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Sterling Bank Improves Core Business, Asset Quality in Q3

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Sterling Bank - Investors King
  • Sterling Bank Improves Core Business, Asset Quality in Q3

Sterling Bank Plc rode on the back of increasingly better operating and credit management efficiency to build up the quality and profitability of its core banking business in the third quarter.

Key extracts of the interim report and accounts of Sterling Bank for the nine-month period ended September 30, 2016 released at the weekend at the Nigerian Stock Exchange (NSE) showed considerable improvements in key underlying fundamentals of the bank as it continues to grow its main focus of retail banking.

The report showed that net interest margin, which measures the profitability of the core lending business, improved to 8.5 per cent in third quarter 2016 as against 7.9 per cent in comparable period of 2015. The proportion of non-performing loans (NPL) to gross loans and advances, which indicates assets quality and the efficiency of the credit risk management, also improved significantly from 4.8 per cent December 2015 to 2.5 per cent in third quarter 2016. This brings Sterling Bank well ahead of the 5.0 per cent industry thresholds for NPL set by the Central Bank of Nigeria (CBN). The bank’s cost of funds also improved to 5.3 per cent in third quarter 2016 compared with 6.2 per cent in corresponding period of 2015.

Managing director, Sterling Bank Plc, Mr. Yemi Adeola said the improvements in the underlying fundamentals in the third quarter in spite of the depressing effect of the tough macroeconomic conditions on the overall performance of the sector, underlined the resoluteness of the bank in building a sustainable business anchored on effective risk management and a robust retail business.

According to him, a 37.7 per cent growth in net interest income was largely due to a 12 per cent reduction in interest expense, which underpinned the 60 basis points increase in net interest margin.

“Sterling Bank has grown its active customer base by over 40 per cent year-to-date with improved penetration across all digital channels. The non-interest banking business has also witnessed significant growth in deposits and profitability by 87 per cent and 415 per cent respectively. This gives fillip to our resolve to diversify our business significantly over the coming years,” Adeola said.

He outlined that the bank would continue to prioritise operating efficiency and aggressively drive retail funding, noting that these priorities will guide bank’s business in the final quarter of the year and serve as the fulcrum for 2017. He noted that the tough operating environment characterised by foreign exchange supply shortages, rising inflation, negative economic growth and generally recessionary environment has sustained downward pressure on core earnings in the industry.

“Although macroeconomic conditions could witness some modest improvements, the operating environment would continue to be challenging and business confidence somewhat subdued. Nonetheless, Sterling Bank remains committed to building a sustainable business anchored on efficiency,” Adeola assured.

Further analysis of the financial statement showed that net interest income rose by 37.6 per cent from N30.2 billion in third quarter 2015 to N41.5 billion in third quarter 2016. Non-interest income however reduced by 47.6 per cent to N10.8 billion as against N20.5 billion mainly because of 34.2 per cent decline in fees and commission. This moderated the gross earnings to N79.65 billion in third quarter 2016 as against N81.81 billion in comparable period of 2015. With curtailed increase of 5.0 per cent in total expenses in spite of a 17.9 per cent inflation rate year-on-year in September 2016, profits before and after tax stood at N6.07 billion and N5.54 billion respectively in third quarter 2016. Profits before and after tax were N8.30 billion and N7.55 billion respectively in third quarter 2015.

The balance sheet of the bank emerged stronger during the period. Net loans and advances increased by 46.2 per cent to N495.3 billion in September 2016 as against N338.7 billion recorded at the beginning of this year. This was driven primarily by foreign exchange revaluation. Customer deposits also improved from N590.9 billion as at December 31, 2015 to N595.1 billion in September 2016. Total assets excluding contingent liabilities increased by 11.4 per cent to N890.3 billion as against N799.5 billion at the start of the year.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Brent Crude Oil Extends Gain to $86.66 a Barrel Amid Tight Supply

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Brent crude oil - Investors King

Tight global oil supply pushed Brent crude oil, against which Nigeria oil is priced, to a multi-year high of $86.66 per barrel on Monday at 3:30 pm Nigerian time.

Oil price was lifted by rising fuel demand in the United States and tight global supply as economies recover from pandemic-induced slumps.

The global energy supply crunch continues to show its teeth, as oil prices extend their upward march this week, a result of traders pricing in the ongoing rise in fuel demand – which amid limited supply response is depleting global stockpiles,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

Goldman Sachs on the other hand is predicting a further increase in Brent crude oil to $90 a barrel, citing a strong rebound in global oil demand due to switching from gas to oil. This the bank estimated may contribute about 1 million barrels per day to global oil demand.

The investment bank said it expects oil demand to reach around 100 million barrels per day as consumption in Asia increases after the devastating effect of COVID-19.

While not our base-case, such persistence would pose upside risk to our $90/bbl year-end Brent price forecast,” Goldman said in a research note dated Oct. 24.

Earlier this month, the Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+ agreed to continue increasing oil supply by 400,000 bpd a month until April 2022 despite calls for an increase in global oil supplies.

The decision bolstered the price of Brent crude oil above $84 per barrel and expected to push the price even further to $90 a barrel. Low global oil supply amid rising demand for crude oil will continue to support oil prices in the near term.

Despite the recent power cuts and impacts to industrial activity in China, oil demand is likely instead supported by switching to diesel powered generators and diesel engines in LNG trucks, as well as by a ramp up in coal production,” Goldman Sachs stated.

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Energy

U.S. and Ghana Inaugurate New $64.7 Million Energy Infrastructure Investment at Pokuase

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electricity

U.S. Ambassador to Ghana Stephanie Sullivan joined the President of Ghana H.E. Nana Akufo-Addo and other Ghana government officials to formally inaugurate the Pokuase Bulk Supply Point (BSP) in Accra today.  The U.S. Millennium Challenge Corporation (MCC) funded the $64.7 million (GH₵ 391.9 million) electrical infrastructure project under the Ghana Power Compact.

“The Pokuase Bulk Supply Point represents sustainable infrastructure investment by the United States with Ghana that will benefit hundreds of thousands of Ghanaians now and into the future,” remarked Ambassador Sullivan at the inaugural event. “It will help deliver more reliable power to the people, places, and businesses of Accra that drive increased economic activity benefitting families, businesses, and communities.”

This represents a flagship investment under the Millennium Challenge Corporation’s Ghana Power Compact.  The Pokuase BSP will reduce outages in the power system, help stabilize voltages, and improve the quality and reliability of power supplied to the northern parts of the capital city of Accra.  It will also reduce technical losses in the power transmission and distribution system, contributing to the financial viability of the Electricity Company of Ghana (ECG) and the Ghana Grid Company (GRIDCo) in the long term.  The Pokuase BSP is now the largest-capacity BSP in Ghana at 580 megavolt amperes (MVA) and will directly benefit 350,000 utility customers.

The Government of Ghana implemented the project through the Millennium Development Authority (MiDA).  MiDA formally handed over the new power substation to ECG and GRIDCo in today’s ceremony.

The Pokuase BSP is the first major construction project to be completed under the Ghana Power Compact. The $316 million compact is helping the Government of Ghana improve the power sector through investments that will provide more reliable and affordable electricity to Ghana’s businesses and households. The compact is also funding a BSP at Kasoa and two primary substations at Kanda and Legon, in addition to other power sector investments, energy efficiency programs, and women’s empowerment programs within the power sector. The compact program will officially close on June 6, 2022.

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Crude Oil

Oil Falls Slightly as China Steps in to Curb Rising Coal Prices

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Crude oil - Investors King

Global oil prices moderated slightly on Wednesday following the Chinese government’s decision to curb high coal prices and ensure coal mines function at maximum capacity.

Brent crude, against which Nigerian oil is priced, dropped to $83.98 per barrel at 11:00 am Nigerian time. While the U.S. West Texas Intermediate (WTI) crude fell by 80 cents or 1 percent to $81.20 a barrel.

“China is planning to take steps to combat the steep rises in the domestic coal market … which could put considerable pressure on the coal price there and reverse the fuel switch to oil,” Commerzbank said.

Prices for Chinese coal and other commodities slumped in early trade, which in turn pulled oil down from an uptick earlier in the day.

China’s National Development and Reform Commission said on Tuesday it would bring coal prices back to a reasonable range and crack down on any irregularities that disturb market order or malicious speculation on thermal coal futures. read more

Oil markets in general remain supported on the back of a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation.

But the market on Wednesday was also pressured by data from the American Petroleum Institute industry group which showed U.S. crude stocks rose by 3.3 million barrels for the week ended Oct. 15, according to market sources.

That was well above nine analysts’ forecasts for a rise of 1.9 million barrels in crude stocks, in a Reuters poll.

However, U.S. gasoline and distillate inventories, which include diesel, heating oil and jet fuel, fell much more than analysts had expected, pointing to strong demand.

Data from the U.S. Energy Information Administration is due later on Wednesday.

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