More Sterling Bank’s debtors are not paying back their debts as the size of the bank’s loans and advances reduces.
The bank’s financial statements for the first months of 2017 showed that its impairment provision rose 74.3 percent in Q1 2017 to N2.5 billion from N1.4 billion at this time last year, pushing its Non-Performing Loan ratio to 11.95 percent from 4.8 percent, which is 4.95 percent above industry threshold.
Sterling Bank’s loans and advances declined -0.2 percent to N467.4 billion in Q1 2017 (Q4 2016: N468.3 billion) after rising 38.2 percent y-o-y at the end of last year.
If nothing to done to address this trend, the bank would post loss in no distant time as its profit after tax dipped -29.2 percent at the end of March 2017 to N1.9 billion.
Sterling Bank’s rising impairment provisions and declining loans and advances “means the bank is heading towards declaring loss,” Mr. Bolarinwa Waziri, Group Head, Lead Capital Limited said in a te
lephone chat.
The bank’s share has lost -20.93 percent of its value in the last one year to N1.20 but has gained 34.21 percent year-to-date at the close of business on Monday. Its current P/E ratio stands at 6.34 and earnings per share 16 kobo.
The lender’s net interest income was up 18.3 percent to N13.5 billion during the period under review, while operating income went down -0.8 percent to N16.7 billion.
The decline in operating income was occasioned by -25.8 percent drop the bank’s fee and commission income to N2.7 billion and N911 million loss recorded from
net trading income (Q1 2016: N1.5 billion). But the over 494 percent rise in other operating income to N1.4 billion was not enough to buffer Sterling Bank Q1 2017 poor performance.
A further breakdown of Sterling Bank’s operating income showed that revenue from foreign exchange trading was down -15.9 percent to N381 million and it posted a N1.3 billion loss from securities trading in Q1 2017 compare to N1.1 billion revenue it generated from this in Q1 2016.
The bank cut its administrative and general expenses by -18.8 percent, which helped reduce Sterling Bank total expenses -3.3 percent to N12.2 billion (Q1 2016: N12.6 billion).
The commercial lender’s earnings per share (EPS) was down 33.3 percent to 6kobo from 9kobo in the corresponding period in 2016.
Sterling Bank’s assets appreciated 6.8 percent to N891.3 billion between December 2016 and March 2017 and liabilities stood at N803.7 billion, indicating a 7.4 percent rise from N748.5 billion in 2016.
Analysts believed Sterling Bank was one of the banks that failed CBN stress test last year and among tier 2 and 3 lenders battling liquidity challenge in the country.
The bank was one of the seven commercial lenders a Federal High Court in Lagos ordered last week Thursday to return $793,200,000 unremitted Treasury Single Account to the government coffers. The bank had denied being with possession of TSA money.