Within analysts coverage, STANBIC stands peculiarly on its mix of strong foreign parent ownership, wholesale service focus, and highly integrated go-to-market strategies across its operating subsidiaries. First, STANBIC’s status as the undisputed money manager in the domestic space makes it a high-value outpost for its parent company, Standard Bank Group SA (67.5% equity holding). It elicits assurance of business support in any event of duress. Furthermore, STANBIC continues to double down on its corporate banking franchise, eking consistently strong PBT contributions from its Wholesale Clients Segment while optimising cross-selling opportunities with its mart approach to service delivery.
Also, its admirably diversified earnings profile, in the long-term, could receive an additional boost from the impending activation of a fintech subsidiary sometime in FY’23. In FY’23, analysts expect NII to settle higher on the impact of the high-yield environment and continued loan-book expansion (5-year CGAR: 24.2%). STANBIC’s credit preferences mirror ZENITHBANK’s, per significant exposure to large corporates, leading to a subdued 5-year stage 3 ratio of 3.31%. Notably, oil & gas and manufacturing obligors have amassed c.54.2% of the Group’s loan book since FY’18 while contributing only 13.9% to total NPLs over the same period. Ex FY’22 and FY20, the NPL average plunges to 5.4%, highlighting possible crude oil price extremity and the slump in the naira. To this end, in FY’23,analysts see scope for a slight strain on asset quality (impaired credit stock could touch 3.0%) with still-elevated energy prices and persistent LCY pressures. Yet, analysts
like the Group’s defensive posture for potentially stressed conditions, with a stout CAR and liquidity ratio of 19.71% and 121.3%, respectively.Another downside risk to this current operating model is an overwhelming reliance on the capital market dynamics, with particularly dilutive effects felt in FY’21, as trading income (-31.5% YoY) lagged the pandemic-induced heights of FY’20. The associated NIR downturn translated into a 9.4ppts decline in ROE to 15.1% in FY’21—nearly 2 standard deviations below the 5-year average of 26.4%. However, the CBN’s monetary hawkish campaign has triggered an indicative recovery in trading contribution to NIR, which is now likely to touch its pre-pandemic 3-year average of 32.3% in FY’22. In FY’23, we expect sustenance of improved trading gains on passthrough from higher fixed-income volatility and FX spreads. We forecast a PAT of N74.3 billion (+30.4% YoY) and N82.0 billion, with an average ROE of 19.5% (FY’21: 14.4%). We revise our 12-month target price upwards to N37.00 (vs N34.63 previously) and revise our recommendation to a BUY rating. STANBIC is trading at a forward PB of 0.86x vs a 4-year averageof1.35x. coverage, STANBIC stands peculiarly on its mix of strong foreign parent ownership, wholesale service focus, and highly integrated go-to-market strategies across its operating subsidiaries. First, STANBIC’s status as the undisputed money manager in the domestic space makes it a high-value outpost for its parent company, Standard Bank Group SA (67.5% equity holding). It elicits assurance of business support in any event of duress. Furthermore, STANBIC continues to double down on its corporate banking franchise, eking consistently strong PBT contributions from its Wholesale Clients Segment while optimising cross-selling opportunities with its mart approach to service delivery. Also, its admirably diversified earnings profile, in the long-term, could receive an additional boost from the impending activation of a fintech subsidiary sometime in FY’23. In FY’23, we expect NII to settle higher on the impact of the high-yield environment and continued loan-book expansion (5-year CGAR: 24.2%). STANBIC’s credit preferences mirror ZENITHBANK’s, per significant exposure to large corporates, leading to a subdued 5-year stage 3 ratio of 3.31%. Notably, oil & gas and manufacturing obligors have amassed c.54.2% of the Group’s loan book since FY’18 while contributing only 13.9% to total NPLs over the same period. Ex FY’22 and FY20, the NPL average plunges to 5.4%, highlighting possible crude oil price extremity and the slump in the naira. To this end, in FY’23, analysts see scope for a slight strain on asset quality (impaired credit stock could touch 3.0%) with still-elevated energy prices and persistent LCY pressures. Yet, analysts like the Group’s defensive posture for potentially stressed conditions, with a stout CAR and liquidity ratio of 19.71% and 121.3%, respectively.
Another downside risk to this current operating model is an overwhelming reliance on the capital market dynamics, with particularly dilutive effects felt in FY’21, as trading income (-31.5% YoY) lagged the pandemic-induced heights of FY’20. The associated NIR downturn translated into a 9.4ppts decline in ROE to 15.1% in FY’21—nearly 2 standard deviations below the 5-year average of 26.4%. However, the CBN’s monetary hawkish campaign has triggered an indicative recovery in trading contribution to NIR, which is now likely to touch its pre-pandemic 3-year average of 32.3% in FY’22.
In FY’23, analysts expect sustenance of improved trading gains on passthrough from higher fixed-income volatility and FX spreads. We forecast a PAT of N74.3 billion (+30.4% YoY) and N82.0 billion, with an average ROE of 19.5% (FY’21: 14.4%). Analysts revise our 12-month target price upwards to N37.00 (vs N34.63 previously) and revise analysts recommendation to a BUY rating. STANBIC is trading at a forward PB of 0.86x vs a 4-year averageof1.35x.
BUY
Target Price:N37.00
Ref Price: N32.00
Upside/(Downside):+15.6%
Market Data
STANBICMarket Cap (N’bn)414.62
Last close price (N)32.00
52-week high-low price (N)36.50/27.50
Avg 3M daily volume (mn)0.73
