The regulatory headwind couldn’t suppress the earnings potentials of Sterling Bank as the Nigeria lender ended 2014 financial year with a profit rise of 8.82 percent.
For the year ended December 2014, Sterling Bank’s profit after tax (PAT) increased by 8.82 percent to N9 billion from N8.27 billion the same period of the corresponding year (FY) of 2013.
BusinessDay analysis showed that the Nigeria lender’s ability to boost loan growth helped interest increase by 11.37 percent to N77.93 billion in 2014 as against N69.97 billion in 2013.
Despite the CBN the tightening policy by the CBN, Sterling was able to keep interest expense as low as 2.21 percent, which contributed to the 20.12 percent increase in net interest income in the review period.
Gross earnings increased by 13.01 percent to N103.38 billion in FY 2014 compared to N91.74 billion in 2013.
However, as a result of regulatory induced costs such as the
Asset Management Corporation Charge of Nigeria (AMCON) charge and huge energy costs emanating from the use of diesel oil to run generators in head office and branches across the country, Sterling’s operating expenses increased.
Operating expenses jumped by 26.52 percent to N50.62 billion in FY 2014 compared with N40.01 billion in 2013.
Cost to income ratio, which measures how a lender is efficient in cutting costs to boost profitability increased to 73.63 percent in 2014 from 69.70 percent in 2013, as regulatory induced costs continues swell overhead cost.
The Central Bank of Nigeria (CBN) mandated lenders in Africa largest economy Nigeria to pay 0.5 percent of their total assets to AMCON on annual basis, a policy some analysts is bleeding profits of banks.
Also, the Abuja based Apex bank increased the MPR on private deposit by 100 basis point to 13 percent from 12 percent with a view to defending the naira.
The naira has been under immense pressure as falling oil price continues to erode its value. The currency was devalued to N168 from N155, but was further depreciated and now trades at N198 at the CBN intervention.
Sterling was aggressive about lending amid tough environment as loans to customer increased by 15.40 percent to N371.24 billion in FY 2014 from N321.74 billion as at December 2013
Deposit to customer jumped by 14.97 percent to N655.94 billion compared with N570.51 billion as at December 2013, while loans to deposit ratio remained flattish at 56 percent.
Total assets were up by 16.50 percent to N824.54 billion in 2014 from N707.79 billion the same period of December 2013.
Return on average equity (ROAE) was 12.15 percent in the period under review, which is lower than the 13.05 percent recorded in 2013.
Sterling Bank’s share price closed at N2.08 on the floor of the exchange while market capitalization was N59.88 billion.
BALA AUGIE
