SKYEBANK Non-Interest Income Grows by 126% YoY in Q4'14; Rated UNDERPERFORM by Expert

L – R : The Head, Listings Sales and Retention, The Nigerian Stock Exchange (NSE), Mrs. Taba Peterside; Executive Director, Business Development, NSE, Mr. Haruna Jalo-Waziri; Chairman, Courteville Business Solution Plc, Group Capt. M. O. Salami (Rtd) and Group Managing Director, Courteville Business Solution Plc, Mr. Adebola Akindele at the Facts Behind the Figures presentation at the Exchange today

 

SKYEBANK Non-Interest Income Grows by 126% YoY in Q4'14; Rated UNDERPERFORM by Expert

kye reported a pretax loss of N1.9bn in Q4 2014; PAT declined 53% y/ySkye Bank’s Q4 2014 results which were published this afternoon showed a pre-tax loss of -N1.9bn. (We are assuming that the figures published reflect recently acquired Mainstreet Bank). Despite the pre-tax loss, PAT came in positive at N4.0bn but declined by 53% y/y. 

A gain of N4.2bn on the other comprehensive income (OCI) line together with a tax credit of N1.7bn were the drivers behind the positive PAT.Further up the P&L, profit before provisions grew by 14% y/y to N25.4bn. 

The growth on this line was driven by a 33% y/y growth in funding income. In contrast, non-interest income declined by 4 y/y. However, the y/y growth in pre-provision profits was not enough to offset a 56% y/y and 59% y/y rise in loan loss provisions and opex respectively.Sequentially, the pre-tax loss of N1.9bn compared with a PBT of N5.1bn in Q3 2014. 

Thanks to the OCI gain and tax credit of N4.2bn and N1.7bn respectively, PAT came in flattish q/q. Compared with our estimate of N7.0bn, the pre-tax loss surprised negatively while PAT came in 39% below our N6.6bn forecast. The negative surprise in profits was driven by profit before provisions (-19% vs our est.) and a loan loss provisions (382% higher than we were expecting).

On a full year basis, Skye’s PBT and PAT declined by 47% y/y and 32% y/y respectively.  While the PBT missed our forecast by 46%, the difference on the PAT line narrowed to 16% because of the positive result on the OCI line and a lower effective tax rate of 7% compared with the 15.0% tax rate that we were modelling. The results also came in behind consensus 2014 PBT and PAT forecasts of N16.2bn and N13.7bn respectively. 

Although the bank did not declare a cash dividend, it has proposed a bonus of 1 for 20.The results imply an ROAE of 10.9%, confirming our view that the management’s ROAE guidance of 15% for the full year was aggressive. Although the shares shed 9% today, we would not be surprised to further sell-off over the next few days given the weak results. 

The shares have shed 18% ytd, compared with the -0.7% return on the All Share Index.