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Q1: Sterling Bank records N1.27bn after-tax profit

By Michael Eboh
Sterling Bank has  recorded profit after tax of N1.27 billion in  the first quarter ended, March 31, 2010 even as it announced plans to shore up its capital base through a fund raising exercise that is expected to be conducted within the next couple of months.

According to a statement by the bank, the decision of the bank to shore up its tier one capital is borne out of its plans to compete effectively in the local and international financial landscape and reposition the bank to take advantage of opportunities in the economy.

The bank noted that events in the banking sector, last year, whereby the bank had to make huge provision for debts severely impacted its balance sheet, eroding its shareholders’ funds.
The statement reads, “Last year’s events, however, have created a new environment where a broader capital base has become vital to support clients as they rebuild their businesses and pursue new opportunities.

“Sterling Bank intends to fully play its role as a preferred lender to business customers. Furthermore, infrastructure and long_term projects in energy, housing, power, telecommunications, transport and water are becoming a major source of demand for funds. “To finance these, Sterling Bank must have access to a bigger pool of permanent capital.

“Finally, the new low interest rate regime has raised the attractiveness of retail customer liability generation which requires the expansion of Sterling Bank’s branch footprint and alternative delivery channels.

“To participate in these lucrative areas, Sterling Bank is exploring a number of strategic options to raise its Tier one capital ratio. It has taken the decision to raise capital for three main reasons.

“One, to restore the Bank”s shareholders’ funds after its depletion from last year’s exceptional provisions.
“Second, to enable the bank provide customers with the level of financing support they have come to expect.

“Third, as cost of funds becomes a major competitive factor for banks, a senior investment grade debt rating, which is dependent on its equity cushion, becomes more crucial to Sterling Bank.

The statement quoted Alhaji Garba Imam, as saying, “There is a convergence between Sterling Bank’s strategy and capital plans. In the past year, the various businesses within the Sterling Bank Group have increased their share of the market.

“Strengthening our capital position will ensure that we are better placed to improve our overall competitiveness and ultimately deliver higher returns to investors.”
The bank recorded a profit after tax of N1.27 billion in its unaudited result for the first quarter ended, March 31, 2010, compared to a profit of N426.8 million recorded in similar period o f 2009.
Its gross earnings stood at N8.3 billion, net interest margin increased by 57 per cent to N3.6 billion from N2.3 billion in the comparable period of 2009. This was blamed on a drop in funding costs and write-back of credit provisions.

Its operating expenses dropped by seven per cent to N3.6 billion from N3.8 billion in the comparable period of 2009, while its funding costs reduced by 15 per cent to N3.9 billion from N4.7 billion in the comparable period of 2009.
Deposits dropped by 14 per cent to N138.5 billion from N161.3 billion in December 2009 while its Capital Adequacy Ratio (CAR) stayed strong at 14.7 per cent.

It recorded a profit before tax of N1.4 billion from N593 million in the comparable period of 2009.
The bank said that its allowances for risk assets moved into positive territory by N864 million reflecting writeback of credit provisions no longer required due to performance improvement in loan assets.


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