Sterling Bank Q2 Net Profit Falls By 25%

Sterling

Sterling Bank PLC, a tier 2 bank offering commercial and retail banking said its net profit for the second quarter of the year fell by 25% to NGN4 billion versus NGN5,4 billion recorded last year.

  • Net interest income increased by 31.9% toNGN25.6 billion (1H 2015: NGN19.4 billion) driven by a 22.0% decrease in interest expense resulting in a 1240 basis point improvement in net interest margin to 61.7%;
  • Non-interest income reduced by 44.0% to NGN8.5 billion (1H 2015:NGN15.2 billion) largely due to a 33.3% decrease in fees and commission income;
  • Net operating income increased marginally by 0.8% to N30.5 billion (1H 2015: NGN30.2 billion) arising from a 16.8% decrease in impairment charges to NGN3.7 billion;
  • Operating expenses increased by 8.0% toNGN26.1 billion (1H 2015: NGN24.2 billion) driven  mainly by inflationary pressures

The revaluation of the Naira (NGN) increased the bank’s loan book by 6.5% to NGN462.3 billion.

Commenting on the result, Yemi Adeola, GMD said:

“Earnings in the financial services industry, and indeed, several other industries weakened due to a period of sustained deterioration in the domestic economy during the first half of 2016. The economy, which has been posited to be in recession, was impacted by depressed commodity prices, continued sabotage of oil assets, weak investor confidence and a slow convergence of both monetary and fiscal policy.”

Adeola said “Nonetheless, our Bank has remained irrepressible as demonstrated by the strength of our core business. We prioritized improvement in asset quality which was reflected by a 200 basis point decline in the non-performing loans (NPL) ratio to 2.8% and a 100 basis point reduction in the cost of risk to 1.5%. Cost of funds also declined from 5.9% (1H 2015) to 4.7%, representing a 120 basis point improvement. This was in spite of the foreign exchange liberalization policy, the attendant liquidity squeeze and the rising inflation rate which peaked at 16.5% in June 2016.”

He added that “The Bank showed deeper pliability through the re-affirmation of its investment grade ratings at a time when corporate and sovereign ratings were under downward ratings pressure. I am pleased to report that we have successfully migrated to a world-class CORE banking application, which will enable us to better manage a significant uptick in customer base and ensure the required flexibility to deliver unique services across business segments. We have taken steps to improve staff productivity by introducing a flexible work environment to achieve our goal of building a great workplace and reduce operating expenses.”

As we look to the second half of the year, we remain committed to our plan to conclude our N35 billion tier 2 capital raise, prioritize operating efficiency and ensure moderate loan growth; while continuing to diversify funding sources as our retail banking strategy gains traction. Although, some of the macroeconomic challenges witnessed during the first half of the year will persist, we expect improvements in the Nigerian economy, driven by the implementation of the budget and other fiscal palliatives introduced by the Federal Government. he concluded

 

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