Sterling Financial Holdings Company Plc has released its unaudited interim results for the year ended December 31, 2024, reporting an impressive 97.21% YoY increase in pre-tax profit to N44.753 billion.
This growth was primarily driven by a 67.09% surge in net interest income, fuelled by higher interest income from loans and advances to customers.
Notably, interest income accounted for 79% of gross earnings, suggesting strong reliance on core lending business.
Key highlights (2024 vs 2023):
- Gross earnings: N328.349 billion +54.21% YoY
- Interest Income: N260.830 billion +67.09% YoY
- Interest Expense: N128.473 billion +76.67% YoY
- Net interest income; N132.357 billion +58.73% YoY
- Net fees and commission income: N32.410 billion +24.15% YoY
- Operating income: N199.876 billion +42.56% YoY
- Net impairment loss on financial assets: N9.929 billion -19.51% YoY
- Income after impairment charge for losses: N189,947 billion +48.55% YoY
- Total expenses: N145.194 billion +38.05% YoY
- Profit after tax: N37.522 billion +73.84% YoY.
- Earnings per share N1.29 +72.00% YoY
- Loans and advances to customers N1.104 trillion +23.22% YoY.
- Total Assets N3.52 trillion +39.05% YoY.
- Customers’ deposits N2.568 trillion +39.37%.
- Share capital and share premium: N131.021 billion +129.24% YoY
- Shareholders’ funds: N285. 814 billion +55.67% YoY
Investor insights & key takeaways
The fact that interest income accounted for 79% of gross earnings with interest income from loans and advances accounting for 68% of the interest income indicates that Sterling Financial is leveraging its lending activities to drive revenue growth.
However, there was a shift in income sources:
- Interest income from loans and advances to customers grew by 45%, but its contribution to total interest income declined by 13%.
- Interest income from securities surged by 128%, increasing its contribution to 27% of total interest income.
This suggests that the bank is increasingly leveraging fixed-income securities as an income source, possibly due to high yields on government securities.
Deposit growth and rising funding costs
The 39.37% growth in customer deposits to N2.568 trillion reflects a good liquidity position.
- However, interest expenses on customer deposits increased by 74% YoY, indicating that the bank is paying more to attract and retain deposits. This could be due to rising interest rates or increased competition for deposits.
- Despite the sharp rise in interest expenses, its share of total interest expenses declined slightly by 2% YoY, suggesting that other funding sources (such as deposits from other banks, borrowings or debt securities) may be contributing more to overall costs.
- Specifically, interest expenses paid on bank’s deposit surged by 403% YoY increasing their contribution to total interest expenses to 17%.
While deposit growth is positive, it is important to monitor net interest margins (NIMs) to assess whether the higher cost of funds is eroding profitability.
A sustained increase in funding costs could pressure earnings if not matched by sufficient loan pricing adjustments or higher-yield investments.
Loan growth and asset quality
The 23% growth in loans and advances to customers suggests that Sterling is expanding its lending activities, which can drive higher interest income and profitability if managed well.
- Also, the declining loan impairments reflect improved asset quality. A 33.36% decline in loan impairments to N8.028 billion indicates better loan performance, improved risk management, or a more favorable economic environment reducing default rates. This suggests that the bank’s asset quality is strengthening.
- While declining impairments are positive, investors should assess whether this is due to genuine credit improvement or reduced provisioning. If loan growth outpaces risk assessment, future impairments could rise if economic conditions worsen or if credit underwriting standards are relaxed.
Overall, the combination of strong loan growth and declining impairments is a positive sign for profitability and asset quality
Efficiency and shareholder value
Total expenses rose by 38% YoY to N145 billion, consuming 76% of net operating income after impairments.
This indicates elevated cost pressures, which, if not controlled, could erode profitability despite revenue growth.
- While rising costs may be linked to business expansion, strategic cost control and operational efficiency improvements are crucial to sustaining long-term profitability.
- However, despite rising expenses, EPS surged 72% YoY to N1.29; a strong bottom-line performance and suggests Sterling has room to reward shareholders.
- Shareholders’ funds grew by 55%, reinforcing the bank’s financial stability. More importantly, retained earnings increased by 69% to N71.76 billion, providing ample room for either dividend payouts or reinvestment in growth opportunities.
Share price performance & investor sentiment:
After a stellar 206% YtD return in 2023, the stock rose 30.54% in 2024 but has shown slower momentum in early 2025 with a 3.57% return as of January’s close.
Investors should assess whether the growth trend can be sustained amid changing market conditions.
