Growing its year on year revenue by 35.1% to just over one and half yards in local currency terms second to none, Zambia’s largest bank by asset size, Stanbic Bank Zambia trail blazed a COVID suppressed market in Africa’s red metal producer demonstrating third quarter stellar performance. Tracking after tax profits Stanbic grew 11.9% to K360million a new annual third quarter year date high water mark industry level ever seen whose momentum was slowed by disease pandemic and sovereign related credit impairment adjustments. The banks quarterly contribution to earnings was 20.1% to K187.5million (as measured by after tax profit) x12 times factor rebound compared to 2Q20 weighed by credit risk adjustments.
Supported by an annual growth in interest income of 30.4% to K1.3billion as its advances revenues where 25% wider than a year earlier while duration income from government risk rose 73%.
Read also: Stanbic Zambia’s 1H20 earnings rally capped to 4% as sovereign risk weighs
Central bank expansionary monetary policy, to aiding absorb COVID shocks, has been a doubled edged sword for the blue bank with a rally in interest rate trading line seemingly compensating for the margin squeeze on policy rate linked loans as systematic across the industry.
FX MARKET LEADERSHIP BOOSTING NON INTEREST LINES
Stanbic maintained market leadership with a foreign exchange earnings sprint of 104.1% to K334.3million which coupled with a 18.9% climb in fee’s and commissions to K308.4million widening non interest income lines 55.4% to K667.8million. The market still continues to exhibit autopsy effects of the central banks waiving of unwarranted fees.
COVID SPEND ENGRAVED ALL OVER THIRD QUARTER EXPENSES
Despite widening industry COVID spend to equip operational resilience, Stanbic cost to income ratio remains very competitive at 55.2% gyrating favorably around industry average and a 5.4% leaner CTI versus previous month (which was 4.5% lower than 3Q19). Non-interest expenses rose 25% to under a billion Kwacha, perhaps due to disease pandemic spend while interest costs widened 57.0% to K294.8million as the market is yet to flush out high deposit costs. Only when this occurs will the benefits of treasury bill rally observed over the last quarter reflect in a leaners number.
HOMOGENEITY OF CREDIT RISKS, FISCAL POSTURE A HARBINGER OF WIDER YEAREND IMPAIRMENTS
Credit risks remain elevated as transfer and convertibility risks weigh as a consequence of liquidity conversion challenges. credit impairments year to date reflected a K161.1million stock. With Zambia’s default risks and recent credit assessment downgrades to Selective Default by Standards and Poor’s banks could be adjusting lending models to provide more for the sovereign risks factors. This will highly likely weigh interest rate trading and duration risk as according to IFRS9 and forward looking risks will attract higher charges. Ceteris paribus, at this earnings velocity, Stanbic could surpass the K500million profit after tax mark but for uncertainty in the sovereign risk space given looming default risks which the markets remains cautiously optimistic about their aversion. (This will be homogenous across the banking industry and accounts for the largest systematic credit risk drivers for the year).
DATA DRIVEN DIGITAL ADVANCES, CRISIS MANAGEMENT AND INVESTMENT BANKING ACCOLADES
Stanbic was recognized for its digital innovation in COVID era by Global Business Outlook for best bank for digital loan banking products and best digital platforms while locally the Zambia Public Relations Association named Stanbic best bank for public relations and crisis management.
Read also: Zambia’s debut data driven digital loans by Stanbic
EMEA finance rated Stanbic best investment bank for 2020. Stanbic remains very critical in Zambia’s mining, agriculture and manufacturing investment as a key driver of growth.
The Kwacha Arbitrageur