In FY’23, STANBIC’s earnings will likely cross the N100 billion mark to c.N125.5 billion based on the improvement in operating income. Unlike most banks in H1'23, STANBIC's relatively modest FX gains of c.N14.0 billion (on the bank's <$50 million net-open position), even though supportive, was not at the forefront of the earnings drive. Ex-revaluation gain, the bank's most noticeable tailwind emerged from the improvement of NII (+44.3% to N72.7 billion) and from the impact of FX liberalisation on trading income as the bank recorded a c.2.0x growth in trading income to N30.7billion.
We see scope for an improvement in NIMs to 7.2% in FY’23 (vs 6.7% in FY’22), with positive pass-through to net interest income (NII). Our prognosis is premised on 1) the banks’ consistent double-digit loan growth (5-year average of 25.2%) and 2) its legroom to reprice loans, with 61.7% maturing within 12 months. We expect these gains to mask expected interest expense pressures. For context, interest expense, which increased by 2.0x to N37.6 billion in H1’23, will likely persist due to the bank’s comparatively lower CASA ratio of 74.1%. Further strengthening our resolve for probable NIM expansion is the progression of STANBIC’s interest income (CAGR of 13.0%), which has outpaced interest expense (CAGR of 7.8%) over the last 2 years.