee and commission income, with significant upticks in Asset management fees amounting to ₦98 billion (+37% y/y), brokerage fees of ₦21 billion (+105% y/y), as well as trading revenue which y/y to tripled to ₦57 billion, amid higher yields in the Fixed Income market.

Costs rise at a slower pace, profitability strengthens

On the other hand, the bank’s costs grew at a slower pace, with Opex coming in 46% higher y/y at ₦243.7 billion, due to a 32% rise in staff costs, a 73% y/y jump in IT costs and a 71% rise in AMCON charges.

Meanwhile, the bank saw no writebacks, as Net impairment losses rose to ₦99 billion from ₦15 billion. Therefore, Pre-tax profits came in 78% higher y/y at ₦303.8 billion, while PAT for the period printed at ₦202.1 billion (Vetiva: ₦206.1 billion), 44% higher y/y.

TP adjusted to ₦88.00

Given these revisions, we have updated our FY’25 estimates, raising our Gross Earnings forecast to ₦1 trillion (FY’24: ₦802 billion) and adjusting provisions to ₦108 billion from ₦99 billion. Consequently, our PAT projection stands at ₦296 billion (FY’24: ₦202 billion). Based on these adjustments, we increase our 12-month Target Price (TP) to ₦88.00 (Previous: ₦70.04) and maintain our BUY rating on the stock. At current levels, STANBIC is trading at a 39% discount to our target price, with a P/B ratio of 1.3x, and PE ratio of 4.1x.

What shaped the past week?

Equities: The local market continued its 2-week bullish run, closing at 105,933.03 points (+138bps w/w). The Banking sector outperformed the ASI, as it led the sector-based gains, up by 4.66% w/w, driven by strong buy-interest in FBNH (+10.18% w/w), ACCESSCORP (+7.69% w/w) and FIDELITY (+6.94% w/w). The insurance sector followed, rising by 1.61% w/w, driven by growth in INTENEGINS (+29.53% w/w), SOVRENINS (21.00% w/w), GUINEAINS (16.44% w/w), and REGALINS (11.59% w/w). The Industrial goods sector also saw modest gains, up by 0.85% w/w, driven by increases in UPDC (+38.50% w/w) and BETAGLAS (+20.98% w/w). However, losses in TANTALIZER (-6.54% w/w) and NB (-5.03% w/w), among others weighed down the Consumer goods sector, which fell by 0.60% w/w.

Fixed Income: On Wednesday, the DMO, via the CBN, held an NT-Bills auction. ₦670 billion worth of bills were offered and allotted, despite receiving over ₦3.2 trillion subscriptions. At the auction, the stop rates for the 91-day (18.00%) and 182-day (18.50%) bills remained unchanged. However, the 364-day bill rate declined further, settling at 20.32%(-148bps).

Nigeria’s FX reserves saw a slight increase to $40.92 million USD on January 6th, 2025. However, this positive momentum was short-lived, as the reserves have since experienced a continuous decline, reaching a current level of $39.45 million USD.  This declining foreign exchange reserves coupled with negative system liquidity can further weaken a nation’s currency, making imports more expensive and potentially fueling inflation. Additionally, we saw Brent crude oil price decline throughout the week and now stand at about $74/ barrel.

In the secondary market trading was largely bullish across the NTB and OMO markets. However, investors traded cautiously in the bonds market, with limited activity throughout the curve. By the end of the week, yield changes on benchmark instruments were as follows: 91-Day (+42bps w/w), 182-Day (-60bps w/w), and 364-Day bills (-914bps w/w), 2-year (-32bps w/w), 3-year (-149bps w/w), and 10-year (-319bps w/w) , 20-year (-1bp w/w),while the 5-year bond inched up by 11bps w/w.

Currency: At the NAFEM, the naira weakened against the USD, reversing the previous week’s gain, closing the week at ₦1,501.61 per dollar.

Domestic Economy:  On Monday, Feb 3, 2025, the President, Bola Tinubu via a letter to the National Assembly, has raised the proposed 2025 budget from ₦49.7 trillion to ₦54.2 trillion. This increase was said to be driven by additional revenues generated by key government agencies; Federal Inland Revenue Service (+₦1.4 trillion), Nigeria Customs Service (₦1.2 trillion), and other government-owned agencies (₦1.8 trillion). Following the announcement, the Senate President, Godswill Akpabio, urged the house to take urgent consideration on the request and assured lawmakers that the budget would be finalised and passed before the end of February. Additionally, Minister of Budget and Economic Planning, Abubakar Atiku Bagudu, affirmed that the 2025 budget was increased to strengthen key economic sectors and infrastructure projects.

Global: The US Stock markets experienced a downturn this week, with major indices declining. The S&P 500 showed the strongest performance, with a relatively small decrease of 0.24%. The week began with a sharp drop in stock prices following an announcement on Friday of potential tariffs on imports from Mexico, Canada, and China. However, after an agreement was reached on Monday to postpone tariffs on Mexico and Canada for 30 days, the markets recovered some losses by the end of the week. In summary, the DJIA snaps a 3-weeks winning streak to close the week at 303.40 ppts, reflecting a significant decline of 0.54% decline. The S&P 500 ended the week at 6,025.99 ppts, down -0.24%. The Nasdaq Composite, down for two consecutive weeks finished the week at 19,523.40 ppts (-0.53% w/w).

Meanwhile, UK stocks were lower on Friday, with the FTSE 100 easing from a record high, as the pound recovered ground and investors tread cautiously ahead of a closely watched U.S. jobs report. Summarily, the FTSE 100 lost 0.2%, while the FTSE 250 was down 0.3% and set to end the week down slightly. Additionally, the NIKKEI 225 Index is down for two consecutive weeks, closing at 785.47 points or -1.98% this week

What will shape markets in the coming week?

Equity market: The market shows steady optimism as the ASI continues edging up. Strong performance in key sectors should support confidence, although occasional profit-taking cannot be ruled out by ergo suggesting some caution should be exercised in the coming week. 

Fixed Income: Next week, we expect trading patterns to remain the same – bullish in the money market, but bearish in the bonds markets, albeit subdued, given liquidity