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Tuesday, March 28, 2023

MoneyCentral Rates Stanbic IBTC Stock Underweight on Poor Earnings

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MoneyCentral is rating the stock of Stanbic IBTC as underweight due to its poor second quarter (Q2) 2021 numbers. In financial markets, underweight is a term used when rating stocks.

A rating system may be three-tiered: “overweight,” equal weight, and underweight. If a stock is deemed underweight, the analyst is saying they consider the investor should reduce their holding.

Of course, banking stocks are already climbing a wall of worry, no thanks to the central banks’ draconian rules, combined with the coronavirus pandemic and the inherent uncertainties in the macroeconomic environment.

Stanbic IBTC’s net income dropped by 50.13 percent to N22.54 billion as at June 2021, as a result of liquidity squeeze and reduced financial investment portfolio due to increased excess Cash Reserve assets.

Its return on average equity fell to 12.10 percent in June 2021, from 28.30 percent in 2020, 28.50 percent in 2019, 43.30 percent in 2018, 31.30 percent in 2017, and 15 percent in 2016.

It is noteworthy that the Commercial Investment Banking division (CIB) suffered the gravest slump as profitability was constrained by the continued pressure on loan yields despite increase in loan volume.

 The division’s net income reduced to N9.71 billion in June 2021, from N35.77 billion in 2020, N23.69 billion in 2019, and N28.32 billion.

Stanbic IBTC and other lenders have been hard hit by rising operating expenses brought on by AMCON charge, NDIC premium charge, and inflationary pressures.

Investors have bemoaned the continuous debiting of the account of banks for cash reserve ratio by the central bank.

Because the CRR is having a negative impact on lenders’ profitability, shareholders have asked the Apex bank to reduce it.

According to Agusto & Co, the industry’s restricted cash reserves exceeded N9.5 trillion in the 2020 financial year and translated to an effective CRR of 37 percent.

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