Sterling Bank Plc has 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 commercial bank. The nine-month report for the third quarter ended September 30, 2016 released at the Nigerian Stock Exchange (NSE) at the 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 December 2015 to 2.5 per cent in 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.

Managing director, Sterling Bank Plc, Mr. Yemi Adeola, said the improvements in the underlying fundamentals in the third quarter in spite of the depressing effect of the tough macroeconomic 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. According to him, 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 prioritize 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. He noted that the tough operating environment characterized 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,” Adeola assured. Further analysis of the financial statement showed that net interest income rose by 37.6 per cent from N30.2 billion in third quarter 2015 to N41.5 billion in third quarter 2016. Non-interest income however reduced by 47.6 per cent to N10.8 billion as against N20.5 billion mainly because of 34.2 per cent decline in fees and commission. This moderated the gross earnings to N79.65 billion in third quarter 2016 as against N81.81 billion in comparable period of 2015. With curtailed increase of 5.0 per cent in total expenses in spite of a 17.9 per cent inflation rate year-on-year in September 2016, profits before and after tax stood at N6.07 billion and N5.54 billion respectively in third quarter 2016. Profits before and after tax were N8.30 billion and N7.55 billion respectively in third quarter 2015.

The balance sheet of the bank emerged stronger during the period. Net loans & advances increased by 46.2 per cent to N495.3 billion in September 2016 as against N338.7 billion recorded at the beginning of this year. This was driven primarily by foreign exchange revaluation. Customer deposits also improved from N590.9 billion as at December 31, 2015 to N595.1 billion in September 2016. Total assets excluding contingent liabilities increased by 11.4 per cent to N890.3 billion as against N799.5 billion at the start of the year.