After several months of mulling its takeover of Keystone Bank, Sterling Bank has rescinded on its decision to acquire the bank.
In a phone chat with Reuters, the bank’s CEO said “We reviewed Keystone Bank and concluded the strategic fit was not strong enough. We will continue to evaluate all the options. As new candidates come into the market, we will also review them”
Instead Sterling Bank will be looking at raising capital at the debt market. To get this one, Sterling Bank will be looking to raise a total of NGN30 billion through bond issuance programme.
The bank decision is not unconnected with the disastrous outcome of Skye Bank after it acquired Mainstreet Bank. It would be recalled that the Central Bank of Nigeria, CBN had taken over the management of Skye Bank as a result of the bank’s inability to meet the apex bank’s capital adequacy ratio, CAR benchmarks.
On the 11th of August, 2011, Sterling Bank acquired Equitorial Trust Bank, ETB after it was taken over by the Asset Management Company of Nigeria, AMCON due to its pile of bad debts.
The decision to go to the bond market is also expedient as the debt market is attractive with lower yields. Investors are also showing more appetite for debt instruments dumping equities.
In its full year 2015 results, the Profit after Tax for FY2015 was up 14.3% year-on-year to N10.3 billion, boosted by improved operating efficiency.
Shareholders’ funds grew by 12.8% to N96 billion in FY 2015 from N85 billion in 2014, driven by accretion from the current year’s profit, a reflection of the Bank’s resilience and increasing market reach. Gross Earnings stood at N110.19 billion, an increase of 6.3% over 2014.
Operating efficiency improved as total operating expenses declined by 1.9% year-on-year. This resulted in an overall growth in the Bank’s bottom line as Profit before Tax grew by 2.5% over the prior year to N11.02 billion. Total Assets decreased by 3.0% as a result of an 8.8% decrease in Loans & Advances, following the transfer of State Governments’ loans to the Federal Government’s balance sheet.
Customer deposits also dipped by 9.9% following the implementation of the Treasury Single Account, TSA. Capital buffer was enhanced by a 12.8% increase in Shareholders’ Funds, driven by profit accretion and further supported by the slowdown in loan growth. Thus, the capital adequacy ratio improved from 14% in 2014 to 17.5% as at year-end 2015.
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