Johannesburg, 04 Oct 2013 — Global Credit Ratings has affirmed the long term national scale and upgraded the short term national scale issuer ratings assigned to Stanbic IBTC Bank (prev. IBTC Chartered Bank) of AA-(NG) and A1+(NG) respectively; with the outlook accorded as Stable. The rating(s) are valid until 9/2014.
Global Credit Ratings has accorded the above credit rating(s) on Stanbic IBTC Bank (prev. IBTC Chartered Bank) based on the following key criteria:
The ratings reflect Stanbic IBTC Bank PLC’s (“Stanbic” or “the bank”) established franchise value, as well as the support from its parent, the Standard Bank Group (“SBG”), which is Africa’s largest banking group ranked by assets and earnings. Cognisance was also taken of the bank’s strong and dynamic management team and its capital adequacy ratio (despite the post restructuring effects and the growth in risk weighted assets).
Liquidity risk is considered low, especially given the bank’s highly liquid balance sheet (with liquid and trading assets at 67.8% of total short-term funding).
Asset quality improved in F12, with the bank posting a gross bad debt ratio of 5.1% (down from 6.2% in F11). The improvement was partly underpinned by the sale of impaired loans (worth N13bn) to Asset Management Corporation of Nigeria (“AMCON”). GCR’s concern, however, remains on the bank’s ability to keep the gross bad debt ratio below the Central Bank of Nigeria’s (“CBN”) ceiling, as it gears up for further asset creation, bearing in mind AMCON’s suspension on the uptake of eligible assets.
Performance improved in F12, with the bank posting a net profit after tax of N5.3bn (F11: N3.2bn). Gross earnings were up 16% to N52.7bn, supported by improved transaction volumes, increased yields on government securities and growth in non-interest revenue. After adjusting for the unrealised gains and losses, Stanbic’s total comprehensive income came in stronger at N8.8bn (reversing the F11 loss). As a result, ROaE ended the year strong at 13.1%, while ROaA stood at 1.5%. Of concern, however, is; (i) the bank’s net interest margin (largely impacted by its high cost of funding) which fell further from 7.1% in F11 to 6.3% in F12, and (ii) the bank’s cost ratio which remains high at 79.4% (F11: 82.0%).
Positive movement/s: Improvement in asset quality, profitability and efficiency metrics, and a strong competitive position.
Negative movement/s: The ratings would be sensitive to an deterioration in asset quality above current levels, pressure on efficiency and profitability, and deterioration in competitive strength/franchise value.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (Dec/2006)|
|Long term: AA-(NG);|
|Last rating (Nov/2012)|
|Long term: AA-(NG); Short term: A1(NG)|
|+23 41 462 2545|
|Sector Head: Financial Institution Ratings|
|+27 11 784 1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Stanbic IBTC Bank (prev. IBTC Chartered Bank) participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Stanbic IBTC Bank (prev. IBTC Chartered Bank) with no contestation of the rating.
The information received from Stanbic IBTC Bank (prev. IBTC Chartered Bank) and other reliable third parties to accord the credit rating included the latest available audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, corporate governance and enterprise risk framework, reserving methodologies, capital management policy, Industry comparative data and regulatory framework and a breakdown of facilities available and related counterparties.