The central bank’s stringent rules have stung Stanbic IBTC Holdings as the lender’s profit slumped to four year low, and there are concerns that margins could further deteriorate in the last quarter of the year.
It is surprising that the lender which was once a star performer in the banking space with one of the highest returns on equity is grasping for breath.
Its net income dipped by 65.46 percent to N39.94 billion in September 2021 from N66.13 billion as at September 2020. That marks the sharpest profit slump in six years.
Interest income and similar charges was down 4.01 percent to N54 billion in September 2021 from N56.25 billion as at September 2020.
Gross earnings were down 20 percent to N146.61 billion as at September 2021, and the drop in earnings was elicited by a reduction in fees and commission income.
Stanbic IBTC is not efficient in reducing operating and increasing operating income as cost to income ratio rose to 64.40 percent in the period under review from 45.80 percent the previous year.
Also, it is not good at generating returns on the investment it received from its shareholders.
Return on average equity (ROAE) fell to 10.80 percent in the period under review from 19.40 percent the previous year while return on average asset (ROAA) reduced to 1.50 percent in September 2021 from 3.0 percent the previous year.
Net interest margin fell to 2.60 percent in September 2021 from 3.80 percent the previous year.
Net interest margin (NIM) reveals the amount of money that a bank is earning in interest on loans compared to the amount it is paying in interest on deposits.
Analysts had warned that the punitive regulatory environment would weaken sector players’ earnings.
Of course, investors had dumped banks’ shares that were attractive a few years ago, as lack of transformation policies by the policy makers remains a roadblock for foreign direct investment needed to spur economic growth.
In 2019, the central bank barred individuals and locals from buying its open market operations (OMO), and that sent net treasury yields crashing.Banks make money by packing their money in short term government securities to earn reasonable returns.
The regulator’s decision to hold onto the cash reserve ratio-which is one of the highest across the globe- is stifling liquidity, while the hike in the minimum loans to deposit ratio exposes lenders to rising non-performing loans.
Stanbic IBTC Holdings loans and advances to customers stood at N854.94 billion as at September 2021, which is 30.50 percent higher than 2020’s N655.92 billion.
Deposits from customers were up 33.50 percent to N1.09 trillion in the period under review from N819.34 billion the previous year.
A pile of deposit seating in the balance sheet shows the lender is not turning money into loans to generate interest on assets.