Sterling Bank posts N11bn profit, to pay N864m dividend to shareholders

Sterling Bank Plc has announced it will pay its shareholders N863.7 million dividends for the
year ended December 31, 2019. The tier-two bank made the announcement last week
Thursday following the release of its audited financial statement for the year ended
December 31,2019.

Based on the results, Sterling Bank realised N150.2 billion as gross earnings in 2019,
representing just 1 percent increase over N148.7 billion the bank made in the previous year.
Profit before tax was N10.7 billion in 2019 as against N9.49 billion in 2018 while profit after
tax was N10.6 billion last year compared with N9.22 billion in 2018, representing an increase
of 15.01 percent.

Earnings per share rose to 37 kobo last year from 35 kobo in the previous year. The board of
director of the bank has recommended a dividend per share of 3 kobo which amounted to 8
percent dividend payout ratio. Qualification date is May 4; closure of the register will run
from May 5 to 8, 2020, while the payment date is May 20, 2020 which is the AGM date
“In the final quarter of 2019, our relentless commitment to improving education through
microbanking was rewarded with ‘The Banker’s Award for Banking in the Community’ on the
global stage by The Financial Times. We were also ranked a top 3 bank in retail by Nigerian
consumers in KPMG banking survey, a major accomplishment for a mid-size bank. Overall,
the bank delivered a 15.0% growth in profit after tax to N10.6 billion as at December 2019,”
Abubakar Suleiman, Sterling Bank’s chief executive officer, said.

The bank improved its non-performing loans which reduced to 2.2 percent in 2019 whereas
it was 8.7 percent in 2018. The regulatory threshold is 5 percent.
When ranked by contribution to overall profit, institutional banking segment outperformed
other banking segments in 2019. Institutional banking segment’s profit after tax in 2019
rose by 3.97 percent over N7.56 billion made in 2018 with a segment return on average
asset of 4.2 percent while it contributed 73 percent to Sterling Bank’s PAT in 2019, which
was lower than 80 percent this same segment contributed to the bank’s PAT in 2018.
Sterling Bank retail banking segment’s PAT rose by 17.3 percent in 2019, with a segment’s
return on average assets of 4.9 percent while it contributed 41 percent to the group’s PAT
whereas in 2018, its contribution was 39 percent.

Non interest banking segment’s PAT remained flat at N1.32 billion in 2019, but with a return
on average assets of 2.8 percent and a segment contribution of 12 percent to the group’s
PAT, which was slightly lower than 14 percent that the non-interest banking segment
contributed to the group’s profit in 2018.

Without doubt, Sterling Bank needs to rejig its commercial banking segment, as well as its
corporate and investment banking segment. It consistently made losses in the two banking
segments.
Corporate and investment banking segment’s loss after tax stood at N2.63 billion in 2019 as
against loss after tax of N2.83 billion in 2018. This loss came at a time the bank allocated
more assets to this banking segment. In 2018, the total corporate and investment assets
worth N653.9 billion, and that increased by 11 percent to N726.2 billion in 2019.

Loss after tax arising from commercial banking segment jumped to N631 million from loss
after tax of N50 million in 2018, and was accompanied with a 19 percent reduction in asset
allocation to this banking segment.
On what the bank should do to return the commercial and investment banking segments
back to profitability, analysts believe sterling Bank should take a cue from other banks which
have profitable commercial and investment banking segments.

“That Sterling Bank made losses in commercial and investment banking segments for two
consecutive years is not a sign the bank doesn’t have what it takes to carry out those
banking operations. Another tier-two bank had its personal banking segment in losses
before it returned to profitability last year. Sterling Bank should understudy tier-one banks
with highly profitable commercial, corporate and investment banking segments to revive its
own segment banking that are right now in losses” , an analyst with a leading investment
bank who did not want his name in print said to BusinessDay Research and Intelligence Unit
(BRIU).