Stanbic Holdings’ net interest income (NNI) growth is to be moderated by the cost-income ratio (CIR) and nominal interest rate (NIR)

We forecast a net interest income (NII) compound average growth rate (CAGR) of 16.0% between FY22-27e, driven by a net loan CAGR of 14.3%. The NII growth rises as net interest margin (NIM) expands 6.2% in FY23e (from 5.6% in FY22) because of a rising rate environment and then up to 6.4% by FY27e as the bank implements its risk-pricing model. However, operational expenditure (OPEX) growth of 22.3% Y-o-Y in FY23e and 14.0% in FY24e (driven by higher inflation, foreign exchange (FX) depreciation, and investments made by the bank) will offset NII growth. On NIR, we forecast it to increase 16.6% Y-o-Y in FY23e (due to exceptional investment banking and foreign exchange (FX) trading income) before declining by 14.2% Y-o-Y in FY24e. Finally, based on the non-performing loan (NPL) ratio persistently above 10% since FY18, we assume its cost of risk will remain relatively elevated at 2.0% in FY23e and 1.5% from FY24e onwards.