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Sterling bank’s 2013FY result buoys future earnings spurt

sterling bank

 

Background

Sterling Bank Plc is a full-service national commercial bank. The Bank, formerly known as NAL Bank Plc, was incorporated in 1960 as Nigerian Acceptances Limited. In 1969, it became the first Nigerian Bank to be licensed as a merchant bank.

The Bank became a universal bank in 2001 to reflect its wide product/service offering. In 2005, NAL Bank merged with the erstwhile Indo-Nigerian Bank, Magnum Trust Bank, NBM Bank, and Trust Bank of Africa to form Sterling Bank Plc.

Buoyed by a commitment to corporate governance principles the Bank has demonstrated resilience in the competitive landscape, while remaining true to its strong ethical leaning.

In 2011, Sterling Bank Plc acquired the franchise of the erstwhile Equatorial Trust Bank to emerge as a stronger institution and is now better positioned to offer a robust bouquet of products and services through a network of over 165 branches spread across major cities in Nigeria.

Sterling bank has 21.6 billion shares outstanding, with shareholder funds standing at N321.74 billion at the end of June 2013.

 

Financial Performance for the year ended December 2013

For the year ended December 2013, Sterling Bank Plc’s gross earnings increased by 33.0 percent y/y to N91.62 billion from N68.85 billion recorded same period of the prior year (FY12).

The increase in top line performance is impressive considering the harsh regulatory environment and the tightening stance of the CBN which have put pressure on earnings of most Nigeria banks.

Interest income in the period under review (FY13) increased by 30.69 percent year on year to N69.97 billion as against N53.54 billion in FY12, while net interest income rose by 15.22 percent to N31.16 billion in FY13 from N21.64 billion as at FY12.

Net interest income for the year ended December 2013 grew by 49.88 percent y/y to N35.81 billion from N23.50 percent in Q4:12

Operating expenses were up by 24.87 percent y/y to N39.90 billion in 12M13 compared with N31.95 billion in 12M12, while operating expenses margin slid to 43.50 percent in FY13 from 46.3 percent as at FY12.

Net interest margin, a measure of profitability and efficiency climbed to 51.0 percent in 12M13 from 34.7 percent in 12M12.

Loan loss expenses surged by 3502.56 percent y/y to (N8.26 billion) in Q4:13 compared with N242.73 million in Q4:12.

The bank was able to translate top line performance into bottom line growth as profit before tax (PBT) in the review period climbed by 24.14 percent y/y to N9.31 billion compared to N7.5 billion as at 2012FY.

Profit after tax (PAT) in the review period climbed by 19.0 percent year on year to N8.27 billion as against N6.95 billion recorded in the corresponding period of 2012.

The bank’s income tax in the review period spiked by 89.58 percent y/y to N1.03 billion from N546.1 billion as at FY12.

Earnings per share EPS grew by 18.18 percent to 52k in Q4:13 from 44k in Q4:12

The bank is expanding its loan portfolio as total loans and advances for 2013 FY increased by 40.24 percent y/y to N321.74 billion compare with N229.42 billion as at 2012FY

Total customer deposits were up by 22.21 percent y/y to N570.51 billion in Q4:13 as against N466.84 in Q4:12.

Sterling’s total assets for the year ended December 2013 jumped by 21.94 percent to y/y to N707.8 billion from N580.2 billion same period of the prior year (FY12).

 Share performance and outlook

The share price of sterling bank on the 27th of March 2014 closed at N2.36 on the floor of the Nigeria Stock Exchange (NSE)

Current Price Earnings Ratio (P/E ratio) and estimated Price earnings Ratio were 7.3x and 50.93 respectively.

BALA AUGIE