May 4, 2022/CSL Research

Sterling Bank’s recently released Q1 2022 unaudited numbers showed a growth of 18.9% y/y in Interest Income to N30.1bn, largely due to growth in Interest Income on Loans and advances to customers (up 18.5% y/y versus Net Loan growth to Customers of 16.3% y/y) and debt instruments at amortised cost (up 80.4% y/y versus a 16.0% decline in the quantum of debt instruments at amortised cost). Net Loan growth to Customers is up 3.4% in Q1 compared with December 2021. Yields on Interest Earning Assets grew to 11.3% in Q1 2022 compared with 9.9% in Q1 2021. 

 Interest Expense also grew strongly, up 20.8% y/y. The y/y increase was mainly due to a 40.5% y/y growth in Interest Expense on Customer Deposits compared with a 16.3% y/y growth in Customer Deposits. Customer Deposits grew only 0.03% in Q1 compared with December 2021. Costs of funds grew to 3.9% in Q1 2022 from 3.2% in Q1 2022. Overall, Net Interest Income was up 17.5%, bringing Net Interest Margins (NIMs) to 7.4% in Q1 2022 from 6.7% in Q1 2021. Notably, CASA ratio improved to 72.5% in Q1 2022 from 68.1% FY 2021. 

Net Fee and Commission Income also grew strongly, up 40.5% y/y. Except for other fees and commission which showed a decline, all other Fees and Commission lines showed growth. Other Income (Net trading income and Other operating income) also grew strongly, up 46.4% y/y. 

Operating Expenses increased 21.3% y/y. However, a stronger growth in Total Operating Income (up 24.5% y/y) led to an improvement in Cost to Income Ratio (CIR ex-provisions) to 76.6% in Q1 2022 (vs 78.6% in Q1 2021). The OPEX growth was driven by an increase in general and administrative expenses, and other operating expenses such as the AMCON surcharge. 

The bank’s Impairment Charge was up 17.5% y/y t0 N2.1bn in Q1 2022, bringing Q1 2022 annualized cost of risk to 1.1% compared with 0.9% for Q1 2021. The bank reports NPL ratio of 0.8%, almost at par with 0.7% reported in Q1 2021. 

Overall, both Pre-tax Profit and Profit after tax grew strongly, up 49.3% y/y and 47.9% y/y to N3.7bn and N3.5bn, respectively. Annualised RoAE improved to 9.8% in Q1 2022 from 6.6% in Q1 2021. EPS increased to N0.12 in Q1 2022 from N0.08 in Q1 2021.  

The bank reports Basel 2 Capital Adequacy Ratio of 14.7%, comfortably above current regulatory minimum of 10% for Sterling Bank. 

Our estimates are under review. Current Price N1.55/s.    

Q1 2022 Nm

Source: Company, CSL Research.