Poor Stock Market Performance Threatens Management Of Sterling Bank

Reports have revealed that the shareholders of Sterling Bank Plc are completely upset with the bank's equity market performance. A survey carried out by an investment firm showed that the bank was the biggest loser in the banking sector in terms of percentage for the year 2021.

Further investigation into the research findings revealed that the lender’s share price depreciated by 26% to close at N43.5 billion. 

e-Nigeriang newspaper, which earlier carried the story, revealed that under the leadership of Abubakar Suleiman, Sterling Bank continued to decline in market share value.

As can be seen in the breakdown below, the crisis rocking Sterling Bank took a different angle when shareholders complained bitterly over the loss of their investment.

For instance, shareholders who invested N1 million in Sterling Bank shares at the beginning of 2021 lost N281,000.00 of their investment as the bank’s equity shed 28.10% of its value last year.

The lender’s stock began trading at N2.10 on January 4, 2021, and ended trading at N1.51 at the close of business on December 31, 2021, a loss of 28.10%. This performance was closely followed by SCOA (64.51%), CWG (55.91%), SUNUASSUR (55%), and FTNCOCOA (40.91%).

Moreover, 2021 was a less rewarding year following the poor performance of both the banking and equity market indexes. The YTD returns for the banking sector and the NGX index were both 0.87% and 6.07%.

As a result, investors in the bank lost nearly 21.50% of their investment in the bank in just 2021, but gained traction following the triumphant entry of BUAFOODS into the apex capital market.

Investors with the bank gained 2.61% this year as the bank’s equity rose from N1.53 on January 4 to N1.57 at the market’s close on January 18.

When e-nigeriang newspaper, spoke with an investment analyst and stockbroker, Hadassah Isaac(Mrs.) who works with TRW Stockbroker, to get her opinion over this development.

she noted that the market was only reacting to the lackluster performance reflected in the drop in the company’s share price.

"The market sees beyond their books," she remarked, "and it is what they are that the market will most often reflect."

Sterling Bank has a low dividend payout, having paid only 21 kobo as a dividend in the last five financial years, which may be one of the reasons investors were averse to its equity last year.

It paid just 5 kobo as a dividend in the 2020 fiscal year.

Even a 28.44% growth in post-tax profit that the bank declared in the third quarter of this year could not overcome investors’ negative sentiment towards its stocks, nor did the N0.05 dividend the bank declared at the end of 2020 financial douse their interest in its favour.

Despite the poor performance of the bank in the capital market, the key indicators used to judge the Abubakar Suleiman-led management still showed positivity in key areas.

The bank posted a N9.47 billion post-tax profit as of September 2021, which was a 26.55% improvement from the N7.37 billion declared in the corresponding period in the prior year.

It raked in N156.89 billion in gross revenues in Q3 2021, 6.85% higher than the N146.84 billion it made in the same period last year. The income growth was driven majorly by a 65.30% and 104.02% rise in net fee and commission income and other operating income, respectively.

Net Operating Income went up by 19.4% to N67.9 billion, which was attributed to the growth in credit loss expenses.

Also, operating expenses increased by 18.8% to N58 billion from N48.9 billion in Q3 2020, driven mainly by FX revaluation losses and other mandatory regulatory levies.

Sterling Bank loans and advances improved by 13.4% to N676.8 billion, while customers’ deposits increased by 20.8% to N1149 trillion during this period.

More so, total assets rose by 12.7% to N1548, underpinned largely by the improvement in loans and advances.

Meanwhile, the increase in Sterling Bank's risk assets came with its own challenges, as it had to make a 14.67% high provision for bad loans to the tune of N6.29 billion in Q3 2021 and its non-performing loan ratio went up to 2.0% during this period from 1.9% in December 2021.

However, the liquidity ratio improved to 37.7% from 32.5% in December 2020, which is above the 30% statutory requirement.

Sterling Bank's loan-to-deposit ratio fell below the 60% regulatory threshold in Q3 2021, posting 58.9% in Q3 2021 instead of the 62.8% it had in the prior period.

In that vein, the capital adequacy ratio declined to 14.3% from 18% in Q3 2020, though it was above the 15% regulatory benchmark.

Sterling Bank spent more on generating its income during this period as the cost-to-income ratio rose to 78.2% from 73.4% in Q3 2020, but the cost of risk was lower at 0.9% from 1.9% in the corresponding period of the previous year. This data was provided by e-nigeriang.com.