Some banks and financial holding groups in the country have recorded impressive results in their full-year financials recently released by the Nigerian Exchange Group (NGX).
Analysts commended the banks for churning out good full-year results but they said that despite the good results, some of these banks should avoid a potential “banana peel” experience in the future.
One such is Stanbic IBTC, which posted impressive results but stands the risk of experiencing a slide after careful analysis of the results.
The results show that the bank posted a profit after tax of N202.104 billion, reflecting a 43.73 per cent year-on-year (YoY) growth.
This growth was driven by a significant expansion in net interest income (+134.29%) and net fees and commission income (+54.52%), indicating robust revenue generation across interest and non-interest income streams.
The results show that interest income recorded a growth of 109.34 per cent when it posted N566.462 billion, while interest expenses rose by 63.63 per cent at N256.011 billion.
Interest income from loans and advances to customers grew by 71 per cent, but its contribution declined to 69 per cent from 85 per cent in 2023.
Interest income from securities surged by 347 per cent, increasing its contribution to 28.49 per cent of total interest income.
This suggests that the bank is increasingly leveraging fixed-income securities as an income source, possibly due to high yields on government securities.
Stanbic IBTC also recorded deposit growth as customer deposits rose by 45.30 per cent to N3.009 trillion.
This shows a strong liquidity position and improved customer confidence but what was noticed in the results was the high cost of funding these deposits.
With interest expenses on customers’ deposits increasing by 173 per cent, net interest margins could be affected in the future as competition for deposits is driving up funding costs.
Another noticeable development in the published results is that, though loans and advances to customers grew by 15.55 per cent which is an indication that Stanbic IBTC is expanding, the bottom line is that loan impairments in the period under review surged by 561 per cent to N88.664 billion which has dwarfed loan growth.
It is noteworthy to infer that this sharp increase suggests a deterioration in asset quality, potentially driven by macroeconomic challenges, loan defaults, or increased exposure to riskier borrowers.
This scenario, according to analysts, shows a disconnect between moderate loan growth and soaring impairments, an indication of a likely poor credit risk management and may impact profitability in the near future.
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