Sterling Bank appears to be struggling with lower margins in its core business segments as well as doing a solid battle with its cost of operation.
By Eugene Onyeji
As the shareholders of Sterling bank Plc meet on the 16th of June, 2022, they cannot afford to punch the air yet with joy but smiles will certainly not be out of place.
Reason? Simple. Their company looks on the way back from the precipice. The Directors are recommending a 100 per cent increase in dividend payout. From the N13.5bn distributable after-tax profit recorded, the bank has proposed a 22 per cent pay-out ratio, which comes to10 kobo per share as against 5 kobo per share paid the previous year.
Bearing any change at the AGM, the dividend will be paid same day to shareholders whose names appear in the Register of Members as at the close of business on June 3, 2022, subject to appropriate withholding tax.
Take this with some caution though because shareholders have waited for years for the bank to start to return value for their investment. It paid about 2 kobo, 3 kobo and 5 kobo in 2017, 2019 and 2020 respectively all of which combine to just 10 kobo in 4 years.
One thing is very clear about Sterling Bank Plc. The bank seems set to achieve its set goals through the consistent execution of the strategic business model of concentrating investments in five key sectors of the economy under its HEART of Sterling programme. The five sectors are Health, Education, Agriculture, Renewable energy and Transportation.
Looking more closely, according to briefs on audited results for December 2021 released recently, Sterling Bank group posted a full-year profit before tax (PBT) of N14.5bn in 2021, a figure that is N2.1bn higher than N12.4bn recorded in 2020 financial year. The bank also reported a PBT of N14.3bn in 2021, a 17.2 per cent growth when compared with N12.2bn recorded in 2020 financial year.
On the other hand, despite the adverse economic headwinds that characterised the Nigerian macroeconomic environment in 2021, Sterling Bank disclosed that its group’s profit after tax (PAT) stood at N13.5bn in 2021, which is N2.3bn higher when compared to N11.2bn gained in 2020 financial year. The bank also reported a PAT of N13.4bn in 2021, a 20.7 per cent increase when compared with N11.1bn recorded in 2020 financial year.
Sterling Bank appears to be struggling with lower margins in its core business segments as well as doing a solid battle with its cost of operation.
For Sterling to impress investors and reward shareholders it must demonstrate a consistent ability to drive topline revenue growth while also delivering on profits and improving its key ratios. It cannot have a single-digit return on average equity and yet pay little in dividends. It also cannot have one of the highest costs to income ratios in the banking sector and yet fail to match this with impressive growth numbers.
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Since its inception, the bank has been through many seasons, from its commencement in 1960 as NAL Bank to its Nationalization in 1972, forming partnerships between 1972 and 1992, leading to its listing in the Nigerian Stock Exchange with the first merger in 2006.
NAL Bank completed a merger with four other Nigerian Banks namely; Magnum Trust Bank, NBM, Trust Bank of Africa and Indo-Nigeria Merchant Bank (INMB). The merged entities have successfully integrated and are operating as a consolidated group with the name Sterling Bank. Since then, it has doubled down on changing to retail and more mainstream banking.
Sterling Bank assimilated the entire business interest of the defunct Equatorial Trust Bank (ETB) in October 2011 to re-position itself to better compete in the market space on all key parameters.
In compliance with the CBN guidelines on the review of the Universal Banking model, the Bank divested its interest from its four (4) subsidiaries and one associate company on 30 December 2011.
In 2016, Sterling Bank Plc registered Sterling Investment Management Plc (“the SPV”) with the Corporate Affairs Commission as a public limited liability company. The main objective of setting up the SPV was to raise or borrow money by the issuance of bonds or other debt instruments. The SPV is a subsidiary and is consolidated in the financial statements of the Bank. The Bank and its subsidiary are collectively referred to as “the Group”.
Sterling Bank, however, faces a teething problem caused by its offensive Easter advert which compared the resurrection of Jesus Christ to Agege Bread. The Christian Association of Nigeria (CAN) has demanded the sack of the bank’s managing director, Abubakar Suleiman.
How the bank is able to manage the crisis will reflect in its financial result of 2022.
