The ability of the management of Sterling Bank Plc to trim costs and the positive effects of lower taxes are responsible for the Nigerian lender’s growth in profit amid a slow growing economy.
For the year ended December, Sterling Bank’s net income increased by 14.33 percent to N10.30 billion compared with N9 billion the previous year.
The growth at the bottom line was as a result of a reduction in operating expenses by 1.92 percent to N49.65 billion and a 58.40 percent reduction in income tax expense to N723.72 million.
The Nigerian lender has beaten analysts expectation that full year profit will be lower than expected on the back of ebbing oil price, foreign exchange restrictions and exposure to oil and gas.
Lenders in Africa’s largest economy are struggling with a sharp fall in oil price languishing at $40, from over $100 in 2014. Oil accounts for two thirds of government revenue and nearly all of dollar earnings.
In order to stabilize the economy and stop the reserve for further depletion as a result of slump in oil price, the central bank restricted dollar sales to banks. This policy is however squeezing bank earnings and stifling the growth of manufacturers.
Most banks that lend to oil companies when price were high are hard hit as a sudden fall in price means collateralize assets have lost value hence exposing lenders to rising Non Performing Loans (NPLs).
Sterling’s share price reacted positively to the earnings spike as its share price increased by 4.85 percent to N1.73 on the floor of the exchange while market capitalization was N49.80 billion. Total assets stood at N799.54 billion.