Stanbic Zambia leads H1 earnings scoreboard

First half commercial bank earnings results reveal that Stanbic Bank Zambia Ltd earnings jumped 84% to K166million (year on year) from K90million leading the industry profitability score board. This rally in earnings, extends the momentum, Zambia’s largest bank by asset size started to build up in Q3 of 2018 as observed by analysts. The earnings gap in after tax profitability widened to K43million with Stanchart in second place at K123million and Barclays at K103million. Bank of China and ZANACO bank tag along in fourth and fifth place at K102million and K97million respectively.

SBZ topped all earnings metrics with a remarkable 230% bottom line velocity in its Q2:19 versus Q2:18 bottom line earnings to K87million from K26million a year ago (QoQ). Supporting the stellar performance was a 30% uptick in interest income to K650million supported by a 33% growth in income from loans and advances (credit extension), slower interest expense pace of 15.4%. SBZ was significantly cushioned by a 50% leaner credit impairment line to K48million compared to previous years K96million, a potential reflection of either aggressive collections or improvement in bad loan stock accumulation.

Stanbic gave up market leadership in trading income to Barclays Bank by a whisker, slipping to second place at K106million, which was K6million shy of BBZs earnings of K113million. The muted currency trading activity links to waning private sector pulse in aggregate demand echoing the purchasing managers index (PMI) readings of below 50. Non interest income line slid 14% to K275million from K321million which potentially could have widened the profitability gap even further.

NON INCOME RELATED METRICS

SBZ maintains its leadership in balance sheet size at K13.62billion (20% stronger than a year ago), with the largest off balance sheet book size of K4.02billion, growing 15% in alignment to the nations construction boom as the bank extends guarantees, letters of credit and trade services generally. The bank booked the highest assets in loans and advance industrywide at K5.6billion.

“This stellar performance is Leina Gabaraane’s true litmus test of strategy execution in tough economic times since he took over as chief executive,” BT Lead Banking Analyst Stacey Susa said in a note. This is a full set of bullish results on his clock, she said.

BANKING RISK NOTE

The Zambian market is currently facing headwinds systemic to the industry. Given the credit risk posture of the sovereign as provided by the rating agencies (Moody’s Caa2/Fitch CCC), credit risks remain elevated making it difficult to book assets and manage impairments which ideally are forecast to be on the rise. Interest income lines will come under pressure in H2. A 50% narrowing in impairments at such a time remains a strong point for the blue bank supporting the non interest income line that slid 14%.

Margin squeeze from the unwarranted fee abolishment is being felt by the entire industry hence the need for other income lines such as non interest options to be explored to hedge against the revenue forgone with the passing of the central bank directive in Q4:18. Ceteris paribus, Stanbic is forecast to maintain market leadership in all earnings metrics for 2019.