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Sterling’s Interest Income grew 2% y/y and 5% q/q. In line with the trend we observed across most banks, the growth in Interest Income was driven by the improvement in Interest earned on loans and advances (4% y/y to N73.3bn) following the marginal growth in loan book (Net loans to customers grew 2.3% YTD).

Interest Expense on the other hand, showed a steep decline, down 12% y/y despite an 18% y/y increase in Customer Deposits. On a quarterly basis, however, Interest Expense was flat. Consequently, Net Interest Income grew strongly, up 19% y/y and 11% q/q. The bank appears to be making progress in improving its deposit mix as CASA ratio improved to 59% in 9M 2019 from 54% in 9M 2018.

[READ MORE: Quick Take: Poor performance extends into Q3]

Net Fee and Commission Income grew strongly y/y (up 30% to N14.0 billion in 9M 2019) but declined 15% in Q3 compared to Q2. The y/y growth was driven mainly by the growth in e-business fees and commissions (up 48% y/y) and other fees and commissions (up 85% y/y). These income lines, however, weakened in Q3, declining by 5% q/q and 36% q/q respectively.

Other Income (Net trading Income and Other Operating Income) fell sharply, down 62% y/y driven mainly by a steep decline in FX trading Income (N364 million in 9M 2019 compared to N4.5 billion in 9M 2018) and zero FX revaluation gains in 9M 2019 compared to N2.1 billion realised in 9M 2018.

Impairment Charge grew 8% y/y to N3.9 billion in 9M 2019, bringing Cost of Risk (COR) to 0.8% compared to 0.7% in 9M 2018.

Operating Expenses grew 11% y/y and 10% q/q. The rise in OPEX was driven by growth in Personnel costs (up 15%/y), General and administrative expenses (up 7%/y) and other operating expenses (up 14%/y). The growth in OPEX compared to Operating Income (+8% y/y) led to a 227bps increase in Cost to Income Ratio (CIR ex-provisions) to 82.3% in 9M 2019.

The rise in OPEX impacted on earnings as Pre-tax profit was down 10% y/y and 40% q/q. Net profits also declined by 8% y/y and 21% q/q. We note that the slower decline in Net profits in Q3 was due to a tax credit of N267m in the quarter compared to a tax expense of N306 million in Q2 2019.

[READ ALSO: Quick take: Earnings beat estimates on strong Non Interest Income and write backs]

Deal book 300 x 250

EPS came in at N0.26 in 9M 2019 compared to N0.29 in 9M 2018. Annualised RoAE declined to 9.7% in 9M 2019 compared to 10.5% in 9M 2018.

We have a BUY rating on the Sterling bank with a target price of N2.84/s. Current price: N2.0/s.




Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

PO Box 9117,


Lagos State,



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