On the global economic landscape, the year 2013 was dominated by widespread uncertainty on the back of recurring concerns about growth in some areas of the Eurozone, political instability in the Middle East and mixed signals about quantitative easing/tapering in the United States
By contrast, the Nigerian economy recorded GDP growth in line with historical trends on the back of improved output from non-oil sectors. In addition, the stability of the Naira against international currencies led to increased confidence by investors and the sustained flow of foreign portfolio investments into the country. These positive indicators were partially moderated by unrest in some parts of northern Nigeria which dampened economic activities in those areas.
On the domestic capital markets scene, the All Share Index of The Nigerian Stock Exchange appreciated by 47% in 2013 on the back of strengthening company fundamentals, positive investor outlook and rising business confidence arising from the successful privatisation of the unbundled electricity distribution and generation companies which previously belonged to the Federal Government of Nigeria via its monopoly Power Holding Company.
Within the banking industry, the main drivers during the year were regulatory changes with the most significant being the increase in cash reserve ratio to 50% imposed on public sector deposits held by banks and the increase in the statutory AMCON levy.
Against this backdrop, our company achieved many milestones during the course of the year. Our banking customer base crossed the one million customer mark, in line with our growth ambitions. We will continue to leverage on economies of scale to optimize costs, and to continue to provide best-in-class service to our customers.
In addition, we were awarded with several accolades across our group including the most active dealing member firm at The Nigerian Stock Exchange CEO award 2013 and the best Investment Management Company in Nigeria by World Finance. These accolades were in recognition of our leadership across asset classes within Nigerian financial markets.
The group’s total assets increased by N86 billion or 13% from N677 billion to N763 billion at the end of 2013. This growth was in line with our continued focus on growing our balance sheet.
The bank’s deposits from customers increased by N61 billion or 17% from N355 billion to N416 billion at the end of 2013. This growth was largely driven by a focus on driving appropriately priced deposits and reducing the average cost of funds of the existing balance sheet.
The Bank’s loans to customers also increased by N23 billion or 9% from N280 billion to N303 billion at the end of 2013. The growth rate was muted due to the persistently high interest rate regime.
Stanbic IBTC Holdings PLC achieved gross earnings of N111 billion for the financial period ended 31st December 2013, which represented an increase of 21% over the N92 billion achieved in 2012. This was largely due to an exceptional performance from increased transactional fee income and growing investor flows.
The group’s net interest income increased by 10% from N34 billion in 2012 to N37 billion in 2013. This growth is largely as a result of our focus on reducing our overall cost of funds.
Non-interest revenue grew by an impressive 42% from N34 billion in 2012 to N48 billion in 2013. This performance was on the back of a strong showing from our Wealth division as well as trading revenue earned by leveraging off opportunities recorded in the market during the year.
Overall, the group’s profit after tax increased by 105% from N10 billion earned in 2012 to N21 billion in 2013.
Following the interim dividend of 70 kobo per share already paid to shareholders on 22 August 2013, your Directors are pleased to recommend a final dividend of 10 kobo per share.
In the coming year, we will continue to leverage on our core strengths to ensure that we are able to provide even better solutions to all of our customers’ financial needs.
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During the year, the domestic banking industry was largely impacted by regulatory headwinds with an attendant constraining effect on revenue streams for banks in the medium term.
Against this backdrop, our group delivered a solid performance, outperforming market expectations and further reinforcing our commitment to building a profitable platform from which we will create value for our shareholders.
Our group posted respective increases of 26% and 105% over the prior year’s performance in operating income and profit after tax. You will find included herein detailed financial reports.
The conclusion of our first full financial year since our reorganization into a holding company structure in November 2012 resulted in operational efficiencies that have validated our decision to restructure ourselves in this manner.
We have continued to expand our customer touch points across the nation, evidenced by the increase in the number of branches to 180 and the deployment of 110 ATMs during the course of the year taking our ATM footprint to 359.
This is in line with our strategy to provide our one million plus customers with easy and convenient access to our services across the nation.
In 2013, we recorded successes through an unrelenting focus on cost control, deposit mobilization and responsible asset growth; we plan to leverage on these efficiencies in 2014 to ensure that we continue to grow our capacity to provide financial solutions to our customers in a sustainable manner.
Our outlook for the year is positive as we leverage on our competencies to provide best-in-class service to our customers while concurrently creating value for our shareholders.
Balance sheet analysis
The group’s total assets stood at N763.0 billion at the end of 2013. This represents a 13% growth over N676.8 billion recorded in 2012. The growth is driven by loans and advances and liquid assets. The total assets were funded primarily from deposits from customers, which accounted for 55% of total assets.
Loans and advances
Loans and advances to customers grew by 9% to N303.3 billion and resulted mainly from 27% growth in Personal and Business Banking (PBB) loans to customers. Corporate and Investment Banking loan book decreased by 3%.
The ratio of non-performing loans to total loans improved to 4.4% from 5.1% in 2012, driven by the reduction in non- performing loans from N14.3 billion in 2012 to N13.4 billion. Cumulative provision on non-performing loans improved from 9110.6%to101.1%.
Total deposits from customers grew by 17% on the back of a 21% growth in PBB deposit book and a 14% growth in that of CIB. The group’s most stable and low cost funding source – demand and savings deposits from PBB business was 28% higher than the prior year, while that of CIB grew by 62%.
The group is focused on generating low cost deposits to improve funding cost.
Net interest income
The group’s net interest income was up 10% and was supported by continued growth in lending activities, increased income from investment securities, albeit at a lower yield than prior year and moderate growth in interest expense. The interest expense benefitted from improved deposit mix as the ratio of low cost deposits to total deposits grew significantly to 52% (2012: 43%) during the year.
Corporate and Investment Banking’s net interest income increased by 23% to N16.6 billion on the back of a 9% reduction in interest expense, while Personal and Business Banking’s net interest income was flat at N18.4 billion. Wealth net interest income grew by 16% to N1.9 billion.
PBB’s net interest income was adversely impacted by a 53% growth in interest expense driven largely by growth in deposit book and customer’s preference for call deposits. Call deposits, although is a lower priced deposit than term deposits, grew significantly to N8.9 billion from N1.8 billion in 2012. Wealth net interest income also recorded a 16% growth driven by increased income from money market activities.
Non-interest revenue increased significantly by 42% to N48.2 billion on the back of significant growth in fee and commission revenue and trading revenue. Net fee and commission revenue grew by 29% to N32.9 billion, while trading revenue was up 84%. The growth in net fee and commission revenue is supported by increased transaction volume, steady growth in assets under management within the wealth business, considerable growth in assets under custody and closure of good advisory mandates in the investment banking business. Trading revenue, on the other hand, benefitted from increased customer transactional volumes, good reading of interest rate movements and relative volatility in the foreign exchange market.
Corporate and Investment Banking’s non-interest revenue grew by 51%, and accounted for 51% of total group’s non- interest revenue, while Personal and Business banking’s non- interest revenue was up 34% and accounted for 14% of total non-interest revenue. Wealth contributed 35% to total non- interest revenue, with non-interest revenue growing by 35%.
Credit impairment charges
Credit impairment charges decreased by 61% to N2.7 billion, benefitting from resolution of delinquent assets and improvement in debt collection capabilities. Corporate and Investment Banking as well as Personal and Business Banking recorded a 90% and 34% reduction in credit impairment charges respectively during the year.
Operating expenses grew by 18% to N57.9 billion. The growth is driven by the increase in staff cost and other operating expenses. Staff cost grew by 20%, while other operating cost grew by 17%. Cost-to-income ratio improved from 72.4% to 68.0% as revenue continue to grow faster than cost.
Operating cost and cost-to-income
CIB’s operating expenses grew 21%, with cost-to-income ratio improving to 50.6% from 57.9% in 2012. The major driver of CIB’s cost growth is staff cost, attributable to the continued investment in people and skills. PBB witnessed a 22% growth and recorded a cost-to-income ratio of 121.1% (2012: 107.1%). Marketing and brand expenses, premises maintenance cost as well as NDIC insurance expenses were major drivers of operating costs in PBB.
Wealth however, recorded a 3% reduction in operating expenses and consequently witnessed improvement in cost-to-income ratio from 46.8% in 2012 to 34.3%. Wealth operating cost benefitted from the absence of regulatory induced technology expenses incurred in 2012.
Overall, the group’s profit after tax improved by N10.5 billion to N20.7 billion, thus, representing a 105% growth. CIB’s profit after tax grew by 140% to N18.4 billion, while that of Wealth grew by 50% to N8.4 billion. PBB’s loss after tax grew from N3.0 billion in 2012 to N6.0 billion.
The group’s return on equity improved significantly from 10.9% in 2012 to 21.0% in 2013.