Nigeria Banking Sector Coverage - December 2011 'Bad ... - Imara

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Financial Summary Income Statement Summary 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Net Interest Income Before Loss Provision 8 776 13 557 18 744 49 376 84 378 83 853 96 872 134 825 Y-o-Y Growth 54.5% 38.3% 163.4% 70.9% (0.6%) 15.5% 39.2% Non Interest Income 9 493 12 015 15 828 34 288 40 736 39 566 52 857 61 931 Y-o-Y Growth 26.6% 31.7% 116.6% 18.8% (2.9%) 33.6% 17.2% Total Operating Income (incl Prov) 17 121 23 789 33 835 79 442 91 838 112 823 136 889 183 690 Y-o-Y Growth 38.9% 42.2% 134.8% 15.6% 22.8% 21.3% 34.2% Operating Expense (10 340) (13 300) (19 325) (41 807) (56 826) (65 254) (68 163) (90 261) Y-o-Y Growth 28.6% 45.3% 116.3% 35.9% 14.8% 4.5% 32.4% Profit Before Tax 7 258 10 772 15 716 37 635 35 013 47 568 70 954 93 428 Y-o-Y Growth 48.4% 45.9% 139.5% (7.0%) 35.9% 49.2% 31.7% Attributable Net Income/Profit After Tax 5 362 8 546 12 993 29 207 28 592 38 890 52 630 69 300 Y-o-Y Growth 59.4% 52.0% 124.8% (2.1%) 36.0% 35.3% 31.7% Balance Sheet Summary 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Cash & Short term Funds 47 471 74 502 127 381 274 634 255 945 273 075 418 206 487 762 Y-o-Y Growth 56.9% 71.0% 115.6% (6.8%) 6.7% 53.1% 16.6% Financial Assets held for Trading 28 934 102 646 135 171 73 011 156 242 176 934 247 866 305 593 Y-o-Y Growth 254.8% 31.7% (46.0%) 114.0% 13.2% 40.1% 23.3% Loans & Advances,Net 65 516 84 201 115 746 421 808 574 733 604 093 675 943 769 672 Y-o-Y Growth 28.5% 37.5% 264.4% 36.3% 5.1% 11.9% 13.9% Deposits 97 445 215 774 294 546 532 239 698 109 779 115 1 031 538 1 236 349 Y-o-Y Growth 121.4% 36.5% 80.7% 31.2% 11.6% 32.4% 19.9% Borrowings 6 910 9 238 58 063 64 324 79 763 89 921 161 857 178 043 Y-o-Y Growth 33.7% 528.6% 10.8% 24.0% 12.7% 80.0% 10.0% Shareholder's Equity 33 973 40 758 49 986 181 038 198 266 220 254 260 037 306 108 Y-o-Y Growth 20.0% 22.6% 262.2% 9.5% 11.1% 18.1% 17.7% Per Share Data 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Earning per Share (kobo) 89.4 142.4 162.4 195.7 153.3 166.8 202.9 213.7 Y-o-Y Growth 59.4% 14.0% 20.5% (21.7%) 8.8% 21.6% 5.3% Dividend Per Share (kobo) 77.00 95.00 75.00 100.00 75.00 100.00 121.72 128.22 Y-o-Y Growth 23.4% (21.1%) 33.3% (25.0%) 33.3% 21.7% 5.3% Book Value Per Share (kobo) 566.2 679.3 624.8 1 213.2 1 062.9 944.6 991.3 933.5 Y-o-Y Growth 20.0% (8.0%) 94.2% (12.4%) (11.1%) 4.9% (5.8%) Tangible Book Value per share (kobo) 564.0 677.1 623.1 1 210.8 1 061.0 943.1 990.0 932.5 Y-o-Y Growth 20.0% (8.0%) 94.3% (12.4%) (11.1%) 5.0% (5.8%) Key Ratios 2005 A 2006 A 2007 A 2008 A 2009 A 2010 A 2011 E 2012 E Gross Loan to Deposit Ratio 69.5% 40.7% 40.3% 80.1% 85.5% 81.7% 70.7% 68.4% Gross Loan to Fund Ratio 64.9% 39.0% 33.7% 71.4% 76.8% 73.2% 61.1% 59.8% Net Interest Income to total income 51.3% 57.0% 55.4% 62.2% 91.9% 74.3% 70.8% 73.4% Cost to Income Ratio 56.6% 52.0% 55.9% 50.0% 45.4% 52.9% 45.5% 45.9% Interest Income to average interest earning assets 9.5% 9.8% 9.3% 11.0% 13.4% 10.6% 9.7% 10.6% Interest expense to average interest bearing liabilities 6.4% 4.9% 4.6% 4.7% 6.4% 3.7% 2.8% 2.8% Net Interest Spread 3.1% 4.9% 4.7% 6.3% 7.0% 6.9% 6.8% 7.8% Net Income Margin 31.3% 35.9% 38.4% 36.8% 31.1% 34.5% 38.4% 37.7% Accumulated Provision as a % of loans & Advances 3.3% 4.1% 2.2% 1.0% 4.0% 5.1% 7.3% 9.0% Return on Equity (average) 15.8% 22.9% 28.6% 25.3% 15.1% 18.6% 21.9% 24.5% Return on Assets (average) 2.9% 3.5% 3.3% 4.0% 2.8% 3.5% 3.9% 4.1% Non-interest income to total income 55.4% 50.5% 46.8% 43.2% 44.4% 35.1% 38.6% 33.7% Provision expense as a % of advances 1.7% 2.0% 0.6% 1.0% 5.6% 1.7% 2.9% 2.8% Advances to equity 192.8% 206.6% 231.6% 233.0% 289.9% 274.3% 259.9% 251.4% 24
EQUITY RESEARCH NIGERIA DECEMBER 2011 BANKING The Standard Bank Group of South Africa merged its Nigerian operations, Stanbic Bank Nigeria with that of IBTC Chartered Bank PLC in 2007. The merger, by way of the first ever tender offer in Nigeria led to USD 525m in FDI and gave birth to a new entity now known as Stanbic IBTC Bank PLC (StanbicIBTC) which became part of the Standard Bank Group (50.8% owned). StanbicIBTC through its wholly owned stock broking and asset management subsidiary, IBTC Asset Management Limited, manages several mutual funds, including the IBTC Nigerian Equity Fund, which is Nigeria’s largest mutual fund. Traditionally strong as a corporate and investment bank, StanbicIBTC continues to look at strengthening its position in the sector. The group’s retail presence has grown since the merger, with 164 branches as at 9M 11 from over 60 branches in 2007. Recommendation SELL Bloomberg Code IBTCCB:NL Current Price (NGN) 7.5 Current Price (USc) 4.6 Target Price (NGN) 5.3 Target Price (USc) 3.3 Upside (%) (29.4) Liquidity Market Cap (NGN m) 141 375 Shares (m) 18 750 Free Float (%) 41.8 Ave. daily vol ('000) - 1 yr. 3 067 Price Performance Price, 12 months ago (NGN) 9.1 Change (%) (16.7) Price, 6 months ago (NGN) 10.3 Change (%) (27.0) • A difficult year for the banking sector was compounded further for StanbicIBTC given its significant capital markets business as the NSE remained in the doldrums. • 2010 experienced a solid recovery as the group aggressively increased its risk assets while also working to improve its funding mix. Along with a notable decline in provision charges, this led to attributable earnings growth of 15.09% to NGN 8.8bn. • For 9M 11, bottom line earnings momentum declined compared with FY 10, up 6.47% to NGN 7.2bn, due to increased provisioning and the impact of the ongoing branch rollout on costs. • StanbicIBTC’s traditional corporate and investment banking bias will continue to weigh on its performance in the short to medium term, while it works to realign its funding mix. RoAE continues to lag many of its peers, while relative PER and PBV ratios are the highest in the sector. We value the group at NGN 5.32, indicating 29.4% downside on its current price of NGN 7.54. SELL. Financials (NGN m) 31 Dec F2010 2011F 2012F Loans & Advances 177 454 237 589 303 647 Net Interest Income (excl. Provisions) 26 370 30 123 36 752 Non-Interest Income 22 024 28 315 35 759 Attributable Earnings 8 802 9 028 11 647 EPS (kobo) 50.4 51.8 66.8 DPS (kobo) 39.0 38.8 50.1 NAV/Share (kobo) 454.0 473.9 510.2 Valuation Ratios Current 2011F 2012F Earnings Yield* (%) 6.5 6.9 8.9 Dividend Yield (%) 5.2 5.1 6.6 PE* (x) 15.3 15.7 12.1 PBV (x) 1.7 1.6 1.5 RoaA (%) 2.4 2.1 2.2 RoaE (%) 10.6 10.4 12.6 Net Interest Margin (%) 6.9 6.4 6.4 Cost to Income Ratio (%) 70.8 75.4 74.4 * - trailing Stanbic IBTC vs NSE ASI Strengths Weaknesses 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 Majority owned by Standard Bank Diversified business Asset management good source of annuity income, especially when the market recovers Opportunities Nigerian acquisition/merger Funding mix remains relatively expensive reflecting corporate & investment bank roots Low RoAE Relatively small branch network vs top tier Threats Mergers/acqusitions by other 2nd tier peers Increased cross-selling opportunities will see them consolidate market position Stanbic IBTC NSE ASI Parent has strong emerging market ties Continued weakness of the NSE 25
Page 1 and 2: Nigeria Banking Sector Coverage - D
Page 3 and 4: Nigeria Banking Sector Overview Hav
Page 5 and 6: The breakdown, on a month-on-month
Page 7 and 8: EQUITY RESEARCH NIGERIA DECEMBER 20
Page 9 and 10: In its 9M 11 results to September,
Page 11 and 12: EQUITY RESEARCH PAN-AFRICAN DECEMBE
Page 13 and 14: In its 9M 11 results to September,
Page 17 and 18: FCMB’s 9M 11 results to September
Page 21 and 22: The 9M results to 30 September 2011
Page 25: The 9M results to 30 September 2011
Page 29 and 30: StanbicIBTC’s 9M 11 results to 30
Page 33 and 34: Interest income remained under pres
Page 37 and 38: For the 9M results to 30 September
Page 39: Imara Africa Securities (A division

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