Sterling Bank Plc continued to build on the efficiency, quality and profitability of its core banking business, as the latest earnings report released at the weekend showed considerable improvements in key underlying fundamentals of the lender.
The nine-month report for the third quarter ended September 30, 2016 released at the Nigerian Stock Exchange (NSE) last weekend, showed steady growth in the core banking business, underlining the success of the lender’s core retail banking business.
Key extracts of the interim report showed that net interest margin, which measures the profitability of the core lending business, improved to 8.5 per cent in third quarter 2016 as against 7.9 per cent in comparable period of 2015.
The proportion of non-performing loans (NPL) to gross loans and advances, which indicates assets quality and the efficiency of the credit risk management, also improved significantly from 4.8 per cent in December 2015 to 2.5 per cent in the third quarter 2016.
This brings Sterling Bank well ahead of the 5.0 per cent industry thresholds for NPL set by the Central Bank of Nigeria (CBN).
The bank’s cost of funds also improved to 5.3 per cent in third quarter 2016 compared with 6.2 per cent in corresponding period of 2015.
Commenting on the results, Managing Director, Sterling Bank Plc, Mr. Yemi Adeola, said the improvements in the underlying fundamentals in the third quarter despite the depressing effect of the tough macro-economic conditions on the overall performance of the sector, underlined the resoluteness of the bank in building a sustainable business anchored on effective risk management and a robust retail business.
He said a 37.7 per cent growth in net interest income was largely due to a 12 per cent reduction in interest expense, which underpinned the 60 basis points increase in net interest margin. “Sterling Bank has grown its active customer base by over 40 per cent year-to-date with improved penetration across all digital channels.
The non-interest banking business has also witnessed significant growth in deposits and profitability by 87 per cent and 415 per cent respectively. This gives fillip to our resolve to diversify our business significantly over the coming years,” Adeola said.
He outlined that the bank would continue to prioritise operating efficiency and aggressively drive retail funding, noting that these priorities will guide bank’s business in the final quarter of the year and serve as the fulcrum for 2017.
The Sterling Bank boss noted that the tough operating environment characterised by foreign exchange supply shortages, rising inflation, negative economic growth and generally recessionary environment, has sustained downward pressure on core earnings in the industry.
“Although macroeconomic conditions could witness some modest improvements, the operating environment would continue to be challenging and business confidence somewhat subdued. Nonetheless, Sterling Bank remains committed to building a sustainable business anchored on efficiency.”
