Stanbic IBTC Plc, the Nigerian unit of Standard Bank Group Ltd., expects the proposed windfall tax on foreign exchange gains to have a minimal effect, consuming only a modest portion of 10% of its profits.
During an investor call, the Chief Executive Officer of Stanbic IBTC Holdings Plc, Demola Sogunle confirmed that the proposed 70% windfall tax is not anticipated to significantly impact the company’s overall business performance.
He said, “What they are referring to as windfall tax for us in Stanbic IBTC will account for less than 10% of our profit after tax. For now, we are not seeing any major impact on us.”
Stanbic IBTC plans to conduct a rights issue before the end of the year to meet the increased minimum capital requirements, according to CEO Sogunle.
He expressed confidence in the success of the offering, citing the bank’s strong financial performance, consistent dividend payments, and support from its parent company.
Stanbic financial performance in H1 2024
Stanbic IBTC Plc reported a pre-tax profit of N62.7 billion in Q1 2024, marking a 73% increase compared to the N36.3 billion recorded in Q1 2023.
- The group also saw a 71% growth in total income for the quarter, reaching N138.2 billion, up from N80.9 billion in the same period the previous year.
- In its Q2 results, the company posted a record pre-tax profit of N84.2 billion for the three months ending June 2024, representing an 80.4% increase.
- This surge in pre-tax profits is the highest ever recorded by the company in a single quarter, according to Nairametrics data.
- For the first half of 2024, Stanbic IBTC’s pre-tax profit rose to N147 billion, a significant jump from the N82.9 billion reported in H1 2023.
Windfall tax in Nigeria
- In July, President Tinubu proposed an amendment to the Finance Act to introduce a 50% tax on banks’ foreign exchange gains to bolster the federal government’s strained fiscal position.
- The National Assembly (NASS) during deliberation increased the windfall tax to 70% of banks’ foreign exchange gain in 2023 and 2024.
- While the Chairmen of major banks in the country have rendered support for the tax, bank directors have raised some issues with the tax calling for a revision.
- Moody’s labelled the tax as credit-negative, and an industry lobby criticized it as a burden on a sector already contending with economic challenges, while banks are also raising fresh capital to comply with central bank mandates.
- An analysis from Nairametrics reveals that in the full year of 2023 and Q1 2024, Nigerian banks recorded up to N3.3 trillion in foreign exchange gains.