Stunning information emerging from the Nigerian banking sector has revealed that Stanbic IBTC Holdings Plc incurred over N7 billion in loan losses in the first quarter of 2024.
The record shows a 117 percent increase from the less than N3.3 billion it expensed in the same quarter in 2023.
Typically, this means that the bank has been experiencing a major increase in credit losses for the third straight year since 2022 when a net charge of N10.3 billion spiked from a net write-back of N1.5 billion in the preceding year.
The figure climbed by over one-half in 2023 to N15.5 billion and has gained much speed in the current financial year.
The bank’s unaudited first-quarter financial report, which ended in March 2024, shows that the high growth in loan losses followed equally strong growth in interest earnings for the period.
This is despite a conservative 9.3 percent expansion in the bank’s net lending position within the quarter’s three months to N2.2 trillion. The bank is expected to reap both gains in interest income and bad loan losses from a massive asset buildup in 2023.
Last year, the bank’s net loans and advances portfolio swelled by about 69 percent to close at over N2 trillion—the most rapid risk asset expansion it has done in decades. In five years to 2023, Stanbic IBTC Holdings multiplied its net loans and advances close to four times from N535 million at the end of 2019.
The bank generally muted loan loss expenses from an all-time peak of N25.6 billion in 2017 to achieve net write-backs of N2.9 billion in 2018 and N1.5 billion in 2021, but the current financial year looks quite likely to see a new peak in credit losses for the bank.
Adding to the surge in loan loss charges is the cost of funds – which keeps encroaching on interest earnings.
At almost N39 billion, interest expenses are up by 177 percent year-on-year compared to an increase of 130 per cent in interest income to less than N116 billion over the same period.
This is sustaining the pattern of last year when the cost of funds grew by 141 per cent to N95.4 billion compared to an increase of 77 percent in interest income to N270.6 billion.
At the end of the first quarter, the bank’s net interest income amounted to under N77 billion, while net income after loan loss expenses stood at N69.8 billion. This represents an outstanding growth of roughly 111 percent from N33 billion in the same quarter in 2023.
Non-interest earnings grew by 37.5 per cent to a little over N61 billion, driven by major growth in other revenue and fee and commission income but weakened by a drop in trading revenue and a loss from life insurance operations.
At the end of the first quarter, the bank’s gross earnings amounted to N177 billion, an impressive growth of 86.4 percent year over year.
While both interest and loan loss charges encroached on revenue, operating costs provided a cost-saving line, with a moderated increase of 65 percent to N68.4 billion at the end of the quarter.
Operating cost margins decreased from 43.6 per cent to 38.6 percent over the review period. However, this was insufficient to remedy the impact of the cost of funds and loan losses on margins. A leap of 130.6 per cent in income tax expenses added to the squeezing of margins.
The net profit margin decreased from 30.4 per cent in the same period last year to 25.8 percent at the end of the first quarter.
Stanbic IBTC closed the first quarter with a pre-tax profit of N62.7 billion and an after-tax profit of N45.6 billion, representing increases of 73 per cent and 58 per cent, respectively.
The bank closed the first quarter operations with earnings per share of N3.45, rising from N2.16 per share in the same period last year.
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