Depleting profitability and income generation capacities are some of the visible reasons why Nigeria’s Stanbic IBTC Holdings, a subsidiary of the South Africa’s based Standard Bank will like to go ahead with its plan to raise N20.4 billion through rights issue, according to the analysis.
The initially approved rights issue by the Securities and Exchange Commission (SEC) was later rescinded due to investigations to be carried out by Financial Reporting Council (FRC) for irregularities in its financials.
Currently the bank’s capital adequacy ratio stood at 10 per cent, the minimum requirement by the Central Bank of Nigeria, which implies that it will need fresh fund to keep its operations running.
Analysis on the bank’s audited financial results for the first half ended June 30, 2015 showed a very challenging financial position as it posted a 52 per cent decrease in profit before tax of N9.5 billion from N19.95 billion in the same period of 2014, while its profit after tax declined 40 per cent to N9.7 billion from N16.2 billion. With this, basic earnings per share dipped by 46 per cent to 80 kobo from N1.48 recorded in the corresponding period of 2014.
In spite of increment in Stanbic’s total assets, the lender’s asset performance via its return on assets showed a 0.7 per cent reduction to 1.15 per cent from 1.8 per cent recorded for half year 2014.
Net Interest Income dropped 3.7 per cent from N23 billion to N22 billion, Cost to Income Ratio rose 6 per cent to 75 per cent from 69 per cent recorded in 2014, showing the group’s reduced efficiency in operations, evident in the group’s 4 per cent decline in Net-interest income.
Return on equity decreased by 7 per cent to 8.16 per cent from 14.8 per cent recorded in 2014, depicting declining profitability of the group, evident in its 40 per cent PAT depreciation to N9.7 billion.
Loan to deposit ratio which measures lending institution’s ability to cover withdrawals made by its customers, rose 5 per cent to 68.24 per cent in 2015 from 63.30 per cent in H1 2014.
On the positive side, Stanbic’s of financial position showed an 11 per cent appreciation in gross earnings to N68.3 million from N61.7 million in the same period of 2014 while customer deposits appreciated 18 per cent to N601.7 billion from N511.8 billion in 2014. Total assets increased 14 per cent to N1 trillion from N906.8 billion while Total liabilities grew 15 per cent to N911.2 billion from N794.5 billion recorded in the corresponding period of 2014.
The company’s share traded last Friday at N21.66, a drop of 1.6 per cent or 34 kobo from previous trading price of N22. The bank has market capitalization of N216.6 billion and 10 billion shares outstanding
CBN’s monetary policies lately impacted negatively on income generation capacity in the financial sector along with high cost of funds.
By Pita Ochai