Corporate & investment banking

 
In the midst of the global financial turmoil which exerted a heavy toll on the local financial industry and further exacerbated by the recent banking sector crisis, we leveraged the bank's growing brand to strengthen our leadership in Global Markets (GM) and Investment Banking (IB), whilst we laid a solid foundation for growth in Transactional Products & Services (TPS).
 
Revenue by business segment
  Total income
₦25,586 million

2008: ₦20,822 million
  Pre tax return on average equity
13.2%

2008: 14.6%
  Cost-to-income ratio
62.5%

2008: 42.7%
  Deposits
₦94,186 million

2008: ₦43,508 million
  Loans and advances (net)
₦93,735 million

2008: ₦81,118 million
 
What we offer
Corporate & Investment Banking (CIB) is the wholesale banking arm of Stanbic IBTC through which innovative investment and financing solutions are provided to large local and multinational corporates, institutional and public sector clients in strategic sectors of the economy. The combination of our industry expertise, cross-border linkages, well-structured balance sheet and highly skilled and experienced team, gives us a competitive edge in meeting our clients' needs and in turn earns us several mandates and awards during the year.
 
2009 highlights
Creation of a carbon origination/trading desk in Global Markets to source emissions reductions projects in Nigeria and Africa to put the team ahead of competition in Certificates of Emissions Reduction (CER) trading; 
Adoption of a product neutral model through the creation of a client coverage unit with the primary aim of deepening relationships across key sectors identified for priority; 
Won mandates to participate in raising more than ₦1.3 trillion in bonds by private and public institutions; 
Grew stockbroking market dominance to about 21% share of total market transaction value, up from 12.49% in 2008; and 
Appointment by the Central Bank of Nigeria (CBN) as a Domestic Money Market Custodian to money market and other fixed income securities in the country 
 
2010 priorities
Increased participation in bond raising activities. Our focus will be on delivering on the mandates already won to help clients raise long term debt as well as winning more mandates from both private and public sector clients; 
Leverage & acquisition financing and other debt solutions; 
Working with regulators to align local regulatory framework with global best practices; 
Building on the already laid foundation to grow our transactional products & services franchise, specifically franchise collections and online payments; and 
Growing our market share of trade financing through a suitable trade finance model that meets the special needs of majority of Nigerian importers. 
 

Overview

In 2009, our GM franchise retained its position as one of the leading market makers in foreign exchange (FX), fixed income and money market businesses. We are an appointed primary dealer and market maker for Federal Government of Nigeria (FGN) bonds and treasury bills. During the year, a carbon origination/trading desk was created in GM to source emissions reductions projects in Nigeria and Africa leveraging our local relationships and expertise in the area via Standard Bank Group (SBG)'s extensive business network. This will put the team ahead of competition in Certificates of Emissions Reduction (CER) trading.

The Investment Banking pillar of CIB continues to consolidate its pre-eminent position in the market and remains a strong franchise for the group. We were able to take advantage of the lull that lasted in the capital market all through the year to grow our share of the market. Following the emergence of Stanbic IBTC Stockbrokers from the consolidation of Stanbic IBTC Asset Management (stockbroking operations) and Stanbic Equities, the bank further increased its stockbroking market dominance to about 21% share of total market transaction value in 2009, up from 12.49% in 2008.

We moved to a product neutral model, whereby our teams of relationship managers ensured that the whole product suites of the bank were sold to relevant clients during the year. Our aim is to create a customer-centric CIB model, double the cross sell ratio to clients and efficiently allocate capital in a way that ensures appropriate matching of return and risk.
 

Strategic direction

During the year under review, CIB embarked on a number of strategic initiatives aimed at creating a sustainable business strategy/model. These include: 
 
Identification of six (6) key priority sectors where we intend to play in and possibly emerge as market leaders. The sectors are: Oil, Gas & Renewables, Telecommunications, Media, Technology & Entertainment, Power, Infrastructure & Construction (Property), Public Sector & International Organisations, Manufacturing & Distribution and Financial Institutions. 
Introduction of new and specialised product offerings, which include securitisation, structured trade finance, leverage & acquisition finance, property finance and debt solutions products. This became necessary in positioning CIB to take advantage on new opportunities presented by the collapse of the equity market and increasing investor appetites for debt instruments and other fixed income investments. 
 

Achievements

Deals completed
CIB executed a number of advisory and financing transactions that further evidenced the growing brand image and positive perception of the franchise in the market place. The following are some of the notable deals that were completed in 2009: 
 
Issuance of ₦50 billion first tranche of the Lagos State Government ₦275 billion 5-year Fixed Rate Bond Issue Programme. Concluded in January 2009, the issue was 117% subscribed. 
₦22.6 billion Rights Issue by Cadbury Nigeria Plc. We were the issuing house/receiving bankers to the offer which was 85.55% subscribed. 
Issuance/Arrangement of an ₦18.5 billion Fixed Rate Bond Issue by Imo State under a ₦40 billion Debt Issuance Programme. We were also the lead underwriter to the issue, which was 100% subscribed. 
Arrangement of a US$15 million cocoa receivable-backed trade facility for Agro Traders Limited on a sole-basis. Disbursements have since commenced. 
Merger of MTN Nigeria Communications Limited and VGC Communications Limited. We acted as the financial advisers. 
 
Mandates won
CIB won a sizable wallet of mandates during the year. Some of the mandates which are at various stages are: 
 
Joint Issuing House to a proposed ₦500 billion Debt Issuance Programme by First Bank of Nigeria Plc. 
Joint Issuing House to a proposed ₦400 billion Bond Issuance Programme by UBA Plc. 
Joint Issuing House to a proposed ₦100 billion Bond Issuance Programme by Access Bank Plc. 
Lead Issuing House to a proposed ₦200 billion Medium Term Note (MTN) Programme by Oando Plc. 
Joint Financial Advisory & Debt Arranging for Puma Energy (a subsidiary of Trafigura International). We got the mandate, jointly with Standard Bank London, to arrange US$120 million for the client. 
7-year Construction Term Facility for Gruppo Investments Limited. Stanbic IBTC is to contribute US$28.5 million of the total US$48.5 million meant for construction of Ikeja Mall. 
 
Awards
The efforts of the various teams within CIB and other segments of the bank did not go unrecognised. Some of the awards and accolades for the year include: 
 
Analyst of the Year, by Ai Financial Reporting Award, 2009; 
Bank of the Year, by ACQ Finance Magazine Global Awards 2009; 
Best Investment Bank in Nigeria 2009, by Euromoney Awards; 
Best Equity House in Africa 2009, by Euromoney Awards; 
Best Sub-Custodian in Nigeria 2009, by Global Investor Awards; 
Best Investment Bank in Nigeria Award, 2009, by Emeafinance; and 
PPP Champion of the Year for Various Initiatives, 2009 by Africa Investor Infrastructure Awards. 
 
Financial performance
Despite the difficult and challenging operating environment experienced in the industry in 2009, the division total income grew by 23% on the back of decrease in interest expense and increase in net fee and commissions. However, the growth in total income was partly offset by the growth in operating expenses. Staff costs and other operating expenses increased by 86% and 74% respectively as a result of procurement of skills and infrastructure to grow our specialised lending products and services such as structured trade, debt capital market, carbon trading, electronic banking to mention a few. 

The key performance indicators are highlighted below
 
2009
2008 Growth
 
₦’million
₦’million %
Total income
25,586
20,822 23
Staff costs
7,444
3,922 86
Other operating expenses
8,541
4,897 74
Provision for risk assets
3,820
4,135 (8)
Tax provision
810
639 27
Profit after tax
5,781
7,798 (26)
Deposits
94,186
43,508 116
Gross loans & advances
103,379
87,271 18
 

Moving forward

The turmoil experienced by the Nigerian banking industry in 2009 presents us with both challenges and opportunities. We are therefore focusing on rightly positioning CIB ahead of the opportunities and the challenges. In line with this, we have identified key business opportunities as anticipated by the market and developed appropriate strategies across the division that will enable us capture them as they crystallise. These include: 
 
Product neutrality model - We have created a client coverage unit, with the primary aim of deepening relationships with key clients operating in the 6 priority sectors earlier mentioned. By becoming customer-centric, we are focusing on increasing our share of clients' wallets in those sectors. 
Our enhanced debt solutions capabilities will be deployed in offering creative solutions to clients who require financing for various projects being undertaken. We will also be looking at providing larger and longer-tenored facilities to key infrastructure projects and core clients who have bankable projects. 
Domestic money market custodial services - Following our appointment by the CBN as one of the money market and other fixed income securities custodians in the country, we hope to grow the domestic portion of our custodial business, going forward. The Nigerian FGN treasury bill and other money market instruments is a market of at least ₦3 trillion in size. These assets are to be de-materialised and held by CBN appointed custodians. 
Online payments - the CBN's recently announced ₦10 million cap on amounts that could be paid through cheques has offered us a good opportunity to leverage our electronic payment solution, New Business Online (nBOL). The nBOL capability will help strengthen our annuity businesses through the expected growth in the volume and value of deposit collections and web pay transactions. 
Trade financing - having identified Nigeria as an import-dependent economy, we have commenced a review of our trade services strategy for us to increase our trade finance market share. 
Cost optimisation - the growing cost trend in the industry together with the resultant pressure on revenue has underlined the need for CIB to put cost in proper perspective. Already, cost-saving measures are being put in place to ensure we derive more value from expenses incurred.