Banking
S&P Affirms Ratings on Stanbic IBTC Bank, Predicts Robust Earnings in 2018
By Dipo Olowookere
S&P Global Ratings has announced affirming its ‘B/B’ long- and short-term issuer credit ratings on Nigeria-based Stanbic IBTC Bank PLC with a stable outlook.
In a statement issued by the firm, it was disclosed that the ‘ngBBB/ngA-2’ long- and short-term Nigeria national scale ratings on the bank were also affirmed.
Stating further, S&P said its ratings on Stanbic IBTC reflect the creditworthiness of the entire Stanbic
IBTC group because it considers the lender to be the core component of the group.
In addition, it disclosed that Stanbic IBTC Bank is strategically important to the South Africa’s Standard Bank Group (SBG) Ltd and it therefore factored in one notch of group support above Stanbic IBTC’s unsupported group credit profile (GCP), which was assessed at ‘b-‘.
The rating agency noted that the ratings on Stanbic IBTC are capped by the foreign currency sovereign credit ratings on Nigeria as it does not rate Nigerian banks above the sovereign because of the likely direct and indirect influence of sovereign distress on their operations, including their ability to service foreign currency obligations.
Stanbic IBTC operates in the mid-tier of the competitive Nigerian banking sector, and its business position benefits from its affiliation to SBG, as well as its brand recognition and segment diversification. Its corporate and investment banking division accounted for 53.5% of group revenues in 2017. Its wealth management business accounted for 19% of group revenues in the same period. These two divisions were the main contributors to the group’s profitability, resulting in a strong return on equity (ROE) of 28.9% at year-end 2017.
S&P said it expects future profitability to compare well to top-tier Nigerian banks’ with an ROE at around 20%-22% over the next two years.
In contrast, Stanbic’s retail franchise profitability lags behind the other two segments owing to high impairment charges and a weak cost-to-income ratio.
That said, it remains central to the bank’s long-term strategy and focuses on noninterest income as opposed to pure loan growth. It does this by offering enhanced client services via a transactional platform, which will also help attract low cost deposits.
The bank’s funding cost improved slightly to 4.0% in the first quarter of 2018 from 4.6% in 2017. This compares well to some top-tier banks’ cost of funds despite a comparatively modest retail franchise. At the same time, the Stanbic IBTC group improved its cost-to-income ratio to 49%, from 55% in 2016, which better aligns with the best-performing banks in Nigeria.
“We expect Stanbic IBTC to report resilient earnings in 2018 despite muted loan growth, and we estimate our risk-adjusted capital (RAC) ratio will remain broadly stable in the 5.2%-5.7% range over the next 12-18 months compared with 5.1% at year-end 2017.
“We assume a convergence of the investor and exporter window rate toward the parallel rate of N360/$1 in 2018. We also expect falling yields on Treasury bills (T-bills) to put pressure on net interest margins in 2018 as the federal government issues fewer T-Bills.
The group’s strong earnings capacity will support its large capitalization buffer above its minimum regulatory capital of 10% through earnings retention. We estimate the group’s earnings buffer to be above 100 basis points (bps) in 2018, which compares adequately with the best performing Nigerian banks.
“We note that in the first quarter of 2018, the group’s capital adequacy ratio (CAR) has improved despite the IFRS 9 implementation. Stanbic IBTC group’s CAR continued to improve to 25.4% compared to 23.5% reported in 2017. The IFRS 9 adjustment was not material. In the first quarter of 2018, the group adjusted its retained earnings by N10.173 billion for credit impairments and N118 million for other classification and measurement requirements, as a result of IFRS 9 transition,” the rating firm said in the statement.
It said further that, “While we expect high impairment charges to somewhat weigh on the bank’s profitability, we forecast ROE to reduce from its 2017 peak to average 20%-22% over the next two years. While the group managed to record N1 billion in loan recoveries in Q1 2018, we still expect cost of risk to remain high, between 4.5%-5.0% in the next 12-18 months.
“We anticipate nonperforming loans (NPLs) will average 8% in 2018-2019. Our elevated projections are a consequence of high singleobligor concentration. The top-20 loans accounted for 48% of total loans at year-end 2017 while the top-20 NPLs represented over 74% of the bank’s total NPLs at the same date.
“Positively, the bank maintains good loan loss reserve coverage of NPLs, which should remain at about 100% in the next 12-18 months. This, combined with strong earnings capacity, mitigates our view of weaker asset quality indicators compared with peers.”
S&P said the bank’s funding structure has improved over time and mostly relies on customer deposits.
“We think Stanbic IBTC also benefits from its brand reputation and the expertise available within the broader SBG to drive its corporate and investment banking relationships. The group maintains a liquid balance sheet. It has proactively managed its foreign currency balance sheet and has access to parent support in case of need. The group reported a net stable funding ratio of 189% at year-end 2017 and exhibits one of the lowest levels of loan leverage among top peers in Nigeria. Broad liquid assets covered short-term wholesale funding about 5x at the same date,” it added.
By Adedapo Adesanya
Access Bank Plc, the banking subsidiary of Access Holdings Plc, has entered into a binding agreement with South African-based Bidvest Group Limited for the acquisition of 100 per cent equity stake in Bidvest Bank Limited.
The deal for the 24-year-old South African lender is due to be completed in the second half of 2025, upon regulatory approval.
This shows Access Bank’s further expansion plans in line with goals set by its late founder, Mr Herbert Wigwe.
The agreement to acquire 100 percent stake in Bidvest Bank reflects Access Bank’s commitment to strengthening its footprint in South Africa and consolidating on its position as the continent’s gateway to global markets as it seeks to optimise the benefits of recent acquisitions and accelerate its transition towards a greater focus on efficiencies.
Bidvest Bank, founded in 2000 is a niche and profitable South African financial institution providing a diverse range of services, including corporate and business banking solutions and diverse retail banking products.
As of its year ended June 2024, Bidvest Bank reported total assets equivalent of $665million and audited profit before tax of $20million.
Upon conclusion of this acquisition, Bidvest Bank will be merged with the bank’s existing South African subsidiary to create an enlarged platform to anchor the regional growth strategy for the SADC region.
This is coming just as the bank opened a new branch in Malta as part of efforts to focus on international trade finance after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
The Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
By Modupe Gbadeyanka
To strengthen Europe-Africa trade ties, Access Bank has opened a new branch in Malta. It will focus on international trade finance, employing approximately 30 people in its initial phase, with plans for controlled expansion over time.
It was learned that this Maltese branch was established by Access Bank UK Limited, the subsidiary of Access Bank Plc, which is also the subsidiary of Access Holdings Plc, which is listed on the Nigerian Exchange (NGX) Limited.
Access Bank Malta Limited commenced operations after obtaining a banking licence from the European Central Bank (ECB) and the Malta Financial Services Authority (MFSA).
Access Bank said the licence marks a transformative milestone in bolstering Europe-Africa trade flows.
Malta, a renowned international financial centre, and a gateway between the two continents, is strategically positioned to play a pivotal role in advancing commerce and fostering economic partnerships.
This strategic expansion into Malta enables The Access Bank UK Limited to leverage growing trade opportunities between Europe and Africa.
It underscores the organisation’s commitment to driving global trade, financial integration, and supporting businesses across these regions.
“By establishing operations in Malta, we will gain a foothold in a market that bridges European and North African economies, moving us one step closer to our goal of becoming Africa’s Gateway to the World.
“It further enhances our bank’s capacity to support clients with innovative solutions tailored to cross-border trade and investment opportunities,” the chief executive of Access Bank, Mr Roosevelt Ogbonna, stated.
“Europe has emerged as Africa’s leading trading partner, driven by initiatives such as the Economic Partnership Agreements between the EU and African regions and the African Continental Free Trade Area (AfCFTA).
“With Europe-Africa economic relations entering a new phase, The Access Bank Malta Limited is ideally positioned to deepen trade and meet the financing and banking needs of our clients in these expanding markets,” the chief executive of Access Bank UK, Mr Jamie Simmonds, commented.
Also speaking, the chief executive of Access Bank Malta, Renald Theuma, said, “Malta is uniquely positioned as a bridge between Europe and Africa, making it an ideal location for our subsidiary. This move allows The Access Bank Malta Limited to engage more closely with customers in Europe and deliver tailored financial solutions that drive growth and connectivity across both continents.”
By Adedapo Adesanya
The International Finance Corporation (IFC) and Goldman Sachs have announced a new partnership with African banks, including Nigeria’s Zenith Bank and Stanbic IBTC Nigeria to support the Goldman Sachs 10,000 Women initiative, a joint programme launched in 2008 to provide access to capital and training for women entrepreneurs globally.
The two Nigerian banks are part of nine financial institutions from across Africa which have agreed to join the 10,000 Women initiative committing to leverage the business education and skills tools the programme provides to create more opportunities for women entrepreneurs across the continent by providing access to business education.
Others banks include Stanbic Bank Kenya, Ecobank Kenya, Ecobank Cote d’Ivoire, Equity Bank Group, Banco Millenium Atlantico – Angola, Baobab Group, and Orange Bank.
Speaking on this, Ms Charlotte Keenan, Managing Director at Goldman Sachs said – “10,000 Women has had a powerful impact to date, but we know that there are more women to reach and more potential to be realized.
“We are delighted to partner with IFC to supercharge the growth of women-owned businesses across Africa, and mainstream lending to female business leaders. We remain committed to supporting entrepreneurs with the access to education and capital that they need to scale.”
Since 2008, the 10,000 Women initiative has provided access to capital and business training to more than 200,000 women in 150 countries.
“This expanded initiative marks a significant step forward in creating equitable economic opportunities for women in Africa, enabling them to build stronger, more resilient businesses and to realize their entrepreneurial goals,” said Ms Nathalie Kouassi Akon, IFC’s Global Director for Gender and Economic Inclusion.
Goldman Sachs’ 10,000 Women initiative complements the Women Entrepreneurs Opportunity Facility (WEOF), launched in 2014 by Goldman Sachs and IFC as the first-of-its-kind global facility dedicated to expanding access to capital for women entrepreneurs in emerging markets.
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