By Omodele Adigun and Chinwendu Obienyi
For Stanbic IBTC Plc, it is time for stocktaking and more due diligence to save management the red of its shareholders who are bewildered at the sheer size of its non -performing loans and other gaffs.
This is because within the first nine months of the year, the Central Bank of Nigeria (CBN) had slammed bank with severe sanctions, debiting it 44.6 per cent, 17.1 per cent more than the mandatory 27.5 per cent in Cash Reserve Requirement(CRR) for its failure to meet the 65 per cent Loan-to-Deposit Ratio(LDR), while at the same time, its non-performing loans (NPLs) had spiraled to N28.7 billion within the period.
According to the Money and Credit Statistics of the CBN, ten banks reported a CRR of N8.04 trillion in the first nine months of 2021. The amount was 1.6 per cent higher than the N7.9 trillion in the 2020 financial year. This was based on data pooled from the financial statements of the major banks listed on the Stock Exchange.
Despite the average being lower in the first nine months of the year, Stanbic IBTC stood out among the banks that recorded higher CRRs. For instance, the bank had about 44.6 per cent of its deposits kept with the CBN as CRR.
The negative impact of this development was evident in the bank’s interest income over the years, which plummated from N91 billion in the first nine months of 2019, to N81.9 and N73 billion in the first nine months of 2020 and 2021, respectively.
Its CRR of N488 billion also represents 59 per cent of its loan book of N827 billion in the period under review.
This seemed to have justified Fitch Rating’s research advisory last year that “the CRR of Nigerian banks was already among the highest in the world which could further limit banks’ ability to fund local-currency (LC) loan growth with LC deposits.”
Observers fear that this may have been responsible for Stanbic IBTC inability to meet the LDR threshold.
Meanwhile, its Non-Performing Loans (NPLs) portfolio rose by 8 per cent to N28.7 billion in the nine months (9M) of 2021 as against N26.5 billion recorded during the period under review.
NPL is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full and could pose a major challenge for the banking sector, as it reduces the profitability of banks and is often presented as preventing banks from lending more to businesses and consumers, which in turn slows down economic growth
According to the group’s unaudited interim results for the period ended 30 September 2021, its Non-performing loan to total loan ratio stood at 3.4 per cent as against 4 per cent recorded in the corresponding year of 2020 while gross earnings fell to N146.6 billion from N183.3 billion recorded in 9months of 2020, thus representing a 20 per cent drop.
Furthermore, the Group’s Net interest income slipped to N54 billion from N56.3 billion, Non-interest revenue fell by 30 per cent from N98.5 billion to N69.3 billion while Total operating income dipped to N123.2 billion from N154.7 billion in 2020.
Group’s profit before tax (PBT) also fell by 41 per cent from N76.9 billion in 2020 to N45.3 billion while profit after tax (PAT) declined to N39.9 billion from N66.2 billion.
Commenting on the results, Dr Demola Sogunle, Chief Executive Stanbic IBTC, said that the increase in interest income arose from increase in volume and average yield of loans and investments.
According to him, the Group is undergoing a future-ready transformation, transitioning from a product/service focus to a Client Segment led organisation effective August 2021.
He said, “Thus, in line with our core value of delivering value to our shareholders, the restructuring will advance the execution of our digital business transformation and enable us to achieve accelerated future readiness for the business and growth through effective mining of the client ecosystems propelled by a future-ready workforce.
We continue to make progress in supporting the financial needs of our communities in Q3 2021, investing to advance tree planting exercise, youth and women empowermentthrough donations, sponsorships and partnerships, library upgrade and renovation, hospital unit refurbishment, amongst others”.