Sterling Bank Plc did not only improve on its profits for the year ended December 31, 2017, it increased its loans and advances by 27per cent, writes Goddy Egene
Most of the banks that released their results for the 2017 financial year, recorded a decline in loans and advances to customers. The reason for this is not farfetched. Some of them are adopting precautionary strategy following the rise in level of payment defaults by debtors. The payment default had led to significant growth in impairment charges of banks in recent years. Most companies are having challenging times due to harsh operating environment and therefore default in loan repayment. Hence, some banks have decided to reduce their exposure to companies. However, Sterling Bank Plc last year increased its loans and advances by 27 per cent to N598.1 billion, from N468.3 billion in 2016.
Sterling Bank Plc recorded gross earnings of N133.5 billion, up by 19.8 per cent to N111.4 billion. This was driven by growth in both interest and non-interest income by 11.3 per cent and 87.8 per cent respectively. The bankâ€™s net operating income rose by 7.9 per cent, while cost-to-income ratio improved by 260 basis points to 71.5 per cent.
Specifically, non-interest income rose 87.8 per cent from N12.3 billion in 2016 to N23.2 billion in 2017. Net operating income stood at N61.1 billion, up from N56.6 billion. Profit before tax (PBT) grew from N6 billion to N8.606 billion, while PAT improved from N5.163 billion to N8.521 billion. Customersâ€™ deposits increased by 17.1 per cent to N684.8 billion as against N584.7 billion in 2016. Overall, shareholdersâ€™ funds grew by 20.2 per cent to N102.9 billion as against N85.7 billion in 2016, reaffirming the bankâ€™s commitment to returning value to its shareholders.
Other performance indicators also showed improvement. For instance, pre-tax return on average equity improved from 6.6 per cent to 9.1 per cent, while post tax-return grew from 5.7 per cent to 9.0 per cent. Earnings per share grew from 18 kobo to 30 kobo per share.
Net interest margin rose from 9.3 per cent to 6.9 per cent, while cost to income ratio improved from 74.1 per cent to 71.5 per cent. Similarly, no-performance loan ratio stood at 6.2 per cent compared with 9.9 per cent, just capital adequacy ratio rose from 11.2 per cent to 12.2 per cent. Net loans and advances grew to N598.1 billion, from N468.3 billion.
However, an analysis of the loans and advances showed that the oil and gas sector got the highest of 251.59 billion, from N233.041 billion in 2016. Real estate got N70.293 billion, up from N45.9 billion, while agriculture received N19.24 billion as against N14.48 billion in 2016.
Managing Director Explains Performance
Commenting on the result, Managing Director/Chief Executive Officer, Sterling Bank Plc, Mr. Abubakar Suleiman said: â€œOur 2017 result highlights positive performance across key financial indices despite challenging operating conditions, reaffirming our underlying institutional strength. The non-interest banking business continued to gain significant traction, adding positively to our bottom-line. This performance underscores the commitment of the entire team to our corporate goals and the resilience of our business model.â€
Suleiman disclosed that the bank maintained a disciplined and prudent approach to loan growth in line with its risk management framework, a development which resulted in a significant improvement in asset quality as reflected in the reduction of non-performing loan ratio by 370 basis points to 6.2 per cent.
The CEO noted that bank continued to scale its business with support from a well-diversified funding base.
â€œFor the first time, we recorded N1.1 trillion in total assets from N834.2 billion in 2016 representing a 28.7 per cent growth. We also gained traction in our retail drive with an active customer base that exceeded three million resulting in 17.1 per cent growth in deposits,â€ he said.
Suleiman explained that during the year, the bankâ€™s liquidity and capital adequacy ratios remained sound and well above the required regulatory benchmark at 33 per cent and 12.2 per cent respectively, adding that the bank prioritised efficiency across its businesses as it progressed on its digital transformation journey by successfully launching â€œSpectaâ€, an innovative online lending platform which offers personal loans within five minutes.
He said the bank also invested in a first-rate business process management tool to optimise operating efficiency while providing its customers with â€˜best in classâ€™ service.
Affirming the bankâ€™s 2017-21 strategic plan, Abubakar said: â€œIn 2018, we will continue to execute our plans to drive efficiency across the business under the three pillars of agility, digitisation and specialisation. These pillars will propel us toward sustainable growth by enhancing our ability to innovate; solidify our retail funding base; strengthen our enterprise-wide risk management framework and drive excellent service delivery across all channels to enhance customer experience.â€
Financial Intermediation Role
The MD/CEO stressed that the bank is intent on achieving its primary role of financial intermediation through intervention in sectors that will create jobs and bring about economic growth for the country.
He identified such sectors as health, education, agriculture, renewable energy and transport, adding that this explains the bankâ€™s commitment to value chain transformation of the transport sector.
According to Suleiman, Sterling Bank is driven by the understanding that an efficient transport system facilitates trade, reduces poverty, creates economic and social opportunities while enhancing human development through greater mobility.
â€œWorking with our partners, our vision over the next few years is to understand the peculiarities of various locations and replicate this kind of solution across the nation.â€
Looking ahead, he said in 2018, the financial institution would continue to execute its plans to drive efficiency across the business under the three pillars of agility, digitations and business specialisation.
â€œIn the area of agility, we will be flexible, energetic and act with speed in response to rapid changes in our environment. Digitisation, while we continue to simplify and streamline our processes, we will also optimise data analytics to meet our customersâ€™ evolving needs,â€ he said.
On business specialisation, Suleiman said Sterling Bank had committed to make significant investments to develop its human capital around critical sectors to enable it provide the best support to its customersâ€™ businesses.
â€œWe will build expertise in the sectors at the â€œHEARTâ€ of Sterling Bank – Health, Education, Agriculture, Renewable energy, and Transportation â€“ in the belief that this will positively impact our society. Our expectation is that these three pillars will propel us toward sustainable growth by enhancing our ability to continuously innovate; solidifying our retail funding base; strengthening our enterprise-wide risk management framework and driving excellent service delivery across all channels to enhance our customersâ€™ experiences. We plan to further strengthen our capital position in the course of the year,â€ he said.