Sterling Bank Launches Indirect Bid to Raise N8b Capital

• Sterling Bank Launches Indirect Bid to Raise N8b Capital

Sterling Bank Plc has secured regulatory approval to raise about N8 billion in new capital as a first step in a large new capital issuance through which the bank seeks to raise a total of N65 billion.

A regulatory document obtained yesterday showed that Sterling Bank would be raising the new capital through an indirect special purpose vehicle known as Sterling Investment Management SPV Plc.

According to the document, Sterling Investment Management SPV will be offering for subscription N7.965 billion in its series 1: seven-year 16.50 per cent fixed rate unsecured bonds due 2023. The maiden issuance is part of the bank’s N65 billion debt issuance programme.

Sources in the know confirmed that the SPV is a tier-11 capital raising programme for Sterling Bank, describing it as a creative way to shield the bank from unnecessary regulatory and market issues while having access to the much-needed capital.

The document indicated that the Nigerian Stock Exchange (NSE) has already approved the debt issuance, paving the way for the bank to conclude the pre-offer opening processes.

Global Credit Ratings (GCR) has accorded a final, public national scale long term rating of BBB (NG) to the N7.97 billion bond; with the outlook accorded as stable. The rating is valid until 31 August 2017.

Managing Director, Sterling Bank Plc, Yemi Adeola, recently said the bank was concluding arrangements to raise tier 2 capital in the second half of this year as improved assets quality and lower cost of fund steadied the performance of the bank in the first half of this year.

He said the bank would in the second half of the year continue to prioritise operating efficiency and ensure moderate loan growth; while continuing to diversify funding sources as our retail banking strategy gains traction.

He added that the bank also remained committed to its plan to conclude its N35 billion tier 2 capital raising.

“As we look to the second half of the year, we remain committed to our plan to conclude our N35 billion tier 2 capital raise, prioritise operating efficiency and ensure moderate loan growth; while continuing to diversify funding sources as our retail banking strategy gains traction. Although, some of the macroeconomic challenges witnessed during the first half of the year will persist, we expect improvements in the Nigerian economy, driven by the implementation of the budget and other fiscal palliatives introduced by the Federal Government,” Adeola assured.

As the Nigerian economy and the banking industry struggled with fiscal and monetary challenges that saw inflation and foreign exchange at their worst in many years, Adeola pointed out that the bank has remained irrepressible as demonstrated by the strength of its core business.

According to him, the bank prioritised improvement in asset quality which was reflected by a 70 basis point decline in the non-performing loans and a 100 basis point reduction in cost of risk. Cost of funds also declined by 120 basis points to 4.7%. This was in spite of the foreign exchange liberalisation policy, the attendant liquidity squeeze and the rising inflation rate which peaked at 16.5 per cent in June 2016.

He pointed out that the bank showed deeper pliability through the re-affirmation of its investment grade ratings at a time when corporate and sovereign ratings were under downward ratings pressure, adding that Sterling Bank has successfully migrated to a world-class CORE banking application, which will enable it to better manage a significant uptick in customer base and ensure the required flexibility to deliver unique services across business segments.

He said the bank has also taken steps to improve staff productivity by introducing a flexible work environment to achieve its goal of building a great workplace and reduce operating expenses.