Strong Interest Income Drive Sterling Bank’s Earnings

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Sterling Bank Plc’s recently released financial results for the year ended December 31, 2013 showed the bank’s net interest income climbed 50 per cent year on year and 28 per cent quarter-on-quarter.
 
The growth in interest income was largely driven by the bank’s strong loan growth, which was up by 40 per cent year-on-year.
 
Analysts at CSL Stockbrokers said the growth in interest income was positive.
They also placed a 'HOLD' recommendation on Sterling Bank’s share.
However, the bank’s operating expenses were up 25 per cent year-on-year as a result of the expenses on the its  IT upgrade, branch network expansion and increase in AMCON charge.
 
However, 47 per cent year-on-year growth in total operating income was sufficient to achieve a reduction in the cost to income ratio (CIR- ex provisions) from 82 per cent in 2012 to 69 per cent in 2013.
 
The bank’s gross earnings rode on the back of a 24 per cent and 31 per cent growth in non-interest income and interest income respectively to N91.6 billion. Non-interest income, which rose to N21.7 billion as against N15.3 billion in 2012 was largely due to a 139 per cent increase in trading income in addition to a 46 per cent increase in fees and commission.
 
Its customer deposits rose 23 per cent to N570.5 billion as against the N466.8 billion it attained the previous year, while total assets including contingent liabilities increased by 28 per cent to N909.4 billion compared with N708.2 billion in 2012.
Similarly, asset quality improved significantly with non-performing loan ratio down to 2.1per cent from 3.8per cent in 2012.
 
Managing Director/Chief Executive Officer, Sterling Bank, Mr. Yemi Adeola, had said: “Our performance for the 2013 financial year highlights our underlying institutional strength, with top-line revenues increasing by 33 per cent to N91.6 billion, despite the pressure on earnings arising from regulatory policy changes during the year. Operating income increased 41 per cent resulting in an improvement in cost-to-income ratio to 69 per cent from 81 per cent in 2012.”
 
He added that overall, the bank’s bottom line remained strong with 24 per cent growth in profit before tax to N9.3 billion.
 
“We also gained traction in our retail drive with an active customer base exceeding one million resulting in 23 per cent growth in deposits.”
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