Background
The Holdco aims to become Nigeria’s preferred destination for investment capital through subsidiaries such as Sterling Bank and The Alternative Bank.
Sterling Financial Holdings Company was incorporated on October 13, 2021 and listed on the NGX on April 6, 2023. It is listed in the Financial Services sector of the Nigerian Exchange, classified in the Main Board segment.
Its major subsidiary is Sterling Bank; a full-service national commercial bank in Nigeria, established in 1960 as Nigeria Acceptances Limited (NAL) and rebranded in 2006 after merging five Nigerian banks, Sterling focuses on the “HEART” sectors: Health, Education, Agriculture, Renewable Energy, and Transportation. The Bank aims to drive socio-economic development in these areas through its financial services and investment initiatives. The bank’s commitment to innovation and digital banking, along with its customer-centric approach, continues to enhance its market position. Despite economic challenges, Sterling Bank’s strategic focus and operational efficiency underscore its resilience and capability to drive sustainable growth.
Board/management
The board of the Holdco consists of seven outstanding professionals led by Yemi Adeola as Chairman. Adeola has over 35 years of experience in banking, finance, law, and corporate consultancy. He worked at PricewaterhouseCoopers as a Consultant, Legal and Corporate Advisory Services at Citibank, Nigeria where he rose to the position of Executive Director, Public Sector, and Infrastructure Banking.
Adeola was the former Managing Director/Chief Executive Officer of Sterling Bank from 2007 – 2018. He also served as the Deputy Managing Director in Trust Bank of Africa Ltd from 2003 – 2005.
He holds a bachelor’s degree in Law from Obafemi Awolowo University, is a fellow of the Chartered Institute of Bankers of Nigeria, Member Chartered Institute of Arbitration (CIARB) and Member, Board of Trustees, Association of Banks’ Legal Advisers and Company Secretaries (ABLACS). He is an alumnus of Harvard Business School, Stanford Business School, University of Oxford, and the Wharton Business School of the University of Pennsylvania. He is also a John F. Kennedy Scholar.
Yemi Odubiyi heads the management team in the role of Group Chief Executive Officer of Sterling Financial Holdings Company Plc. Over the years, he played a central role as a key member of the management team of Sterling Bank PLC (as it then was) from its founding in 2006, having originally joined through its legacy component, Trust Bank of Africa, back in 2003.
Financials
Sterling Bank Plc, in its FY ‘2023 financial report released on May 28, 2024, maintained its position as a leading financial institution, boasting total assets reaching N2.53 trillion. The company experienced a moderate 27 percent increase in Gross earnings during the review period, with net interest income rising by 9 percent to N83.38 billion in FY’2023. Despite facing increased interest expenses (40%) and operating expenses (13%), the company demonstrated resilience, reporting a profit before tax of N22.7 billion (9% year-on-year) and a profit after tax of N21.58 billion (12% year-on-year).
Double digit in PAT
In FY 2023, Sterling Financial Holding Company Plc demonstrated moderate revenue growth, with gross earnings increasing by 27 percent year-on-year. This performance was primarily driven by significant growth across various revenue streams: net trading income surged by 170 percent to N20.79 billion, fee and commission income increased by 23 percent to N34.96 billion, and interest income rose by 22 percent to N156.10 billion.
This comprehensive growth underscores Sterling’s robust performance and its ability to leverage diverse income sources to drive top-line expansion. Despite a 29 percent increase in total expenses to N199.08 billion, Sterling achieved a 12 percent increase in Profit After Tax to N21.58 billion from N19.30 billion in FY’2022, marking a significant achievement for the company.
Strengthened financial position
Sterling Plc maintained a robust financial position, evidenced by significant growth in key metrics. Total assets increased by 36 percent to N2.53 trillion, up from N1.86 trillion in FY 2022. This growth was primarily driven by a 40 percent increase in cash and cash equivalents, a 172 percent rise in dues from banks, a 34 percent increase in investments in securities, and a 21 percent growth in loans and advances to customers.
“Moving forward, maintaining cost efficiency while enhancing revenue streams and managing credit risk will be crucial for sustaining growth and delivering value to the shareholders”
Despite navigating a challenging macroeconomic landscape that saw total liabilities increase by 38 percent to N2.35 trillion, Sterling’s financial health remained robust. The institution’s total equity surged by 19 percent to ₦183.60 billion, up from N153.99 billion, reflecting strong capital management and a solid foundation for future growth. This remarkable performance positions Sterling well for continued success and shareholder value creation in the coming fiscal periods.
Impressive EPS and valuation metrics
Sterling Financial Holdings Company Plc reported a notable 12 percent year-on-year increase in EPS, indicating improved earnings performance and profitability per share. This growth reflects enhanced operational efficiency. The P/E ratio rose significantly to 5.47 in FY 2023 from 3.13 in FY 2022, showcasing heightened market expectations and investor confidence in Sterling’s future earnings potential. Similarly, the P/BV ratio increased to 0.64 from 0.39, indicating the market’s perception of improved intrinsic value, financial performance, and asset quality. This upward trend reflects investor optimism about Sterling’s growth prospects and value-generation capabilities.
Financial ratios
Sterling Financial Holdings Company Plc’s financial ratios show a positive trend. The cost-to-income ratio improved from 45 percent to 42 percent, highlighting enhanced cost efficiency.
The loan-to-deposit ratio decreased from 54 percent to 49 percent, reflecting better risk management. The ROE for FY 2023 was 11.8 percent, slightly down from 12.5 percent in FY 2022, indicating a minor reduction in equity utilization efficiency. However, the ROE of 11.8 percent still demonstrates significant shareholder value creation. Similarly, the ROA slightly declined from 1.0 percent to 0.9 percent, suggesting a minor decrease in asset utilization efficiency. Despite this, an ROA of 0.9 percent indicates effective asset leverage and stable operational performance.
Market capitalization
The Holdco’s market strength stood at about N123.51 billion as of June 14, 2024 while shares outstanding are 28,790,418,124 in the same period. The Holding company is expected to raise N142.85 billion within the next 18 months.
In summary, Sterling Plc has demonstrated robust financial growth in FY 2023, marked by significant increases in gross earnings, net interest income, and overall asset base. The company’s improved cost efficiency and strong market performance reflect effective management strategies and a positive market sentiment. However, the slight decline in ROE and ROA suggests room for further optimization in profitability.
Moving forward, maintaining cost efficiency while enhancing revenue streams and managing credit risk will be crucial for sustaining growth and delivering value to the shareholders.
Red flags
1. Loan-to-deposit ratio decreased from 54 percent to 49 percent.
2. Return on equity down 0.7 percentage points for FY 2023 to 11.8 percent.
3. Slight drop in asset utilization efficiency to 0.9 percent.
Green flags
1 Notable 12 percent year-on-year increase in EPS
2. Total assets reaching N2.53 trillion
3. Moderate 27 percent increase in Gross earnings.
