Stanbic IBTC Holdings PLC
ANNUAL REPORT 2018
Stanbic IBTC Holdings PLC
Annual Report 2018
OVERVIEW ANNUAL REPORT &
FINANCIAL STATEMENTS
6 Our vision and values
8 Results at a glance 118 Directors’ report
10 Board of Directors 124 Statement of directors’ responsibilities
12 Corporate profile
14 Notice of AGM in relation to the financial statements
15 Stanbic IBTC Group Credit Ratings 125 Corporate governance report
16 Standard Bank Group Network 129 Report of the external consultants on
18 Recognitions
board effectiveness and evaluation
BUSINESS REVIEW 140 Report of the audit committee
142 Independent auditors report
22 Chairman’s statement 146 Consolidated and separate statement
25 Chief Executive’s statement
29 Economic review of financial position
33 Financial review 148 Consolidated and separate statement
46 Executive committee
49 Personal and Business Banking of profit or loss
50 Case study: Zartech Ltd 149 Consolidated and separate statement
52 Case study: Necit Nigeria Ltd
55 Corporate and Investment Banking of other comprehensive income
58 Case study: Dangote Cements Plc 150 Consolidated statement of changes in equity
60 Case study: Actis 154 Consolidated and separate statement
62 Case study: Eland Oil & Gas
65 Wealth of cash flows
73 Abridged Sustainability Report 2018 155 Notes to the consolidated and separate
83 Enterprise Risk Review
financial statements
287 Annexure A
288 Annexure B
OTHER INFORMATION
292 Management team
296 Branch network
300 Contact information
4 Stanbic IBTC Annual report for the year ended 31 December 2018
PAGE TITLE
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 5
OVERVIEW
6 Our vision and values 14 Notice of AGM
8 Results at a glance 15 Stanbic IBTC Group Credit Ratings
10 Board of Directors 16 Standard Bank Group Network
12 Corporate profile 18 Recognitions
6 Stanbic IBTC Annual report for the year ended 31 December 2018
PVAISGIOE NTIATLNED VALUES
TO BE THE LEADING END-TO-END
FINANCIAL SOLUTIONS
PROVIDER IN NIGERIA
THROUGH INNOVATIVE AND
CUSTOMER-FOCUSED PEOPLE.
SERVING OUR CUSTOMERS GROWING OUR PEOPLE
We do everything in our power to ensure that we We encourage and help our people to develop to
provide our clients with the products, services and their full potential and measure our leaders on how
solutions to suit their needs, provided that everything well they grow and challenge the people they lead.
we do for them is based on sound business principles.
DELIVERING TO OUR RESPECTING EACH OTHER
SHAREHOLDERS
We have the highest regard for the dignity of all
We understand that we earn the right to exist by people. We respect each other and what Stanbic IBTC
providing appropriate long-term returns to our stands for. We recognise that there are corresponding
shareholders. We try extremely hard to meet our obligations associated with our individual rights.
various targets and deliver on our commitments.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 7
WORKING IN TEAMS CONSTANTLY RAISING THE BAR
We, and all aspects of our work, are interdependent. We have confidence in our ability to achieve ambitious
We appreciate that as teams we can achieve much goals and we celebrate success, but we are careful never
greater things than as individuals. We value teams to allow ourselves to become complacent or arrogant.
within and across business units, divisions and countries.
BEING PROACTIVE UPHOLDING THE HIGHEST
LEVELS OF INTEGRITY
We strive to stay ahead by anticipating rather than
reacting, but our actions are always carefully considered. Our entire business model is based on trust and integrity
as perceived by our stakeholders, especially our clients.
8 Stanbic IBTC Annual report for the year ended 31 December 2018
RESULTS AT A GLANCE
Total Assets Customer Deposits Customer Loans
& Advances
+20% +7% +16%
FY18: N1.664trillion FY18: N807.7 billion FY18: N432.7 billion
FY17: N1.386trillion FY17: N753.6 billion FY17: N372.1 billion
Nmillion 1,663,661 464,321
1,800,000
1,600,000 114,637
1,400,000
1,200,000 142,543
1,000,000
400,000
800,000
600,000 432,713
400,000
200,000 86,968 22,479
0
Total assets Cash & loans Trading and Pledged assets Financial Loans & advances Other assets Intangible assets,
to bank derivative assets
investments to customers property &
equipment
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 9
ROA CASA Ratio Gross NPL Ratio
(IFRS)
56.8%
8.6%
4.8% 49.2%
3.9%
3.8%
FY18 FY17 FY18 FY17 FY18 FY17
Nmillion 2,940
200,000
180,000 102,604 (95,601)
160,000
140,000 (40,173)
120,000
100,000 (13,712)
80,000 118,382
60,000
40,000 88,152 74,440
20,000
0
Interest Interest Non-interest Credit Operating Profit before Taxes Profit after
income expense taxation taxation
revenue impairment charges expenses
10 10 SSttaannbbiicc IIBBTTCC AAnnnnuuaall rreeppoorrtt ffoorr tthhee yyeeaarr eennddeedd 3311 DDeecceemmbbeerr 22001188
BPAOGAERDTIOTLFEDIRECTORS
Basil Omiyi (CON) Yinka Sanni
Chairman Chief Executive
BSc, PGD BSc, MBA, AMP (Harvard Business School)
Appointed: 2015 Appointed: 2017
Directorships: Directorships:
David Michaels Nigeria Limited, SEPLAT Petroleum The Nigeria Economic Summit Group; Stanbic IBTC Bank PLC;
Development Company PLC, TAF Nigerian Homes Limited, Stanbic IBTC Pension Managers Limited; Stanbic IBTC Asset
RIVTAF Nigeria Limited Management Limited; Stanbic IBTC Insurance Brokers Limited,
Stanbic IBTC Trustees Limited; Stanbic IBTC Capital Limited;
Stanbic IBTC Ventures Limited; Stanbic IBTC Investments
Limited; Stanbic IBTC Stockbrokers Limited
Committee member:
Board Risk Management Committee;
Board Legal Committee; Board IT Committee;
Board Nominations Committee
Prof. Fabian Ajogwu (SAN) Ngozi Edozien
Non-executive Independent non-executive
LLB, BL, LLM, MBA, PhD BA, MBA
Appointed: 2017 Appointed: 2015
Directorships: Directorships:
Urshday Limited, Nep Mall Limited, Elysium Dem Nigeria Barloworld; Physio Centers for Africa Limited; Invivo
Limited, Gray-Bar Alliance Limited, Kenna Partners, Partners Limited; Invivio Holdings Limited (Mauritius);
Guinness Nigeria PLC Guinness Nigeria Plc
Committee member: Committee member:
Board Remunerations Committee, Board Legal Committee, Board IT Committee, Board Risk Management
Board Risk Management Committee Committee, Board Audit Committee
OVERVIEW OVEBRUVSIEINWESS REBVUISEINWESS REAVINENWUAL REAPNONRUTA&L RFEINPOARNTC&IAFLINSATNACTIEAML SETNATTSEMENTSOTHEROITNHFEORRIMNFAOTRIMONATION 11 11
Lilian Ifeoma Esiri Ballama Manu (MFR)
Non-executive Non-executive
LLB, BL, LLM BSc, MSc
Appointed: 2012 Appointed: 2015
Directorships: Directorships:
Stanbic IBTC Asset Management Limited; Podini Sicom Capital Services Limited, Alpine Investments Limited,
International Limited; Ashbert Leisures Limited; Ashbert Shell Nigeria Closed Pension Fund Administrator Limited
Beverages Limited; Ashbert Oil and Gas Limited;
Childlifeline; Lilian Esiri & Co.; Zaccheus Onumba Dibiaezue Committee member:
Memorial Libraries Limited; Zarc Corporate Services Limited Board Risk Management Committee, Board IT Committee,
Audit Committee
Committee member:
Board Risk Management Committee, Audit Committee,
Board Legal Committee
Salamatu H. Suleiman Simpiwe Tshabalala
Independent Non-executive Non-executive
LLB, BL, LLM BA, LLB, LLM
Appointed: 2016 Appointed: August 2013
Directorships: Directorships:
Forte Oil Limited; Flour Mills of Nigeria PLC; Primechoice Stanbic IBTC Bank PLC; Standard Bank of South Africa;
Investments Limited; S & M Investments Limited, S&M Standard Bank Group; Banking Association of South Africa.
Essential Units & Co., Hussaini Suleiman & Co, Alkali
Hussaini Foundation, West African Network for Peace Committee member:
Building Board Remunerations Committee; Board Nominations Committee
Committee member:
Board Remunerations Committee; Board Legal Committee
12 Stanbic IBTC Annual report for the year ended 31 December 2018
CORPORATE PROFILE
Stanbic IBTC Holdings PLC (“Stanbic IBTC”) was incorporated as a 2007, IBTC Chartered merged with Stanbic Bank Nigeria Limited
Public Limited Liability Company on 14 March 2012. Stanbic IBTC (“Stanbic Bank”), a wholly owned subsidiary of Stanbic Africa
is the holding company for the entire Stanbic IBTC Group and its Holdings Limited (“SAHL”), which in turn is a wholly owned
subsidiaries. The Company was listed on the floor of The Nigerian subsidiary of Standard Bank Group Limited of South Africa.
Stock Exchange on 23 November 2012, following the delisting of As part of the transaction that resulted in the combination of
the Group’s erstwhile holding company, Stanbic IBTC Bank PLC IBTC Chartered and Stanbic Bank, SAHL acquired a majority equity
(“the Bank”), pursuant to its compliance with the CBN Regulation stake (50.1%) in the enlarged bank, which was named Stanbic IBTC
on Banking and Ancillary Matters No. 3 of 2010. Bank PLC.
The Bank, on the other hand, was incorporated as Investment On 1 November 2012, the Stanbic IBTC Group officially adopted
Banking and Trust Company Limited (“IBTC”), a private limited a Holding Company (“Holdco”) structure in compliance with CBN
liability company, on 2 February 1989. IBTC was granted a Regulation 3 of 2010, which requires banks to divest from non-
merchant banking licence in February 1989 and commenced core banking businesses or adopt a HoldCo structure.
operations on 1 March 1989. IBTC’s merchant banking licence
was converted to a universal banking licence in January 2002, Under the new structure, the subsidiaries of Stanbic IBTC Holdings
pursuant to the universal banking guidelines of the Central Bank of PLC are: Stanbic IBTC Bank PLC, Stanbic IBTC Pension Managers
Nigeria (“CBN”). In 2005, IBTC became a public company and its Limited, Stanbic IBTC Asset Management Limited, Stanbic IBTC
shares were listed on The Nigerian Stock Exchange (“The NSE” or Trustees Limited, Stanbic IBTC Capital Limited, Stanbic IBTC
“The Exchange”). Stockbrokers Limited, Stanbic IBTC Insurance Brokers Limited,
Stanbic IBTC Ventures Limited, and Stanbic IBTC Investments
In December 2005, IBTC merged with Chartered Bank PLC and Limited. It should be noted that Stanbic IBTC Nominees Limited
Regent Bank PLC and changed its name to IBTC Chartered Bank and Stanbic IBTC Bureau de Change Limited are wholly owned
PLC (“IBTC Chartered”) on 25 January 2006. On 24 September direct subsidiaries of Stanbic IBTC Bank.
Corporate Structure 99.9%
99.9% Stanbic IBTC Asset
Management Ltd (“SIAML”)
Stanbic IBTC Investments
Ltd (“SIIL”) 88.2%
99.9% Stanbic IBTC Pension
Managers Ltd (“SIPML”)
Stanbic IBTC
Trustees Ltd (“SITL”)
Stanbic IBTC Holdings PLC
99.9% 99.9%
Stanbic IBTC Stanbic IBTC Stockbrokers
Ventures Ltd (“SIVL”) Ltd (“SISL”)
75.0% 99.9%
Stanbic IBTC
Stanbic IBTC Capital Ltd (“SICL”)
Insurance Brokers Ltd
(“SIIBL”)
99.9% 99.9% 99.9%
Stanbic IBTC
Stanbic IBTC Nominees Ltd Bank PLC Stanbic IBTC Bureau de
(“SINL”) Change Ltd
Stanbic IBTC is a full service financial institution which offers Standard Bank Group, to which Stanbic IBTC belongs, is Africa’s
a wide range of products to a variety of segments. Stanbic IBTC largest bank by assets and earnings with strategic representation
provides end-to-end financial solutions which include corporate in 20 key sub-Saharan countries and other emerging markets.
and investment banking, personal and business banking, Standard Bank has been in operation for over 150 years and prides
stockbroking and wealth management. itself on being a global financial institution with African roots.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 13
Corporate and Personal and Wealth
Investment Banking Business Banking
(“CIB”) (“PBB”)
Total income Total income Total income
N84.6 billion N48.9 billion N47.4 billion
Corporate and investment banking Banking and other financial services Investment management in form
services to government, parastatals, to individual customers and small to of asset management, pension
larger corporates, financial institutions and medium sized enterprises. fund administration, trusteeship
international counter-parties in Nigeria. and insurance brokerage.
Gross revenue Total income
Corporate and Corporate and
Investment Banking Investment Banking
52% 47%
Personal and Personal and
Business Banking Business Banking
27% 27%
Wealth Wealth
21% 26%
Gross loans and advances Total deposits
Corporate and Corporate and
Investment Banking Investment Banking
61% 38%
Personal and Personal and
Business Banking Business Banking
39% 62%
14
Notice Of Annual Notes:
General Meeting
Proxies
NOTICE IS HEREBY GIVEN that the 7th Annual General
Meeting of STANBIC IBTC Holdings PLC will be held at the Only members are entitled to be represented at the meeting. A member entitled to attend and vote may appoint one
Jasmine Hall, Eko Hotel & Suites, Adetokunbo Ademola Street, or more proxies to attend and vote instead of him/her. A proxy need not be a member of the Company. For a proxy
Victoria Island Lagos on Wednesday 19 June 2019 at 10.00am to be valid, it must be appropriately stamped (at the rate of N500) at the stamp duties office and deposited at the
to transact the following business: registered office of the company or the office of the Registrars (First Registrars & Investors Services Limited, 2
Abebe Village Iganmu Lagos) at least 48 hours before the time fixed for the meeting. A blank proxy form is
ORDINARY BUSINESS forwarded with the notice of meeting.
1. To receive and consider the Report of the Directors and the
Dividends
Financial Statements for the year ended 31 December 2018
and the Auditors’ Report thereon. If the dividend recommended by the Directors is approved at the meeting, the accounts of shareholders with the
2. To declare a dividend. appropriate e-dividend mandate, will be credited on Thursday 20 June 2019 provided that their names appear
3. To re-elect retiring Directors and to approve the on the register of shareholders at the close of business on Wednesday 20 March 2019, which is the qualification date.
appointment of additional Directors for the Company.
4. To authorize the Directors to fix the remuneration of the Closure of Register
Auditors for the ensuing year.
5.To elect members of the audit committee The Register of members was closed on Thursday 21 March 2019.
SPECIAL BUSINESS: Unclaimed Dividends
6.To consider and if thought fit pass the following as an
Several dividends remain unclaimed or are yet to be presented for payment or returned to the Registrars for revalidation.
ordinary resolution: A schedule of members who are yet to claim their dividends will be circulated to Shareholders along with the Annual
“That the directors’ annual fees for the year ending Report and Financial Statements. Members affected are advised to write or call at the office of the Company’s
31 December 2019 be and is hereby fixed at Registrars, First Registrars & Investors Services Limited, Plot 2, Abebe Village, Iganmu, Lagos during normal
N250,000,000.00”. working hours.
7. To consider, and, if thought fit, pass the following resolution
as an Ordinary Resolution: E-Dividend
“That in compliance with the Rules of The Nigerian Stock Notice is hereby given to all shareholders to open bank accounts in order to take advantage of the E-dividend
Exchange governing transactions with Related Parties or payment platform. A detachable application form for e-dividend and e-bonus is attached to the Annual Report
Interested Persons, the Company and its related entities to enable all shareholders furnish particulars of their accounts to the Registrars (First Registrars & Investors
(the Group) be and are hereby granted a General Mandate in Services Limited) as soon as possible.
respect of all recurrent transactions entered into with a related
party or interested person provided such transactions are of a We request our shareholders to use the e-dividend payment portal that will serve as an on-line verification and
revenue or trading nature or are necessary for the Company’s communication medium for e-dividend mandate processing through the new E-Dividend Mandate Management
day-to-day operations {as specified in the General Mandate System jointly introduced by the Central Bank of Nigeria, Securities and Exchange Commission, Nigeria Inter-Bank
Circular sent to Shareholders along with the Annual Report}. Settlement Systems PLC and the Institute of Capital Market Registrars.
This mandate shall commence on the date on which this
resolution is passed and shall continue to operate until the date Rights of Shareholders to ask Questions
on which the next annual general meeting of the Company is
held in 2020”. Shareholders have a right to ask questions not only at the Meeting, but also in writing prior to the Meeting, and
such questions must be submitted to the Company Secretary at the registered office of the Company (I.B.T.C.
Dated this 21 day of May 2019 Place Walter Carrington Crescent, Victoria Island, Lagos) on or before Wednesday 12 June 2019.
BY ORDER OF THE BOARD Scrip Dividend Issue
Chidi Okezie We are once again advising our esteemed shareholders that in line with the authority granted to Directors by
Shareholders at the 06 August 2015 Extra Ordinary General Meeting, Shareholders have a choice of receiving
Company Secretary dividends declared by the Company, up to year 2020, either in cash or may elect to receive their dividends as new
ordinary shares in the Company (“scrip dividend”).
stanbicibtc.com
Where a shareholder elects to receive his or her dividends by way of new ordinary shares, then such scrip dividend
shall only be allotted after receipt of any required regulatory approval and shall apply to shareholders
whose names were on the Register of Members as at the qualification dates for the payment of such
dividends (“Qualifying shareholders”).
In order to be valid, any scrip dividend election by shareholders, must be made to the Company’s Registrars, not later
than seven working days prior to any dividend payment date. With respect to the one naira fifty kobo (N1.50)
dividend being recommended by Directors for approval at the 7th Annual General Meeting of the Company, holding
on Wednesday 19 June 2019, the qualification date as previously published was Wednesday 20 March 2019.
The reference price to be used in determining any scrip dividend allotment shall be the volume weighted average
price (VWAP) of the Company’s shares on The Nigeria Stock Exchange (The NSE) for the five business days
commencing on the day the ordinary shares are first quoted ex-dividend. With respect to the one naira fifty
kobo (N1.50) dividend indicated above, the reference price for determining the scrip dividend allotment is
N47.89 (forty seven naira eighty nine kobo).
Shareholders, who wish to receive their one naira fifty kobo (N1.50) dividend by way of new ordinary shares, can
either download the Scrip Dividend Election form (“the form”) from our website, by clicking on the following link:
http://reporting.stanbicibtc.com/resultsreports.php. In addition, you may also obtain a copy of the form by
contacting either the Group Company Secretary – Email: [email protected] or Idris Toriola, Head Investor
Relations – Email: [email protected]; Tel +234 1 422 8501; or by contacting the Registrars: First Registrars
and Investor Services Limited on Tel: +234 1 2701078-9. All completed forms must reach the Registrars on or before
close of business on Monday 10 June 2019.
Shareholders who however elect to receive their dividends in cash, are not required to take any action as they will
have their bank accounts (in the case of shareholders with the appropriate e-dividend mandate) credited on the
dividend payment date.
For any enquiry, please contact Chidi Okezie, Group Company Secretary– Email: [email protected] or
Idris Toriola, Head Investor Relations – Email: [email protected]; Tel +234 1 422 8501.
Voting
Voting shall be by show of hands.
Audit Committee
In accordance with section 359(5) of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria
2004, any shareholder may nominate another shareholder for appointment to the Audit Committee. Such nomination
shall be in writing and must reach the Company secretary not less than 21 days before the annual general meeting.
The Central Bank of Nigeria’s Code of Corporate Governance has indicated that some of the members of the audit
committee should be knowledgeable in internal control processes. Also, the Securities and Exchange Commission’s
Code of Corporate Governance has indicated that members of the Audit Committee should have basic financial literacy
and should be able to read financial statements.
Accordingly, we would therefore request that the nominations be accompanied by a copy of the nominee’s
curriculum vitae.
Re-Election and Election of Directors
In accordance with the provisions of Company’s Articles of Association and the Companies and Allied Matters Act CAP
C20 Laws of the Federation of Nigeria, the Directors to retire by rotation at this Annual General Meeting (AGM) are
Mrs. Salamatu Suleiman, Mrs. Ifeoma Esiri and Mr. Sim Tshabalala. All retiring Directors, being eligible, are offering
themselves for re-election.
The appointments of Mr. Barend Johannes Kruger and Mr. Kunle Adedeji as Directors of the Company are also being
tabled for Shareholders’ approval.
Stanbic IBTC Holdings PLC RC 1018051
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 15
Stanbic IBTC Group Credit Ratings
National
Entity Long-term Short-term
Stanbic IBTC Bank PLC
Stanbic IBTC Holdings PLC AAA(nga) F1+(nga)
AAA(nga) F1+(nga)
Entity National Issuer
Stanbic IBTC Bank PLC
Long-term Short-term B/Stable/B
ngBBB ngA-2
National
Entity Long-term Short-term Outlook
Stanbic IBTC Bank PLC
AA-(NG) A1+(NG) Stable
The full rating reports can be accessed on our website via http://reporting.stanbicibtc.com/credit-ratings.php
16 Stanbic IBTC Annual report for the year ended 31 December 2018
STANDARD BANK GROUP NETWORK
Country overview
3 13 5
6 15
18 7
4 17
1
19 9
12 20
2 11
14 10
16
1 Angola 11 Mozambique Presence in International markets:
2 Botswana 12 Namibia 8 • Beijing • London
3 Cote d’Ivoire 13 Nigeria
4 DRC 14 South Africa • Dubai • New York
5 Ethiopia 15 South Sudan
6 Ghana 16 Eswatini • Sao Paulo
7 Kenya 17 Tanzania
8 Lesotho 18 Uganda International Financial Services:
9 Malawi 19 Zambia
10 Mauritius 20 Zimbabwe • Isle of Man
• Jersey
• Mauritius
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 17
Standard Bank
Group Overview
Market Total assets Presence
capitalisation R2 trillion
R289 billion in 20 African countries
(USD148 billion) and 8 countries
(USD20 billion) outside Africa
47,419 1,200 branches 9,321 ATMs
employees
(177 in Nigeria) (575 in Nigeria)
(2,933 in Nigeria)
Nigeria overview
Branches ATMs BNAs
Lagos Island: 27 Lagos Island: 94 Lagos Island: 4
Lagos Mainland: 33 Lagos Mainland: 124 Lagos Mainland: 10
North Central: 31 North Central: 97 North Central: 2
North West: 23 North West: 65 North West: 2
South East: 16 South East: 41 -
South South: 16 South South: 49 South South: 1
South West: 31 South West: 105 South West: 5
Total: 177 Total: 575 Total: 24
18 Stanbic IBTC Annual report for the year ended 31 December 2018
RECOGNITIONS
Euromoney Awards 2018 The Bridge Leadership FMDQ Gold Awards
Best Investment Bank in Nigeria Foundation Recognition Award
For continuous sponsorship during • Largest Fund Manager on FMDQ Award
Marketing Edge Brands and the Annual Career Day - Stanbic IBTC Asset Management
Advertising Excellence Award Limited
Best Customer Centric Financial Brand EMEA Finance African
of the year Banking Awards • FMDQ Registration Member
• Best foreign investment bank (Quotations) Award - Stanbic IBTC
Global Finance Best Sub-Custodian Capital Limited
in Nigeria Award - Stanbic IBTC Capital Limited
• Best debt house • FMDQ FX Market Liquidity Provider
Global Banking and Finance Award - Stanbic IBTC Bank PLC
Awards 2018 - Stanbic IBTC Capital Limited
• Best Corporate Governance • Best equity house • FMDQ Member Compliance Award -
Stanbic IBTC Bank PLC
Company 2018 - Stanbic IBTC Capital Limited
• Best CSR Company Nigeria 2018 • Best loan house • Most Active Buy-side Participant in
• Best Non - Pension Asset Management the Fixed Income Market Award -
- Stanbic IBTC Capital Limited Stanbic IBTC Pension Managers Limited
Company Nigeria 2018
• Best Pension Management Company 4th Nigeria Finance and • FMDQ Capital Markets Securities
Innovation Awards 2018 Origination Primary Market Champion
Nigeria 2018 Award - Stanbic IBTC Capital Limited
• Best Investment Bank Nigeria 2018 • Innovative Pension Company of
• Best Equity House Nigeria 2018 the Year – Stanbic IBTC Pension • FMDQ 1st Lustrum Dealing Member
Managers Limited Secondary Member Champion Award -
Stanbic IBTC Bank PLC
• Asset Management Company of
the Year – Stanbic IBTC Asset • FMDQ Markets Luminary Award
Management Limited Atedo N. A. Peterside
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 19
The PEARL Awards • Issuing House with The Largest CFA Society Nigeria
Value in a Single Deal: Stanbic IBTC
• 2018 Highest Dividend Growth – Stanbic Capital Limited • Career progression for women
IBTC Holdings PLC • Work-Life balance
• Dealing Member with Highest
• 2018 Sectoral Leadership (Financial Traded Volume: Stanbic IBTC 2018 BusinessDay top
Services – Other Financial Institutions) – Stockbrokers Limited 25 CEOs award
Stanbic IBTC Holdings PLC Yinka Sanni
• Dealing Member with Highest
BusinessDay Banking Awards 2018 Traded Value: Stanbic IBTC University of Ibadan, Nigeria
Stockbrokers Limited Award of Honour: In recognition
• Pension Fund Administrator of the year - of your Lifetime Achievements
Stanbic IBTC Pension Managers Limited 2018 International Finance Basil Omiyi CON
Banking Awards
• Best Bank CEO of the year - University of Ibadan, Nigeria
Demola Sogunle • Most Innovative Commercial Bank – Award of Honour: For being
Stanbic IBTC Bank PLC a worthy Ambassador
Professional Wealth Management Sola David Borha
(PWM) and Financial Times Global National Sports Festival
Private Banking Awards Inaugural Awards University of Ibadan, Nigeria
Award of Honour: For being
• Best Private Bank in Nigeria • Special Honours for Promoting Youth a worthy Ambassador
and Sports Development Demola Sogunle
NSE CEO Awards 2018
• Issuing House with Highest Number Central Securities Clearing
of Debt Issuance- Corporate Bond: System (CSCS) Awards 2018
Stanbic IBTC Capital Limited
• Best Custodian 2018 – Stanbic IBTC
• Issuing House with Highest Number Nominees Limited
of Primary Issuance – Equity: Stanbic
IBTC Capital Limited • Best Stockbroker 2018– Stanbic IBTC
Stockbrokers Limited
20 Stanbic IBTC Annual report for the year ended 31 December 2018
PAGE TITLE
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 21
BUSINESS REVIEW
22 Chairman’s statement 49 Personal and Business Banking 60 Case study: Actis
25 Chief Executive’s statement 50 Case study: Zartech Ltd 62 Case study: Eland Oil & Gas
29 Economic review 52 Case study: Necit Nigeria Ltd 65 Wealth
33 Financial review 55 Corporate and Investment Banking 73 Abridged Sustainability Report 2018
46 Executive Committee 58 Case study: Dangote Cement Plc 83 Enterprise Risk Review
22 Stanbic IBTC Annual report for the year ended 31 December 2018
CHAIRMAN’S STATEMENT
WE CONTINUE TO the first half of the year. The recovery
regained some lost impetus in the third
FOCUS ON quarter, after growth fell to a one-year
low in the second quarter. According to
OUR OBJECTIVES data released by the National Bureau of
Statistics (NBS), GDP expanded 2.4%
Fellow shareholders, distinguished ladies and gentlemen, on behalf of the Board annually in Q4 2018, above Q3 2018’s
of Stanbic IBTC Holdings PLC, I am pleased to welcome you all to the Annual 1.8% increase. The acceleration was broad-
General Meeting (“AGM”) of our company being the seventh since it became a based, with better performance recorded
holding company. It gives me great pleasure to preside over this Annual General by the non-oil segment of the economy.
Meeting, which is coming shortly after we marked our 30th anniversary as a
legal entity on 2 February 2019. NSE equity market started the year on
a high, with the All Share Index (ASI)
On the global economic landscape, the concerns eventually took their toll reaching a ten-year peak of 45,092.83
year 2018 began with synchronized growth on investor confidence. in January 2018. This was largely driven
pattern across regions. The Eurozone was by the positive performance of the ASI in
not left out on the robust growth track On the equity side, having enjoyed a 2017 which emerged the best in Africa.
as the US accelerated on the back of summer of gains, the market took fright in As we approached the second quarter,
fiscal stimulus. Emerging economies grew the fourth quarter. Some of the volatility the upcoming Nigerian elections, oil price
steadily with a few notable exceptions. stemmed from the ongoing antagonism volatility coupled with the rising global
Some vulnerable emerging market between the US and China over trade yields resulted in bearish sentiments that
economies came under strain as the US and tariffs, but as the year ended, fears saw 50.53% increase in foreign outflows
dollar gained value and the level of risk that increasingly focused on weakening US, from a total of N402.26 billion in 2017 to
global financial investors were prepared to global growth and changing monetary N605.54 billion in 2018. This resulted in
accept dropped. Most of these countries conditions. Similarly, in a year when Wall the ASI and equity market capitalization
saw increases in their external borrowing Street predicted oil would surpass $100 for falling by 17.81% and 13.87%, respectively
costs. After two years of steady growth the first time in four years, the oil market to close the year at 31,430.50 and N11.73
in asset prices, 2018 proved more of a instead experienced its worst annual loss trillion, respectively.
challenge for investors, particularly in the since 2015 with Brent crude and US crude
last three months of the year. US President settling at $54 a barrel and $45.4 a barrel, On FX liquidity, the Investors’ and
Donald Trump’s tax cuts had provided an respectively. The oil market’s sudden turn Exporters’ Foreign Exchange (“IEFX”)
added boost for investors heading into around in the fourth quarter has ended a window was responsible for $33.11 billion
2018, and US GDP growth accelerated 2½-year recovery for oil prices following the inflows to the FX market with Foreign
to 4.2% on an annualized quarterly basis 2014-2016 downturn. Portfolio Investors (“FPIs”) supplying
in Q2 2018. However, economic growth the largest chunk of 37.25% to the IEFX
elsewhere, notably in the Eurozone, Locally, the Nigerian economy started 2018 window. However, the FPI inflows were
decelerated and global growth became on a positive note having exited a recession largely from Q1 2018. In subsequent
less synchronized. In the meantime, the in 2017 coupled with the wonderful quarters, investors started moving to
prospect of fading US policy support in performance of its stock market in the same higher yielding assets with lower risks in
2019, together with escalation in the year, Nigerians and investors alike came developed countries, coupled with the
US-China trade conflict, reduced monetary into 2018 with expectation of continuous impending political risks of the upcoming
stimulus and global growth growth. However, this was short-lived as the Nigerian elections.
economy lost some momentum in
Investor confidence was further dampened
in August 2018, when the Central Bank
of Nigeria (“CBN”), announced sanctions
on our Bank and three others and also
demanded a refund of $8.1 billion from
MTN Nigeria Communications Limited
(“MTNN”) in relation to foreign exchange
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 23
remittances effected on behalf of MTNN, focused on the Open Market Operations changes; with the most significant being the
using what was termed “invalid Certificates (“OMOs”) as its major monetary policy tool reduction in fees. In the course of the year,
of Capital Importation”. However, in for the year as it increased the frequency the multi-fund structure (RSA funds I, II,
December 2018, MTNN and the CBN of OMO issuances, which drove yields on III and IV), a framework that aims to match
reached an amicable resolution. The short dated assets to 17% levels. Headline your age and risk profile to one of four
news of the resolution was well received inflation reduced from 15.1% in January distinct funds – i.e three (3) RSA Fund types
by investors. 2018 to 11.4% in December 2018. for active contributors and one (1) Retiree
Fund for retired contributors.
Consequently, the capital repatriation Stanbic IBTC Bank PLC and Stanbic Prior to the commencement of the new
by FPIs coupled with FX interventions IBTC Holdings PLC, retained their AAA multi-fund structure, the management
by the CBN to stabilize the currency (nga) rating from Fitch, reaffirming the fee for RSA fund II was reduced to
affected the external reserves as it institutions’ strong fundamentals and 1.25% effective July 2018 with further
dropped from a high of $47.6 billion in stability. All subsidiaries within the Wealth reductions expected from January 2019.
June 2018 to $43.2 billion in December group, excluding the Insurance Brokerage Also, the Pension funds switched from using
2018. This was despite the foreign receipt business (which did not participate in the Nigerian GAAP to the IFRS
of $5.36 billion in Eurobond sales. the certification process at this time), based reporting.
received the prestigious ISO 9001:2015
Due to inflationary pressures, increased certification, which underscores the In light of the above, our company
fragilities in the global financial markets, standard and quality of our customer consolidated on the giant strides recorded
capital flow reversal and unstable crude service as well as an attestation to the in 2017. The company’s share price closed
oil prices, the CBN kept a tight monetary strength of our business model. With this the year as the most priced banking stock
policy all through the year. Hence, fixed certification, the wealth subsidiaries are at a price of N47.95 and traded at a high
income yields remained elevated, which now aligned with the bank (which was of N53.25 on 28 December 2018. The
was attractive to some investors. Similarly, certified in 2017). institution also improved in almost all of
Federal Government bond yields rose its key performance metrics resulting in
to 16% levels in the final quarter of the Within the Pension industry, the main an ROE of 34.5%.
year as demand remained weak. The CBN drivers during the year were regulatory
54%
Group’s profit after
tax increase
2018 IN NUMBERS 15.1%
7.2% Group’s non-interest
revenue increase
Deposits from
customers increased
to N807.69billion
20%
Group total assets
increased by
N277 billion
24 Stanbic IBTC Annual report for the year ended 31 December 2018
Chairman's Statement (continued)
In the meantime, we continue to focus There was significant improvement in our mosquito nets to two communities
on our long-term objectives and seek Non-performing loans as NPL ratio reduced (Makoko and Tarkwa bay) and completed
to maintain our leadership position in from 8.6% in the prior year to 3.9% as at the refurbishment of our adopted school;
significant segments of the businesses 31 December 2018. Lagos Progressive School. Furthermore,
in which our Group engages. We have several departments across the group
remained the leading wealth manager in Total liabilities increased by 18.5% carried out various CSI projects. This
Nigeria with the Pension management (N222.79 billion) from N1,201 billion as include but not limited to the following:
business, SIPML, consolidating its pre- at 31 December 2017 to N1,424 billion
eminent position as the largest Pension as at 31 December 2018. Deposits from • Operations Shared Services (“OSS”)
Fund Administrator (“PFA”) in terms of customers increased from N753.64 team empowered 100 graduands of
AUM and number of Retirement Savings billion to N807.69 billion, representing a the Women and Poverty Alleviation
Accounts (“RSAs”). SIAML also maintained 7.2% growth year-on-year. This growth Skills Acquisition Programme with
its position as the largest non-pension is in alignment with the bank’s focus on basic work equipment.
assets manager measured by value of raising cheap customer liabilities. Total
AUM, number and size of mutual funds Shareholders’ funds grew by 29.4% • Donation of relief materials to the
and number of customers. (N54.45 billion) to N239.67 billion Spinal Cord Injury Association of
following the impressive result for the Nigeria Rehabilitation centre by
In confirmation of our contribution to year 2018. the SIPML compliance team.
providing excellent solutions to clients
in the different sectors that we operate Income Statement • IT department of the bank constructed
in, we won several awards during the a borehole for the Farayibi Community,
year across the group, including the Stanbic IBTC Holdings PLC achieved total Bariga Lagos.
Euromoney Awards for Best Investment income of N180.81 billion for the financial
Bank in Nigeria, Best Non-Pension Asset period ended 31 December 2018, which is • PBB operations team built some blocks
Management Company in Nigeria at the 4.7% above prior period result of N172.77 of classrooms for the Africa Bethel
Global Banking and Finance Awards, billion. This growth was largely due to Primary School, Maya Ikorodu and
Pension Fund Administrator of the year an increase in fees and commissions and also carried out renovation works
at the Business Day Banking & Finance trading revenue. in the school.
Awards, Dealing Member with Highest
Traded Volume and Value - NSE CEO The group’s net interest income declined • Finance team delivered hospital
Awards and the Best Digital Bank in Nigeria by N5.38 billion (6.4%) from N83.59 equipment to help optimise the
- Agusto & Co. We also won the 2018 billion in 2017 to N78.21 billion in 2018. maternity clinic at Ifako-Ijaiye,
BusinessDay top 25 CEOs award and the Non-interest revenue increased by N13.42 General Hospital.
Best Bank CEO of the year - BusinessDay billion or 15.1% from N89.18 billion in
Banking Awards. 2017 to N102.60 billion in 2018 driven • Global Markets refurbished the
by significant growth in net fee and Paediatrics unit of the General Hospital,
We remain optimistic that in 2019 and commission of N10.76 billion. Mushin, Lagos.
beyond, we are well positioned to sustain
the progress made so far as we will Overall, group profit after tax increased As a group, we remain committed to
continue to leverage on our strengths and by 54% from N48.38 billion in 2017 to excellence in corporate governance with
seek innovative ways to deliver best-in- N74.44 billion in 2018. entrenched practices that ensure that we
class service to our customers and value run a profitable business in an ethical and
to all stakeholders. General environmentally sustainable manner.
Balance Sheet Our corporate social responsibility The board is confident that with our
initiatives were sustained in 2018, with innovative and customer-focused people,
The Group’s total assets increased by focus on the health and educational sector we will strive to deliver best-in-class
20% (N277 billion) from N1,386 billion as as well as economic empowerment. Our services to our customers in the coming
at 31 December 2017 to N1,664 billion flagship CSR programme “Together for year and do our best to deliver on our
as at 31 December 2018 due to growth a Limb”, which provides prosthetic limbs promises to stakeholders.
in business activities. Major growth lines and educational trust to beneficiaries,
in total assets are investment in financial took place in Lagos, Port Harcourt and Finally, I would like to thank our clients,
securities (N83.36 billion), cash and cash Abuja. In the last four (4) years we have shareholders, regulators and staff for their
equivalents (N54.43 billion), pledged had twenty (20) beneficiaries. Asides from unwavering support during the year.
assets (N99.30 billion) and Loans & new beneficiaries, we also replace the
advances to customers (N60.63 billion), prosthetic limbs at least once every year Basil Omiyi (con)
which closed at N432.71 billion. for the previous beneficiaries. Chairman
31 January 2019
We also provided financial support to
the Global Fund Partnership, distributed
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 25
CHIEF EXECUTIVE’S STATEMENT
WE CONTINUE TO On the equities market, The Nigerian
Stock Exchange (“The NSE”) ended the
BELIEVE AND last trading day in 2018 on a positive
note. However, the stock market lost
INVEST IN PEOPLE 17.8% as the benchmark market Index,
NSE ASI closed the year at 31.430.50
Globally, the year 2018 was a year when economies across developed and points from the 38,243.19 points it
emerging markets experienced growth, with few exceptions. For the first half closed on 29 December 2017. All the
of 2018, that momentum played out in a synchronised trend across most of sectorial indicators also closed 2018 in the
the global economies. By the second half of 2018, however, the cracks began negative zone, with the industrial index
to appear as this expansion – while persisting overall – became more divergent. worst off, after shedding 37.4%, while
The split was increasingly clear in currencies and interest rates, too, with the The NSE Banking index lost 16.09%. This
dollar continuing to strengthen and the Federal Reserve pushing ahead with performance was driven by significant
rate rises while other central banks held back. market sell-off in emerging markets; weak
gross domestic product growth; reversal
Locally, in the first and second quarters keep monetary policy tight reflects in foreign portfolio flows over political
of 2018, the economy reversed the rising stubbornly high price pressures in Nigeria’s uncertainty regarding the 2019 elections.
streak as evidenced in the slowed growth economy. Nigeria’s yearly inflation rate, Consequently, there was increased
rates of 1.95% and 1.50%, respectively. although eased somewhat from 15.1% in pressure on the FX market. To reduce the
However, with improvement in the non-oil January to 11.44% in December 2018, pressure, ensure exchange rate stability
sector, the economy received an impetus has lingered well above CBN’s target of and eliminate currency speculators,
for growth, which pushed the GDP 6.0%–9.0% all year due to pre-election the Central Bank of Nigeria (“CBN”)
growth rate in the third quarter to 1.81% spending, higher energy costs, flooding increased its FX intervention exercise to
according to the National Bureau of and the farmer-herdsmen conflict in key meet demand in the various segments of
Statistics (‘NBS”). food-producing states. the interbank market. Foreign exchange
liquidity was also significantly supported
The Stanbic IBTC Bank Nigeria Purchasing In the local fixed income market, yields by activities of investors on the Investors’
Managers Index (“PMI”) reading depressed remained elevated as some portfolio and Exporters’ FX (“IEFX”) window,
from 57.3 at the beginning of the year to investors, who exited the equities market, bringing total trades for the year to
55.0 in December 2018. The indicator lies pitched their tent in the fixed income $59.75 billion in 2018 with Stanbic IBTC
comfortably above the 50-point threshold market. Increased frequency in OMO Bank PLC accounting for approximately
that separates expansion from contraction issuances drove yields on short dated 47% of this amount.
in business conditions, pointing to robust assets to 17% levels, offering a healthy
growth in the private sector. cushion to inflation. The turnover at the Notwithstanding the tough operating
OTC fixed income and currency market rose environment, the group’s financial results
In the banking sector, the Central Bank by a significant 26.9% to N165.15 trillion in the year reflect a solid performance
of Nigeria (“CBN”) through its Monetary against N130.17 trillion recorded in the and good momentum in the group’s
Policy Committee (‘’MPC’’) agreed to corresponding period in 2017. The federal underlying businesses. Significant growth
retain the benchmark Monetary Policy Rate government bond yields also rose to 16% in profitability and business operations
(“MPR”) at 14% per annum as well as leave levels in the final quarter of the year as were recorded. This was driven largely
all monetary policy parameters unchanged demand remained weak. by very strong performances from our
since July 2016. The Bank’s decision to Corporate and Investment Banking and
Wealth Management businesses. Our
Personal & Business Banking division
also came to the party as it broke-even
with a PAT of N581 million.
26 Stanbic IBTC Annual report for the year ended 31 December 2018
Chief Executive's Statement (continued)
Total Assets (N1.66trillion) grew by 20%. As a result of the reversal and repatriations All our subsidiaries within Wealth group,
Our group posted 5% and 54% increase in foreign portfolio flows, the assets under excluding the Insurance Brokerage
over the prior year’s performance in total custody with Stanbic IBTC Nominees business (which did not participate in
income and profit after tax, respectively Limited (‘SINL’) reduced from N5.6 trillion the certification process at the time),
and achieved an ROE of 34.5% compared in December 2017 to N4.89 trillion at the received the prestigious ISO 9001:2015
to 28.9% in the previous year. You will find end of 2018, having attained a peak of certification, which underscores the
included herein detailed financial reports. N6.7 trillion on 30 April 2018. However, standard and quality of our customer
our custody business still retained its service as well as an attestation to the
Our share price reached an all-time high of market leadership and reinforced its role strength of our business model.
N53.25 on 28 December 2018 and closed as the leading non-pension custodial
at N47.95 / share for the year ended 31 service provider in Nigeria. Stanbic IBTC continues to believe and
December 2018. invest in its People with the launch of
Our asset management subsidiary, Stanbic the Stanbic IBTC Employee Assistance
In the wealth management business, IBTC Asset Management Limited’s Programme on 1 June 2018, which
Stanbic IBTC Pension Managers Limited (“SIAML”) flagship fund, Stanbic IBTC provides professional guidance and
(“SIPML”) achieved record assets Money Market (“SIMM”) fund defended counselling (psychologist and counsellors)
under management of N2.69 trillion, its position as the largest mutual fund either via the telephone or face-to-face
representing a growth of 16%, SIPML in Nigeria. The fund achieved an AUM to all employees who may be facing
remains the largest institutional investment growth of 38% in 2018, thereby difficulties causing emotional and
business in Nigeria. reaching N230 billion. psychological stress in their daily life.
Our Trustee business achieved a significant Stanbic IBTC, in a move aimed at Our regulatory risk was further heightened
milestone as the assets under management offering Nigerian and Chinese clients a during the year when CBN imposed fines
for the Education Trust, a product of business-to-business networking service on Stanbic IBTC and three other banks in
Stanbic IBTC Trustees Limited (“SITL”), to unlock the many opportunities around relation to foreign exchange remittances
attained the half a billion Naira mark and the Nigeria-China trade corridor, launched effected on behalf of MTN Nigeria
currently stands at N672 million. the Africa-China Banking Centre (“ACBC”), Communications Limited (“MTNN”), using
a state-of-the-art virtual finance hub what were termed “invalid” Certificates
Our stockbroking subsidiary, Stanbic IBTC that offers seamless consultation and of Capital Importation. The remittances
Stockbrokers Limited (“SISL”) retained its advisory services via telephone, online effected by Stanbic IBTC related to a
number one position in the industry with or email platforms to both Nigerian and successful and highly acclaimed private
a market share of 19.38% from 15.85% in Chinese banking clients. It is manned placement it handled in 2008. The CBN
2017 and closed the year as the dealing by Chinese and Nigerian (Mandarin later reached an amicable settlement of
member with the highest volume of trade speaking) relationship managers ready the matter with MTNN in December 2018.
and value of transactions on The Nigerian to assist clients with their day-to-day
Stock Exchange. SISL has been Nigeria’s banking needs.
number one stockbroking house, posting
the highest turnover for the last ten (10)
years consecutively. The business has
retained the number one spot in sixteen
(16) of the last twenty (20) years.
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 27
We are grateful that as an indicator of our leadership in our focus sectors and recognition
of our efforts to making our company a great place to work, 2018 saw Stanbic IBTC again
receiving several accolades and awards, including:
• Jobberman Certificate of • Best debt house - EMEA Finance • Best Bank CEO of the year
Recognition – For emerging African Banking Awards - Demola Sogunle - BusinessDay
one of the best companies to work Banking Awards 2018
for in Nigeria 2018 • Best equity house - EMEA Finance
African Banking Awards • Professional Wealth Management
• Euromoney Awards 2018 for (PWM) and Financial Times Global
Best Investment Bank in Nigeria • Best loan house - EMEA Finance Private Banking Awards for the Best
African Banking Awards Private Bank in Nigeria.
• Marketing Edge Brands and
Advertising Excellence Award • Best Digital Bank in Nigeria • Issuing House with Highest Number
- Best Customer Centric Financial - Agusto & Co. of Debt Issuance - Corporate Bond -
Brand of the year NSE CEO Awards 2018
• Asset Management Company
• 2018 BusinessDay top 25 CEOs of the Year • Issuing House with Highest Number
award – Yinka Sanni - 4th Nigeria Finance and Innovation of Primary Issuance – Equity: NSE CEO
Awards 2018 Awards 2018
• Best Corporate Governance
Company 2018 - Global Banking • Largest Fund Manager - FMDQ • Dealing Member with Highest Traded
and Finance Awards 2018 Award Volume - NSE CEO Awards 2018
• Best CSR Company Nigeria 2018 - • FMDQ Capital Markets Securities • Dealing Member with Highest
Global Banking and Finance Origination Primary Market Traded Value - NSE CEO Awards 2018
Awards 2018 Champion Award
• Most Innovative Commercial Bank -
• Best Non-Pension Asset • FMDQ 1st Lustrum Dealing 2018 International Finance
Management Company Nigeria 2018 Member Secondary Member Banking Awards
- Global Banking and Finance Champion Award
Awards 2018 • Employer of Choice 2017
• Pension fund administrator of (large corporates category)
• Best foreign investment bank - the year - BusinessDay Banking - 2018 HR People Magazine Awards
EMEA Finance African Banking Awards Awards 2018
The achievement of these milestones is a in 2019 to ensure that we continue to then Investment Banking & Trust
testament to the hard work and dedication grow our capacity to provide incomparable Company Limited (“IBTC”). We are
of our staff. A big thank you to all our high quality end-to-end financial solutions grateful to Mr Peterside and all the
customers and staff without whom none of to our customers in a sustainable manner. past and present members of the Board,
the above would have been possible. Management and staff for their selfless
Despite the economic, regulatory and sacrifice and for bequeathing to us, by
To all our stakeholders who have assisted political uncertainty in an election year, the grace of God, a highly professional,
in making 2018 a success - Thank You. our outlook for the year is positive as we reputable and successful financial
I would particularly wish to thank our leverage our competencies to provide institution that continues to add value
Chairman and the rest of the Board for best-in-class service to our customers to Nigeria and Nigerians.
their commitment, contribution and while concurrently creating value for
invaluable support. our shareholders. Yinka Sanni
Chief Executive
In 2018, we recorded successes through Year 2019 represents our 30th 31 January 2019
harnessing our universal financial services anniversary. The seeds of the Stanbic IBTC
capability, unrelenting focus on cost group were sown on 2 February 1989
control, digitization and client centricity. when Mr Atedo N. A. Peterside, CON,
We plan to leverage on these efficiencies founded and incorporated the
28 Stanbic IBTC Annual report for the year ended 31 December 2018
PAGE TITLE
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 29
ECONOMIC REVIEW
Global Economic Environment of tax cuts, trade wars and tariffs and how crude oil prices remain at moderate
the US FED hiking policies. The US FED levels in 2019. The continued relevance of
Global financial markets were characterised does not seem to share the views of an the Organisation of Petroleum Exporting
by a number of factors in 2018 ranging imminent recession and sees economic Countries (“OPEC”) in international oil
from the trade tensions between the growth rate in the US at 2.3% in 2019 markets is poised to be put to test in 2019.
United States of America (“US”) and the and 2% in 2020. In any case, the US Sure, the cartel could embark on further
People’s Republic of China, global equities economy grew 3.2% year-on-year in the production cuts to keep oil prices higher,
performing below par, BREXIT concerns in first quarter of 2019. but it might not be enough to counteract
the United Kingdom, the Federal Reserve the effect of the demand and supply
Bank (“FED”) raising rates four times, oil Financial market gyrations in the UK in imbalance in an already oversupplied
price volatility, amongst others. However, 2019 will likely be precipitated by the sort market. Ultimately, it seems the market
the emerging market crisis precipitated by of BREXIT agreement that will be reached will be looking for some geopolitical
debt and currency concerns in Argentina between the UK and the European Union tensions for oil prices to trend significantly
and Turkey had a far more sustained (“EU”). From an economic standpoint, a higher. Those oil price dynamics definitely
impact throughout the year, particularly in preferred BREXIT option is definitely one don’t bode well for oil dependent countries
emerging and frontier markets. But how that will ensure the closest possible trading like Nigeria, particularly from a balance
will the global economic environment and relationship between the UK and the EU of payments perspective. Generally,
asset prices shape up in 2019? Sure, there while also maintaining access to financial commodity prices are gearing up to be
was a concerted move away from riskier services in overseas markets. In which modest at best in 2019.
asset classes in 2018 and towards the case, the financial markets recover, and
safe haven US dollar, which saw the the currency stabilises. In the event of a Political Landscape
currency strengthen amid the interest no-deal BREXIT, the government will need
rate hikes. We expect this trend to to take some temporary measures needed There has been a lot of talks and
continue, particularly in the light of to cushion the economy and support arguments around the devolution of
the economic uncertainties across displaced workers. The expansionary fiscal powers to state governments with a
most global economies. stance and a modest recovery in exports is view to giving them more economic
expected to support economic growth in responsibilities. Over the years, the state
The International Monetary Fund (“IMF”) the UK with projections of 1.3% and 1.1% and local governments in Nigeria have
reduced its global growth forecast for in 2019 and 2020, respectively. heavily depended on getting resource
2019 to 3.5% from the previous 3.7% allocation from the Federal Government,
citing trade tensions between the US and Accommodative monetary policy, particularly oil revenues. In the light of
China as a major reason for the downward resilience in domestic demand with strong the volatility in oil prices, oil revenue
revision. In the event of a full-blown trade link between consumption and job growth allocations to the states could keep
war, trade protectionism from the US not and long term structural changes are part getting smaller and that was evident
only escalates, with more tariffs on the of the arguments made in favour of a during the oil price crash in 2016.
likes of China, Japan and the euro zone, continued expansion in the euro-area into
but other nations could adopt a more 2019, albeit at a slower pace. Broad-based These arguments have become more
nationalistic/populist approach to trade trade growth has definitely been weaker prominent in the past year owing to the
and global coordination. The World Trade after world trade growth decelerated from delay in payment of salaries, which was
Organisation (“WTO”) could come under 5.2% in 2017 to around 4.6% as at the predominant in majority of the states, and
substantial strain in a bid to regulate first half of 2018. The European Central the reluctance of the Federal Government
global trade. Global financial markets Bank (“ECB”) ended its asset purchase to initially raise minimum wage. Perhaps
will be roiled by these events and global programme but has recently announced a clamour for states to look inward and
equities will be the first to take the hit as plans to restart a 2-year monetary stimulus tap more into the state-owned resources
usual. After 4 rate hikes in 2018, the US programme in September while lowering with a view to increasing their internally
FED is poised to be patient on any further its growth expectations for the Euro-area generated revenues and hence, rely less on
interest rate hikes in 2019. Belief that in 2019 to 1.1% from 1.7% previously. federal allocation to run state governments
the US FED would continue to tighten could prove more beneficial.
monetary policy seems to have led to Commodity prices (particularly crude oil
expectations that such tightening might prices) will have their say in how the global Structurally, maybe a move towards
actually lead to a recession. So much so, financial markets eventually play out in some level of federalism could become
in fact, that the market is not pricing 2019. With record production levels in more tenable for the country in the long-
any further hikes. The growing concerns the US on increased shale production and run and thereby likely accelerate some
around the US economy slipping into a Russia also producing at its highest level level of infrastructural development,
recession sometimes from late 2019 into since the Soviet Union, it is easy to see particularly in terms of power, road and
2020 largely hinged on the fading impacts rail infrastructures. Furthermore, if these
30 Stanbic IBTC Annual report for the year ended 31 December 2018
Economic review (continued)
states can significantly grow internally 2 quarters of 2018 and we expect the pace 20%, there are increasing concerns
generated revenue with the resources of recovery to continue in 2019 baring around the country’s debt-service-to-
available to them, a case could be made any other disruptions. The trade sector revenue ratio which we estimate was 61%
for increased lending from development recorded 2 quarters of marginally positive in H1:18. Clearly, the government needs
financial institutions to fund infrastructural growth levels; 1% year-on-year after two to make concerted efforts to drive the
projects within the states. consecutive quarters of negative growth. revenue base.
A sustained recovery in that sector will
Economic Growth remain dependent on how quickly consumer The exchange rate assumption in the 2019
purchasing power and disposable incomes budget was retained around the Central
We expect the Nigerian economy to improve going into 2019. The new minimum Bank’s official rate of N305/$ and to this
grow by 2.5% year-on-year in 2019 as wage bill that was recently approved by the end, we see a less likelihood of significant
private consumption expenditure should legislature should prove supportive. depreciation of the currency during the
improve amid moderating inflation. The year. FX stability has been a major focus
recently approved minimum wage increase Ultimately, we expect economic growth for the CBN over the past couple of
could prove to be near term catalyst for in 2019 will be largely driven by the years. Oil production is projected to
consumer disposable income. non-oil sector. In truth, government be at 2.3 million bpd while oil price
spending, particularly to bridge the benchmark was increased from $51 in the
The periodic volatility in oil prices, skewed persistent infrastructural deficit in the 2018 budget to $60 in the 2019 budget.
more to the downside, has brought back country, will be vital in further unlocking Economic growth rate projection of 3.01%
to the fore questions around the Nigerian some level of growth in the non-oil sectors. may not be too far-fetched.
economy sliding back into a recession Credit-to-private sector was benign in 2018
should oil prices stay lower for longer. and we don’t see a significant change in The revenue expectation of NGN6.9
Sure, the structure of the economy has 2019 given the current positioning of trillion; out of which 53% is expected to
not quite changed significantly for us to banks in government securities. However, come from oil revenues is again a tad bit
immediately expect a different outcome the CBN’s developmental actions could ambitious in our view. There are indications
from 2015/2016. However, there are prove supportive. that the global oil market will be
reasons for us to believe that a recession oversupplied for the most part of the year
could be avoidable in the event of another Fiscal Position and hence, oil prices could moderate to
oil price crash. First is the fact that the levels lower than the 2018 average which
Nigerian foreign reserves are in a much Although the 2019 budget that was will ultimately result into a shortfall in the
healthier position now (USD45 billion) presented to the legislature in December oil revenue expectations. NGN3.3 trillion is
compared to USD26 billion average 2018 was slightly lower than that of expected to come from the non-oil sectors
levels recorded during the oil price 2018, the revenue projections remain but it is clear that the authorities will
crash in 2015/2016. To this end, the quite ambitious given the negative need to embark on significant tax reforms
CBN has some ammunition to support the impact of the volatility in oil prices. Sure, to stand any chance of achieving the
currency at current levels in the event of the country is in dire need of reforms to budgeted revenue expectations.
further portfolio outflows and not have drive revenues, particularly in the non-oil
to immediately resort to capital controls. segments. The budget deficit is projected Authorities are looking to spend
by the authorities to be within the fiscal NGN8.8 trillion in 2019 with NGN2.8
Furthermore, one of the reasons the responsibility rule of 3% of GDP. However, trillion (32%) of that budgeted for capital
Nigerian economy was quick to slip into a potential shortfall in revenue projections spend. Debt servicing is expected to gulp
a recession in 2016 was the relatively could push the ratio above the 3% guidance another 24% of the total expenditure
low oil production levels precipitated by as was the case in 2017. while the balance is left to the non-
the attack on the Trans-furcados pipeline. debt recurrent expenditure. In truth,
We estimate that if Nigeria’s oil production The 2019 budget deficit is projected capital expenditure implementation has
levels can remain largely around 1.8 at NGN1.86 trillion (1.33% of GDP); increased to an average of 65% in the
million bpd (excluding condensates), the NGN210 billion of which will be funded past 3 years compared to an average of
economy stands a good chance of avoiding by privatisation proceeds. The balance of 55% in the preceding 4 years. We expect
a recession in the event of another oil NGN1.65 trillion is expected to split equally the government will continue to make
price crash. between domestic and foreign borrowing. significant investments to bridge the
However, the government is looking to country’s enormous infrastructural deficit.
The Agricultural sector, which accounts for more foreign concessionary financing However, with the anticipated shortfall in
over 25% of GDP, witnessed a significant as opposed to more commercial loans revenue, we expect a good portion of
slowdown in 2018 owing to the farmers- (Eurobonds) as those are becoming more the capital expenditure will be funded
herdsmen conflict which impacted output. expensive to raise. Despite the country’s by borrowings.
We saw some level of recovery in the last debt-to-GDP ratio comfortably around
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 31
Exchange rate and Interest Rate
Dynamics
We maintain that the CBN will continue
to prioritise FX stability in the near-to-
medium term, true to one of its core
mandates. Hence, we see the USD/NGN
pair at N365 by FY 2019. The biggest
risks we see to the currency this year are
lower oil prices and oil production, which
could impact negatively on the balance
of payment dynamics and the current
account. That said, we expect that the
monetary policy tightening stance of the
CBN will keep market yields attractive
enough to kindle some portfolio inflows
into H2 2019.
Although we saw some convergence in
the NIFEX and NAFEX rates in 2018, our
expectations are for the market to remain
segmented at least until the current CBN
governor’s tenure expires in June 2019.
Nonetheless, we do not see an immediate
change to the current FX market structure
even in the event of a change at the helm
of affairs at the CBN.
From all indications, the CBN is keen
to keep monetary policy conditions
tight at least over the next six months.
Undoubtedly, volatility in oil prices and the
slightly upward bias for headline inflation
will support the CBN’s tightening stance.
But clearly, the CBN still has a bias for
supporting economic growth. Hence, the
CBN provides credit to some sectors of
the economy while also restricting access
to foreign exchange for the importation
of some products. We believe the CBN
could have scope to lower interest rates
at some point in H2 2019 to further
stimulate growth, provided inflation
numbers are supportive.
32 Stanbic IBTC Annual report for the year ended 31 December 2018
PAGE TITLE
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 33
FINANCIAL REVIEW
The group delivered another impressive back of N2.9 billion, which is a testament band. This was amid further UK BREXIT
result in 2018 which eclipsed 2017 to the strategic focus on loan recoveries. negotiations with the European Union and
performance despite the macro-economic Operating expenses grew by 11.1%, a complete wound down of asset purchase
pressure on interest rate and liquidity. which aligns with inflationary trend though programme by the European Central Bank
largely induced by adjustments made to (“ECB”) in 2018.
The country has maintained a growth staff cost.
trajectory in GDP since emerging from Financial highlights for year
recession in early 2017, which has Operating environment
impacted positively on business Except for Stanbic IBTC Bureau De Change
performance. The relative stability in The operating environment in 2018 Limited, all other subsidiaries of the Group
oil prices which was above $60pb for improved fairly compared to 2017 as churned out profitable result for the year.
most part of the year and FX rate owing economic growth remained on a sustained
to the introduction of the Investors’ and positive trajectory although the pace The banking subsidiary continued its
Exporters’ Foreign Exchange (“IEFX”) of growth did not pick up significantly. dominance in terms of being the most
window by the Central Bank of Nigeria, Headline inflation moderated to an profitable subsidiary within the Group
has boosted investor confidence in the average of 12.15% from 16.55% average with the Pension business coming a
market with the attendant impact on FX recorded in 2017 as the disinflation distant second. The banking subsidiary,
supply and trade business. process was sustained for most of the year. which has Personal & Business Banking
(“PBB”) and Corporate & Transactional
The drivers of the 2018 impressive result The currency was largely stable all through Banking (“CTB”) as its segments, both
are improved loan book quality, loan loss the year amid continued efforts from contributed positively to the bottom line.
recoveries, growth in loan and increased the CBN to tame foreign outflows. The PBB, which is the retail arm of the bank,
customer transactional volumes. Profit Naira averaged N361.77 to the US dollar closed with a profit after tax (“PAT”) of
after tax for the year stood at N74.4 in 2018. Despite the efforts from the N581m thereby breaking into profitability.
billion, which is N26.1 billion higher than CBN, the emerging markets contagion This feat was achieved on the strength of
prior year’s number. Interest income triggered foreign portfolio outflows which the quality of the loan book. A significant
decline of N4.5 billion can be adduced to meant the CBN had to burn through its loan book clean-up was done last year,
reduced yield on government securities built-up reserves. The country’s foreign which placed the business on the pedestal
despite growth in average value of reserves position dipped from a peak of profitability in 2018. It is important to
government securities holdings. The of $47.8 billion in June 2018 to $41.6 mention that volume of transactions also
impact was however cushioned by growth billion in November 2018. However, the increased, which impacted positively on
in interest income from customer loans and successful issuance of a $2.86 billion Net Interest Income (“NII”) and Non-
advances following an increase in the loan Eurobond by the government meant Income Revenue (“NIR”). CTB recorded
book. Marginal growth in interest expense the country’s foreign reserves position a new high in its performance with a PAT
was on the back of rising interest rate, closed the year around $43 billion. Crude growth of N5.6 billion (13%) to close
higher customer deposit and the issuance oil production in the country averaged the year at N48.9 billion. The strong
of a long-dated senior unsecured bond. 2.1mbpd (including condensates) in 2018. growth is predicated on growing trade
There were no severe attacks on the and transactional business volumes, taking
The institution took full advantage of major export terminals all through the advantage of market opportunities mostly
the liberalisation of the FX market, which year- except a period of shut down for on the trading desk, successful execution
accounted for increased FX flows and the maintenance on Q2:18, oil production of several corporate finance deals and a
attendant impact on investor confidence levels were sustained. Oil prices however deliberate focus on client centricity. It is
and trade business to improve its non- became rather volatile towards the end pertinent to mention the concerted effort
interest revenue line. Fee and commission of the year as increased production from towards loan loss recoveries that upturned
burgeoned because of increased trade the US and Russia impacted negatively the impairment line from a charge in 2017
transactions, improved custody fees on prices. Oil prices averaged $71.7 in to a recovery in 2018.
coming from higher asset under custody 2018 nonetheless.
and increased customer trade and Wealth business sustained its yearly
transactional business. Trading revenue From a global perspective, economic impressive record of double digit growth
also grew on the back of increased FX growth and employment numbers in the in Asset under Management (“AuM”)
trades and money market transactions. US remained strong all year and that while profit soared. The business grew
gave support to the USD. The US Federal AuM from N2.7 trillion in 2017 to N3.2
Unlike prior year where credit impairment Reserve “(FED”)’s normalization process trillion in 2018 with N139 billion of the
charge stood at N25.6 billion following meant that US interest rates were hiked 4 growth coming from net contributions
management decision to write-off times during the year with the FED fund and the rest from growth in average
delinquent facilities, 2018 was a write rates closing within the 2.25% - 2.5% return on investment.
34 Stanbic IBTC Annual report for the year ended 31 December 2018
Financial review (continued)
The Pension business also grew the Notwithstanding, our capital business It is worth mentioning the fact that our
number of Retirement Savings Account won a record 16 industry awards in 2018 non-pension custody business remains the
(“RSA”) by 100,518 accounts despite among which are largest in the industry with asset under
the competitive environment. Wealth custody (“AuC”) at a peak of N6.7 trillion
business contributed significantly to the • Euromoney Awards for during the year but however closed the
overall result of the Group by delivering a Excellence 2018 year at N4.9 trillion following the recent
total income and PAT of N47.4 billion and exit of offshore investors.
N22.6 billion, respectively compared to • Best Investment Bank in Nigeria
prior year’s performance of N39.5 billion Looking ahead
and N19.2 billion. • emeafinance African Banking
Awards 2018 We expect a slightly subdued operating
The multi-fund structure initiative of the environment in 2019 and the reason for
National Pension Commission came into • Best Foreign Investment Bank in this is not farfetched. We envisage that
effect from July 2018. The multi-fund Nigeria the 2019 elections and the legal actions
structure is a framework that aims to align thereafter will affect government’s focus
the age and risk profile of RSA holders • Best Debt House in Nigeria and cause distractions in the first half of
into three (3) funds while maintaining the year. We maintain that the CBN will
an additional Retiree fund for retired • Best Equity House in Nigeria continue to prioritise foreign exchange
contributors. The major distinguishing stability in the near-to-medium term
feature in these funds is the percentage • The Nigerian Stock Exchange CEO hence, we see the USD/NGN pair at
of the portfolio that can be invested in Awards 2018 $1/N365 by full year 2019. We see a
variable instruments. possible rise in interest rate following
• Issuing House with the highest uptick in inflation and also in response
Stanbic IBTC Stockbrokers Limited number of primary issuance - Equity to rise in US Fed rates, which has been
maintained its market dominant position partly responsible for the streaming
as the largest stockbroking house in the • Issuing House with the highest outflows of offshore investors funds. GDP
country with a market share of about number of debt issuance is forecasted at 2.5% while inflation may
20%. Volume of trade increased by 10.6% - Corporate Bonds hover around 11-12%.
to 17.002 billion shares. The business
also won The NSE CEO award for dealing • Issuing House with the largest On the business front, our success in 2019
member with the highest volume of trade value in a single deal will be hinged on our continuous focus on
on The Nigerian Stock Exchange client centricity, precision in executing our
in addition to other accolades. Stanbic • FMDQ Gold Awards 2018 client strategy, efficient cost management,
IBTC Capital Limited had a resilient improvement in the quality of loan book
performance in 2018 though slightly • Capital Markets Securities while still focusing on recoveries and
behind prior year’s result. Origination (Primary Market interest margin management. Risk and
Champion) Award conduct continues to be one of the major
strategic drivers of the institution.
• Registration Member
(Quotations) Award
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 35
Business activity Income statement Principal risk arising
impact from this activity
We lend money to our Interest income and Credit risk
customers, invest in credit impairment Interest rate risk
government securities and charges
money market instruments Liquidity risk
We source for deposits Interest expense Operational risk, including compliance, environmental and/or social risk
from our customers and Business and reputational risk
Income after credit impairments other banks
We provide transactional Net fees and Credit risk
banking facilities to our commission Market risk
customers and clients revenue Investment risk
We offer equity, foreign Trading revenue
exchange and commodity
instrument to customers
We earn income from Other revenue
investment properties
and dividend income
Expenses We offer trustee, pension Income from pension
and non-pension asset and non-pension asset
management services management
– Staff costs
We invest in developing
and retaining our people
to deliver on our strategy
We invest in our operations, Other operating costs
which includes IT systems
and business running costs
= = Retained equity which is reinvested
to sustain and grow our business
Dividend to our shareholders
Net profit –
Tax to governments
36 Stanbic IBTC Annual report for the year ended 31 December 2018
Financial review (continued)
Impact of the economic environment on key financial ratios
The economic statistics in 2018, together with their 2019 expected influence on the Group’s performance assuming no management
action, have been set out in the table below.
The table below relates to the Group’s operations in Nigeria.
Key measurement metric Economic factors that impact metrics Economic Impact of Expected Expected impact
factor economic factor economic factor of economic factor
Growth in loans and advances GDP growth
Net interest margin Interest rates in 2018 in 2018 in 2019 in 2019
Interest rates + + + +
Credit loss ratio Unemployment rates - + - +
Crude oil prices - - - -
Growth in fee and Interest rates - - - -
commission revenue GDP growth + + + +
Growth in trading revenue Inflation (CPI) - - - -
Market trading volumes + + + +
Growth in operating expenses Market price volatility - - - -
Effective tax rate Exchange rate + + + +
Growth in pension revenue Inflation (CPI) + + - -
Corporate tax rate + + + +
Equity market performance - - - -
Unemployment rates / / / /
- - + +
+ - + -
+ = Increase in economic factor/positive impact on the group’s performance
– = Decrease in economic factor/negative impact on the group’s performance
/ = Neutral
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 37
Growth in loans and advances Net interest margin
Loans and advances remain the biggest portion of total assets in Net interest margin is the profit earned from interest on loans,
the group’s balance sheet. This asset class provides revenue to advances and investments less interest paid on customer deposits
the Group in form of interest income, transaction fees charged and other funding sources. The movement in benchmark lending
as documentation and administration fees and opportunities for rates such as the prime lending rate in Nigeria impacts significantly
insurance related income. The group is focused at growing this on the net interest margin.
asset class within the accepted risk levels.
The graph below shows the average prime lending rate and the
Gross domestic product (“GDP”) growth and interest rate have Group’s net interest margin.
major impact on loan growth in the Nigerian economy as this
impacts customers’ ability to repay their loans.
The graph below shows GDP growth as it impacted loan growth:
% %
20
500 7
450 5.9 6 18
400 5 16
350 4 14
300 2.6 3 12
250 413.4 379.4 375.3 403.9 458.9 10 16.5 16.8 16.9 17.6 17.0
6.9 5.2
200 1.9 2 8
6 5.5 4.7 5.9 2017 2018
150 0.8 1
4
100 0
50 -1.6 -1 2
0 -2 0
2014 2015 2016 2017 2018 2014 2015 2016
Gross loans and advances (N’million) Net Interest Margin
Real GDP Average Prime Lending Rate
The growth in economic indices coupled with increased support to The interest rate charged on loans and advances are mostly
clients in our preferred sectors resulted in the growth in risk asset. linked to the prime lending rate which serves as the benchmark
The change in FX translation rate to the IEFX rate also contributed rate for loans.
to the growth.
Yields on government securities declined for the better part of
The Group will continue to monitor the economy in 2019 the year but began a gradual uptick in the fourth quarter while
to harness emerging opportunities and also tighten its risk interbank lending rates were largely elevated for most of the year
management process to improve the quality of loans. due to the tight monetary stance of the Central Bank partly due to
a deliberate effort from the CBN to stem portfolio outflows in the
months leading up to the 2019 general elections.
38 Stanbic IBTC Annual report for the year ended 31 December 2018
Financial review (continued)
Credit loss ratio Growth in non-interest revenue
The credit loss ratio is the credit impairment charge expressed as The two major components of non-interest revenue are net fee
a percentage of the average group loans and advances balance. and commission and trading revenue. The growth or decline in
Credit impairment is a percentage of loans and advances given to non-interest revenue is largely induced by changes in these
customers that is charged to income statement as provision for two variables.
bad loans. This is the cost of risk incurred by the bank from the
customers’ inability to repay their loans. Growth in net fees and commission revenue
The decrease in credit impairment charges is occasioned by This depends on growth in transaction volumes and activity across
significant write-backs which resulted from recoveries made the service delivery channels, which are a function of economic
on previously written off loans and reversals on some non- activity. The Central Bank of Nigeria (“CBN”) has however placed
performing loans. a ceiling on some fee lines, which means that banks cannot charge
above the amount stated by the CBN. Net fees and commission
Credit loss ratio and average crude oil prices grew by 18.2% in 2018 on account of growth in assets under
management as well as electronic banking transaction volumes
$/pb 5.2 6.6 % across our digital channels.
120 3.8 7
54.8 6 Growth in trading revenue
100 2017 5
4 The trading revenue is basically income from trading in foreign
80 3 currency, fixed income securities and equities. This revenue source
2 is dependent on trading volumes and volatility in the market,
60 73.0 1 which impacts on the spread made by traders. The 7.4% growth in
0.8 -0.7 0 trading revenue is on the back of increased FX trades and money
-1 market transactions.
40 2018 -2
Growth in operating expenses
99.5 53.6 45.1
20 Inflation is a major economic factor that drives cost growth in the
group. Headline inflation (year-on-year) moderated for most of
0 2014 2015 2016 2018 averaging 12.10% during the year from 16.5% levels in 2017
and this contributed partly to current cost growth. Other factors
Average crude oil price ($/pb) responsible for the growth in operating costs include the general
Credit loss ratio one-time adjustment to staff cost, increase in deposit insurance
and AMCON sinking fund contribution expenses, marketing and
advertising expenses and information technology expenses.
Therefore, the group’s cost-to-income deteriorated to 52.9%
(2017: 49.8%).
Operating expenses and average yearly inflation rate
Nmillion 16.5 %
120,000 18.0
86,026 16.0
100,000 15.7 2017 14.0
12.0
80,000 9.0 69,041 12.1 10.0
60,000 2016 8.0
8.1 95,601 6.0
2018 4.0
40,000 2.0
0
20,000 57,901 62,066
0
2014 2015
Operating expenses (N’million)
Average inflation rate
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 39
Effective tax rate on assets under management which in turn increases the net
asset value of the funds. The revenue from the pension and non-
Nigeria’s corporate tax rate remained unchanged throughout pension asset management business is usually a percentage of the
2018, although the government intensified its tax collection net assets value of the funds.
efforts. This is not expected to change in 2019 given the revenue
drive of both state and federal government. The level of unemployment also affects the revenue from pension
business. A decline in unemployment levels means that more
Growth in revenue from pension and non-pension assets people are getting employed and pension contributions will
increase resulting in increased assets under management, while an
The growth in revenue from managing pension and non-pension increase in unemployment levels will have an adverse effect on the
assets is dependent on equity market performance, money market revenue of the pension business.
interest rates and yields on government securities. Growth in
equity market performance results in higher investment income
Analysis of the Group’s financial performance
Income statement analysis
The statement of profit or loss reflects the revenue earned by the business and costs incurred in generating the revenue for the
year end 2018.
The profit for the year grew strongly year-on-year by 54%. Below are explanations for significant movements recorded in the year.
Summarised income statement – Group Change % 2018 2017
Gross earnings 5 Nmillion Nmillion
Net interest income 222,360 212,434
Interest income (6) 78,209 83,587
Interest expense (4) 118,382 122,911
Non-interest revenue (40,173) (39,324)
Net fees and commission revenue 2 102,604 89,182
Fees and commission revenue 15 69,845 59,089
Fees and commission expense 18 71,219 59,430
Trading revenue 20 (1,374)
Other revenue >100 31,311 (341)
7 29,148
53 1,448
945
Total income 5 180,813 172,769
Credit impairment charges >100 2,940 (25,577)
Income after credit impairment charges 147,192
Operating expenses 25 183,753 (86,026)
Staff costs 11 (95,601) (36,282)
Other operating expenses 19 (43,027) (49,744)
Profit before taxation 6 (52,574)
Direct taxation 44 61,166
Profit for the period 7 88,152 (12,785)
Profit attributable to: 54 (13,712)
Non-controlling interests 74,440 48,381
Equity holders of the parent 8
Profit for the period 56 2,353 2,186
54 72,087 46,195
74,440 48,381
40 Stanbic IBTC Annual report for the year ended 31 December 2018
Financial review (continued)
Net interest income In CIB, net interest income was down 14.6% on the back of a
decrease in interest income and an accelerated increase in interest
Net interest income decreased year-on-year by 6.4%. Interest expense of 18%.
income declined by 3.7% while interest expense increased
year-on-year by 2.2%. In PBB, net interest income grew by 3.0%. The business witnessed
a marginal decline in interest income of 3.7% due to the general
The contraction in interest income is as a result of the general declining yield environment while interest expense decreased
compression in yields on investment securities given the declining significantly by 19.9% due to the increased focus on low-cost
yield environment. This is in spite of the growth in interest earned deposit liability generations which helped reduce cost of funds.
on loans and advances as the risk assets portfolio grew, which was
unable to compensate for the decreased yields on investments. Non-interest revenue
The marginal increase in interest expense is largely due to the
growth in interest paid on borrowed funds, which was dampened Non-interest revenue comprises mainly fee and commission and
by the decrease in interest costs on expensive term deposits and trading revenue. Fee and commission revenue is dependent on
wholesale funds. transactional banking volumes and asset under management,
which are a function of economic activity and of the competitive
N’million 5.5 4.7 5.9 6.9 5.2 % environment for banking services.
90,000 5.1 5.4 8
80,000 46,658 3.6 3.9 4.8 7 Non-interest revenue increased by 15.1% on the back of an
70,000 43,860 57,859 83,587 78,209 6 18.2% growth in net fees and commission, 7.4% increase in
60,000 2014 5 trading revenue and 53.2% increase in other revenue.
50,000 2015 2016 2017 2018 4
40,000 3 Growth in fees and commission was largely on the back of
30,000 2 increased asset management fees from the wealth business,
20,000 1 growth in non-pension custody fees, foreign services transactions,
10,000 0 corporate finance and electronic banking fees.
0 PBB business witnessed a 30.4% growth in net fees and
commission income. The strong growth resulted from growth in
Net interest income transaction volumes from customers across our digital channels,
Net interest margin before impairment charges increased revenue from trade activities and Letter of Credit
Net interest margin after impairment charges volumes, growth in revenue from increase in foreign exchange
transfer limit for Outward Telegraphic Transfers and revenue
N’million 57 % growth from increased transactions volumes on current accounts.
120,000 58
100,000 55 56 54 52 57 CIB recorded a marginal 1.5% contraction in net fees and
56 commissions revenue. This is partly due to the emerging markets
80,000 57,987 56,788 68,194 89,182 102,604 55 contagion which resulted in the repatriation of funds by foreign
60,000 2014 2015 2016 54 investors. This led to a decline in non-pension custody fees on
40,000 53 account of decline in asset under custody to N4.9 trillion from
20,000 52 N5.6 trillion at the beginning of the year as well as the bearish
51 stock market leading to decreased trades thus decrease in
0 50 stockbroking fees.
49
Trading revenue grew by 7.4% due to the increase in trade
volumes though at a slower pace compared to prior year.
Wealth business continued to be the trail blazer in this area with a
growth of N7.1 billion (20.2%) above previous year. The growth
can be adduced to increase in asset under management of 19% as
well as higher average return on investment.
2017 2018
Non-interest revenue
% of total income
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 41
Non-interest revenue by business units Operating expenses
Corporate & Investment Banking 43% The Group uses the inflation and cost-to-income as the benchmark
Personal & Business Banking 16% to measure its performance on cost management. Total operating
Wealth 41% expenses grew by 11%, slightly below the 12.1% average inflation
rate for the year. The growth comprised 19% increase in staff
Credit impairment charge costs and 6% increase in other operating expenses as the Group
Credit impairment charge was a write-back of N2.9 billion continued its cost optimisation initiatives.
compared to a charge of N25.6 billion in the prior year,
representing an improvement of over 100%. Thus, cost of risk was While the Group’s cost growth trends a little below inflation rate
negative 0.7% (write-back) in 2018 as provisions for impaired loan of 12.1%, cost to income ratio deteriorated to 52.9% from 49.8%
were offset by write-backs which resulted from recoveries made in 2017 largely due to the accelerated increase in staff costs.
on previously written off loans and reversals on some non-
performing loans. Growth in staff cost (18.6%) accounted for about 70% of
CIB’s credit impairment decreased significantly resulting in a the increase in total operating expenses. The growth was due
write-back of N3.6 billion from the N10.6 billion charge incurred to the general one-time adjustment to staff cost to cater for
last year. The impairment write-back came mainly from provisions inflationary adjustments and staff salary alignment market
made on a previously impaired facility granted to an oil and gas benchmark. Other operating expenses grew by 5.7% due largely
client following the repayment of its loan obligation. Therefore, to the increase in deposit insurance, AMCON sinking fund
CIB’s credit loss ratio for the year stood at negative 1.3% (write- contribution expenses and information technology expenses while
back) as against 4.4% in 2017. the costs of stationery and printing as well as maintenance of
PBB’s credit impairment charge also decreased to N618 million premises amongst others, decreased year-on-year in line with the
during the year from N14.9 billion in 2017. The decrease in Group’s cost optimisation efforts.
credit provisions on personal lending is attributable to recoveries
made on previously written off delinquent loans which resulted in CIB’s operating expenses increased by 12.1%, resulting in the
significant write-backs. Credit loss ratio for PBB business stood at cost-to-income ratio deterioration to 39.1% from 33.2% reported
0.4% as against a ratio of 9.9% in previous year. in prior year. Other operating expenses increased by 19.8% due
to increased AMCON levy and the penalty levied against the Bank
with respect to FX remittances made on behalf of MTN Nigeria,
while staff costs remained relatively flat year-on-year.
PBB business witnessed a cost growth of 7.2% driven by 26.6%
increase in staff cost, which was cushioned by an 8.2% decrease
in other operating costs. The cost growth was on account of the
general one-time adjustment to staff salaries as well as increase
in deposit insurance premium resulting from increased deposits
and growth in IT expenses on the back of payment for licenses.
Nevertheless, cost-to-income ratio of the business decreased to
97.0% from 99.9% in prior year.
Wealth’s operating expenses recorded a growth of 22.8% driven
by growth in staff cost of 28.7% and other operating costs of
17.9%. Cost to income ratio remained flat at 31.7% in 2018 when
compared to prior year as revenue generated outgrew costs.
The general one-time adjustment to staff salaries accounted for
growth in staff cost. The major contributor to growth in other
operating expense was the higher management and technical
service fee expenses driven by year-on-year growth in fee income.
42 Stanbic IBTC Annual report for the year ended 31 December 2018 Change % 2018 2017
19 Nmillion Nmillion
Financial review (continued) 6 43,027 36,282
16 52,574 49,744
Breakdown of operating expenses 9
(8) 6,933 5,984
Staff costs 7 1,310 1,205
Other operating expenses: (2) 4,170 4,517
Information technology 70 4,432 4,129
Communication expenses 56
Premises and maintenance 8 45 46
Depreciation expense 14 4,212 2,482
Amortisation of intangible assets 95 7,836 5,034
Deposit insurance premium 39
AMCON expenses 929 858
Other insurance premium (24) 387 340
Auditors renumeration 44
Non-audit service fee 13 44 19
Professional fees 7 1,181 850
Administration and membership fees 2,820 3,711
Training expenses (50) 1,643 1,139
Security expenses 12 1,676 1,484
Travel and entertainment 75 1,897 1,773
Stationery and printing 1,182
Marketing and advertising >100 586 2,982
Pension administration expense (47) 3,336 215
Penalties and fines >100
Donations 377 38
Operational losses 7 1,902 437
Directors fees (92)
Provision for legal costs, levies and fines (>100) 233 25
Impairment/(Recovery) of other financial assets >100 196 401
Motor vehicle maintenance expense 429 3,538
Bank Charges 22 300 3,068
Indirect tax (VAT) 15 (232) 764
Others 33 1,556 1,496
Total operating expenses 11 1,831 828
950 1,199
1,595 86,026
95,601
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 43
Balance sheet analysis
The statement of financial position shows the position of the group’s assets, liabilities and equity at 31 December 2018.
The group’s balance sheet size increased by 20% to close at N1.66 trillion from N1.39 trillion at the end of 2017. Significant movements
over the year are discussed below.
Assets Change % 2018 2017
Cash and cash equivalents Nmillion Nmillion
Pledged assets 14
Trading assets >100 455,773 401,348
Derivative assets (44) 142,543 43,240
Financial investments >100 151,479
Assets held for sale 84,351 11,052
Loans and advances 26 30,286 316,641
Loans and advances to banks (100) 400,000 114
Loans and advances to customers 381,711
Other assets 16 - 9,623
Property and equipment (11) 441,261
Intangible assets 372,088
Deferred tax assets 16 8,548 49,442
Total assets 57 432,713 21,883
(1) 605
Equity and liabilities 37 77,787 8,901
21,652
Equity 3 1,386,416
Equity attributable to ordinary shareholders 20 827
Ordinary share capital 9,181
Ordinary share premium 1,663,661
Reserves
Non-controlling interest 29 239,667 185,218
29 235,406 182,060
Liabilities
Trading liabilities 2 5,120 5,025
Derivative liabilities 14 76,030 66,945
Deposit and current accounts 40 154,256 110,090
Deposits from banks 35
Deposits from customers 4,261 3,158
Other borrowings 19
Debts Securities Issued >100 1,423,994 1,201,198
Current tax liabilities 125,684 62,449
Deferred tax liabilities 60 4,152 2,592
Provisions 19 967,964 815,363
Other liabilities >100 160,272 61,721
Total equity and liabilities 7 807,692
(7) 69,918 753,642
>100 60,595 74,892
22 14,899 29,046
14 137 12,240
13,452 120
4 167,193 12,979
(13) 191,517
1,663,661
20 1,386,416
44 Stanbic IBTC Annual report for the year ended 31 December 2018
Financial review (continued)
Cash & cash equivalents improvement during the year and focus Customer deposits grew by 7.2% to
were on identified growth segments of close at N807.7 billion at the end of
The growth on this balance sheet line the economy. 2018 (2017: N753.6 billion) as a result
of 13.6% (N54 billion) due to CBN of the deliberate strategy aimed at growing
reserving policy. In CIB, customer loan balance grew low cost deposits through the targeted
by 10% and this can be attributed to acquisition of customers with regular
Trading assets increase in both overdraft facilities and flow income, banking the customers’
term loans. The bulk of the growth in ecosystem and improved service delivery
The contraction in trading assets is term loan came from the foreign currency across all channels. The 7.2% growth in
on account of the decrease in position book on account of new facilities booked customer deposits constitute a strong
held in treasury bills investments. and change in exchange rate for foreign growth in current and savings deposits
currency translation. while term deposits declined, in line with
Financial investment the Group’s deliberate efforts to de-
In PBB, customer loan balances increased emphasize expensive term deposits in the
Financial investments provided a veritable by 20% with the major growth also coming bid to reduce cost of funds. Consequently,
alternative investment outlet to risk asset in from overdraft facilities and term loans. the group’s deposit mix of current and
the course of the year due to its attractive The growth witnessed in PBB was largely savings deposits to total deposits improved
yields. The growth of 26% witnessed in from business banking clients with facilities to 56.8% from 49.2% in 2017. In CIB,
financial investment was to take advantage availed to customers in the oil and gas customer deposits decreased by 3.4% due
of the attractive yields on this asset class downstream, manufacturing and food to loss of some current deposits.
in the absence of quality customer loans processing sectors, while in the personal
and advances. banking space, facilities were given to In PBB, customer deposits grew by 14.9%,
staff cooperative of companies through the with current-and-savings-accounts
Loans and advances workplace banking offering. (“CASA”) growing by 34% reaffirming the
continued strategy to grow CASA volumes.
Total net loans and advances increased Deposit and current accounts The ratio of CASA as a proportion of
by 16% to N441.3 billion (2017: N381.7 customer deposits improved to 78% from
billion), with customer loans and advances Deposit and current accounts grew by 67% in 2017. The business continued its
accounting for the entire growth with a 19% from a prior year close of N815.4 focus on growing retail deposits during
balance of N432.7 billion compared to prior billion to N968.0 billion in 2018, the the year with particular focus on banking
year of N372 billion. Loans and advances major contributor to this growth being the customers’ ecosystem.
to banks declined by 11.2% to N8.5 billion the increase in customer deposits of
(2017: N9.6 billion). N54 billion.
The bank maintained a cautious approach
to loan book growth as the economy
continued on a moderate level with slight
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 45
46 SSttaannbbiicc IIBBTTCC AAnnnnuuaall rreeppoorrtt ffoorr tthhee yyeeaarr eennddeedd 3311 DDeecceemmbbeerr 22001188
EPAXGECEUTTITIVLE COMMITTEE
Yinka Sanni Demola Sogunle
Chief Executive Chief Executive
Stanbic IBTC Holdings PLC Stanbic IBTC Bank PLC
Wole Adeniyi Andrew Mashanda Eric Fajemisin
Executive Director Executive Director Chief Executive
Personal & Business Banking Corporate & Transactional Banking Stanbic IBTC
Stanbic IBTC Bank PLC Stanbic IBTC Bank PLC Pension Managers Limited
Adekunle Adedeji Angela Omo-Dare Benjamin Ahulu
Chief Financial Officer Country Head, Legal Services Head, Internal Audit
Stanbic IBTC Holdings PLC Stanbic IBTC Holdings PLC Stanbic IBTC Bank PLC
OVERVIEW OVEBRVUIESWINESS RBEUVSIIENWESS REVAINENWUAL REAPNONRUTA&L RFEINPOARNTC&IAFLINSATNACTIEAML SETNATTSEMENTSOTHEROINTHFEORRIMNFAOTRIOMNATION 47 47
Sam Ocheho Rotimi Adojutelegan
Head, Global Markets Chief Compliance Officer
Stanbic IBTC Bank PLC Stanbic IBTC Bank PLC
Gboyega Dada Olufunke Amobi Kola Lawal
Chief Information Officer Head, Human Capital Head, Credit
Stanbic IBTC Holdings PLC Stanbic IBTC Holdings PLC Stanbic IBTC Bank PLC
Chidi Okezie Oluwatosin Odutayo Taiwo Ala
Company Secretary Ag. Head of Finance Head, Internal Control
Stanbic IBTC Holdings PLC Stanbic IBTC Bank PLC Stanbic IBTC Bank PLC
48 Stanbic IBTC Annual report for the year ended 31 December 2018
PAGE TITLE
OVERVIEW BUSINESS REVIEW ANNUAL REPORT & FINANCIAL STATEMENTS OTHER INFORMATION 49
PERSONAL AND BUSINESS BANKING
Personal and Business Banking Despite the challenging macro-economic The business has also seen consistent
environment in 2018, the key drivers of growth across all digital banking platforms.
Personal and Business Banking (“PBB”) the PBB business continued to progress The growth recorded in 2018 represents
supports everyday banking essentials positively. Customer deposits closed 48% year-on-year increase across all
of individuals/businesses. It is the retail at N501.7 billion, which represents a digital banking channels. Total downloads
arm of the Stanbic IBTC Holdings PLC year-to-date growth of N65.1 billion on the Stanbic IBTC Mobile Banking App as
which offers investment and other (15%). The growth was driven majorly by at December 2018 represents 165% year-
financial services to customers. PBB’s current-and-savings-accounts (“CASA”), to-date growth on downloads compared
focus segments include individual which has grown by N99.5 billion year- to December 2017 across Android, Apple,
customers, youth segment, high net- to-date. CASA ratio closed at 78% which Windows and Blackberry devices. We
worth individuals (“HNIs”), mid-level was an improvement on the 67% in the continue to make significant investments
corporates and small and medium scale same period of prior year. Gross loans and in digital channels to increase our digital
enterprises (“SME”) amongst others. advances closed at N179.8 billion, which engagements with customers and also
The aim of PBB is to provide appropriate, represents a year-to-date growth of 20% deliver enhanced customer experience.
affordable, convenient and accessible (N30.5 billion) while the performing loan
financial solutions to customers through book closed at N163.7 billion as at end The business has made progress on the
passionate and customer focused of 2018, which represents a 27% (N34.6 virtual banking proposition, which would
employees nationwide. The business offers billion) year-to-date growth in performing support several product offerings in order
services such as vehicle and asset finance, loans compared to N129.1 billion as at end to meet the needs of our target customer
unsecured and secured personal and of 2017. segment. The virtual banking proposition
business loans, mortgage loans, a range of is designed to enable ease of account
trade finance products and various current, PBB continues to focus on customer opening and transaction processing for the
savings and investment offerings. centricity and client satisfaction as banked, underbanked and multi-banked
Stanbic IBTC emerged winner of the customers. The delivery channels for the
To ensure efficient service delivery, 2018 Most Innovative Commercial Bank proposition are via USSD Banking, ATMs,
the business is divided into two major in Nigeria awarded by International Agent Network and the @ease App.
segments. The first is the Personal Finance Publications Ltd.
Banking segment which focuses on The Africa-China Banking initiative remains
banking services to individuals through The business continues to acquire quality an important focus for PBB. The Africa-
lifecycle management and offering customers within all segments which China Banking Centre was launched in
bespoke services. The Personal banking led to a 17% year-on-year growth in 2018 and would provide bespoke solutions
segment also caters for high net- customer acquisition, as well as increase to support business needs for communities
worth individuals by handling their in total customer base to 2,352,585 as at in Nigeria and China.
wealth portfolio needs both locally and December 2018, compared to 1,787,784
internationally. The second is the Business as at December 2017. We thank all our customers for their
Banking segment which caters for Small support in 2018 and look forward to
& Medium Scale Enterprises (Enterprise a better 2019.
Banking) and Commercial Banking
segments by providing bespoke business
solutions, which support the client’s
commerce needs.
50 Stanbic IBTC Annual report for the year ended 31 December 2018
Case Study
ZARTECH LIMITED
The Business The collections into the company’s account has been majorly driven
by cheque pickups and e-banking collections via POS terminals
Zartech Limited, a member of the Zard Group of Companies, strategically deployed at their major outlets.
specialises in poultry production. The Zard group has been in
existence in Nigeria since 1932. The Group has diversified its 40% of the company’s raw materials: Calcium Hypochlorite, Vaccines,
operations into several industrial sectors. Minerals and Vitamins, Accessories for poultry keeping are imported
while the other feeds components, majorly maize and soya beans, are
Zartech Ltd was incorporated in December 1978 to take care locally sourced. In the light of the above, Stanbic IBTC has positioned
of the agricultural arm of the Group business. The company has to ensure the Bank has a wallet share in both the importation and
become a household name in the supply of day old chicks, frozen local business.
chicken, processed chicken and processed beef.
Furthermore, there is an ongoing on-boarding of the company’s
Zartech ensures continuous improvement in quality of products employees, the company has a total number of 50 expatriate staff
by continuously engaging in research and development and is the out of which 40 have been converted into the Bank’s books and route
leading supplier to international brands in the fast food industry. their salaries, including the monthly Personal Home Remittances,
through Stanbic IBTC. On the other hand, a number of the Nigerian
All processing procedures are conducted in accordance with staff have also been converted with some of them enjoying loan
international health standards and are audited by international facilities through the Workplace Banking opportunities.
third party specialists.
Business Location and Outlets
Relationship with Stanbic IBTC
The company’s head office is located in Ibadan, Oyo State.
Zartech Limited commenced banking relationship with Stanbic The company has several farm sites located in the South West of
IBTC in July 2017. the country and maintains its own distribution chain via wholesale
facilities spread across the geo-political zones of the country
The relationship has been of non- borrowing relationship to date. (Lagos, Ibadan, Jos, Abuja and Port Harcourt) for distribution.
The Bank enjoys float income from the account sitting balances.
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2018 Annual Report - Stanbic IBTC Holdings PLC
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