Sterling Bank Plc 2018 Annual Report

We have extracted below the Chairman’s Statement from the 2018 annual report of Sterling Bank Plc (, listed on the Nigerian Stock Exchange:


Dear fellow shareholders, It is with great pleasure that I warmly welcome you all to the 57th Annual General Meeting of our Bank. Going by the results for the financial year ended 31st December 2018, I am pleased to report that Sterling Bank has, once again, delivered steady growth performance, despite the slow-growth environment.

Ladies and gentlemen, the Bank’s performance in the just concluded financial year reflects good progress against the execution of our strategy. Before I proceed with our performance in 2018, please allow me to give context to the operating environment and highlight key aspects that shaped our performance in 2018.

The macroeconomic and operating environment

In 2018, the Nigerian economy consolidated on the recovery from the recession in 2016 delivering modest improvements in key economic indicators. According to the Nigerian Bureau of Statistics, our GDP expanded by 1.93% – this could be considered slow economic growth given our long-term growth average. Our economic recovery was buoyed by the growth in the oil sector with Brent crude prices averaging US$70/bbl during the year, rising by over 30% from an average of US$55/bbl in 2017. The sector continues to remain a key economic driver even with the inconsistent growth patterns and production levels at under 2mbpd all year round. Our industrial sectors maintained a steady growth pace since exiting the recent five-quarter recession, expanding twice as much in 2018 compared to 2017. On the other hand, clashes between herdsmen and farmers escalated during the year, causing a significant year-on-year decline in growth of the agriculture sector. With the monetary policy stance remaining largely unchanged through the year, the economy continued to witness relatively positive outcomes such as the convergence of the multiple exchange rates and a steady decline in inflation rate to 11.44% from 15.13% in January 2018. Also, 2018 saw the reduction in the government’s debt-financed deficits through the local fixed income markets, significantly easing the interest rate environment for corporates looking to attract long-tenured funding.

Externally, volatility heightened as the momentum in growth trends quickly waned leading into the second quarter. The deceleration in growth was boosted by rising trade tensions between the U.S and its long-term allies (China, Canada, European Union, Mexico), gradual unwinding of quantitative easing programs by the U.S Federal Reserves and ongoing political unrests in some regions. The Eurozone witnessed decelerating growth amid prolonged social unrest in France and weak momentum in Germany, while the effects of Brexit began to materialize as the uncertainty diminished economic activity in the UK. In China, the combination of high tariffs, large debt profile, looming real estate bubble and a weakening currency have created downside risks for the economy. In contrast, the U.S economy achieved a 2.9% growth – the highest since 2015, underpinned by several factors including employment growth, elevated consumer confidence and strong wage growth. The strengthening of the U.S and its monetary policy normalization led to a reversal of capital inflow into the Nigerian economy. These reversals became evident in the second half of the year with Foreign Portfolio Investments decreasing by 47% to US$634 million as at December 2018 from US$1.2 billion as at June 2018 and was further propagated by the uncertainty that precedes every election cycle in Nigeria.

Performance overview and shareholders’ returns

Our financial results in 2018 reflects an even stronger business performance despite the impact of an ailing operating environment. We sustained our earnings growth momentum in 2018 as gross earnings grew by 14.0% to N152.2 billion from N133.5 billion recorded in 2017. Although operating expenses increased by 26.4% to N66.9 billion – due to our investment in human capital and technology – we grew profit before tax by 17.1% to N9.5 billion and profit after tax by 14.9% to N9.2 billion.

We closed the year with an improved balance sheet position as total assets grew steadily by about 2.9% to N1.10 trillion, maintaining the over one trillion Naira
mark achieved in the previous year. We continued to sustain operational efficiencies and our focus in growing the Bank’s retail franchise. This resulted in an improved deposit base and moderate growth in our loan book, specifically riding on the 108.3% growth in retail and consumer loans delivered mainly by SPECTA – Nigeria’s fastest digital lending platform. In addition, we were also able to maintain our cost of funds at 7.4% despite the high interest rate environment which persisted for a significant part of the year.

We recognized a 3.9% decline in shareholders’ funds due to the newly adopted IFRS 9 standard under the International Financial Reporting Standards (IFRS) regime. The mild erosion of the Bank’s capital was occasioned by the requirement to charge certain credit losses. These charged losses and our determination to accelerate our growth ambitions suggest to your Board that it should not recommend the payment of dividends for the 2018 financial year. We are grateful for your continued support and count on your understanding as,together, we continue to build a formidable institution.

Banking on sustainability

Our bank has overtime understood the potent impact of sustainable banking on economic development and its contribution to the achievement of our sustainable development goals. We have achieved this by promoting the culture of innovation and inclusion in our initiatives as a financial institution. We have successfully adopted international best practices of sustainability across our business operations, entrenching this into areas such as product development, carbon footprint management, financial inclusion, environment and social risk management, amongst others. Some notable initiatives during the year include:
(i) The inauguration of the One Million Teachers (1MT) Initiative, a programme aimed at retraining one million teachers nationwide; and
(ii) Facilitating trainings for over 20,000 Micro, Small and Medium Enterprises and financing of over N4 billion to MSMEs with a view to growing and expanding their businesses.

Our focus on Healthcare, Education, Agriculture, Renewable Energy and Transportation (the ‘HEART’ sectors), has led us to review and expand our environmental and social risk sectoral coverage. This enables us to be at the forefront of developing initiatives within each of these sectors as part of financing our growth programmes.

One notable initiative in this regard includes the commissioning of the total solarization of our head office – Sterling Towers which will allow us run on alternative and clean energy, reducing our conventional energy consumption and the attendant costs, significantly. Our digital assets, notably SPECTA and Farepay (a contactless payment solution on the mass transit network) have also contributed to economic and social development.

In the pursuit of building a truly sustainable institution, we understand that our employees are the driving force of the sustainability culture, which is why we continuously build an institution that attracts and retains the best, assures first class training, whilst providing favorable working conditions, and enhancing the work- life balance of our employees. A comprehensive sustainability report has been provided as part of this annual report. We remain firm in our commitment to the Central Bank of Nigeria’s sustainable banking principles.

Board Changes

Strong management and governance are an integral part of the Board’s responsibilities and critical component of our business operations. During the year, three of our Board members retired; Mr. Kayode Lawal who served as Executive Director, Corporate & Investment Banking, Mr. Rasheed Kolarinwa who served as an Independent Director and Mrs. Egbichi Akinsanya who served as a Non-Executive Director. I wish to take this opportunity to once again convey my utmost gratitude for their outstanding contribution to our Bank.

Correspondingly, in line with our commitment to best practice in organizational succession planning, we strengthened our Board by appointing two new Directors who have been duly approved by the Central Bank of Nigeria.

On this note, it would be a great honor to be considered These challenges present the Bank with a unique opportunity to create value in innovative ways within our sectors of focus and deliver superior returns to our esteemed shareholders suitable by you, our esteemed shareholders, the endorsement of my colleagues, Mrs. Folasade Kilaso as Non-Executive Director and Mr. Michael Ajukwu as an Independent Director.

Their Resumes are contained in this Report. I have no doubt that their wealth of experience will be of great value in our continuous commitment to steering this great institution to unprecedented heights in the years to come.

Business Outlook for 2019

On the global scene, we should expect to see staggered growth compared to 2018, mainly due to less accommodating financial conditions worldwide. Despite the recent truce, both political and trade tensions between China and the United States remain elevated, fueling economic uncertainty. Meanwhile, the ongoing monetary tightening by central banks in advanced economies is likely to further spur capital outflows from emerging markets, putting their financial markets at risk.

The Nigerian business environment for 2019 would remain a “story of two halves”. We anticipate the first half of the year would be largely dominated by election activities at the expense of economic growth, heightened by subdued foreign capital inflows, increased pressure on the Naira – albeit moderate, and an accelerated foreign exchange intervention programme. Going into the second half of the year, we expect to see increased economic activities with the likelihood of stronger consumer confidence.

However, the business environment may experience challenges owing to a possible delay in the passage of the budget accompanied by the perennial budgetary deficits. That said, these challenges present the Bank with a unique opportunity to create value in innovative ways within our sectors of focus and thus deliver superior returns to our esteemed shareholders.


In closing, I take this opportunity to thank all our stakeholders, particularly our esteemed shareholders, customers and partners for the ardent support given throughout the year. I would also like to thank the management team and assure them of our continued support as they strive to take the Bank to greater heights. We have full confidence in their ability to strengthen theB ank’s performance as we transform into a leading and extremely efficient financial institution. We also recognize the commitment of all our staff, the sterling family, and would like to extend our heartfelt gratitude for their hard work and dedication to this institution.

I also wish to extend my sincere appreciation to our regulators, the Central Bank of Nigeria, the Nigeria Deposit Insurance Corporation, the Securities and Exchange Commission, the Nigerian Stock Exchange, the Corporate Affairs Commission, and to the other government agencies and regulatory bodies we interact with, for their invaluable and ongoing support.

Sterling Bank’s performance is the result of the actions of all our stakeholders. We are committed to creating appreciable and sustainable value and ensuring that you benefit extensively from the successes of your institution.

I thank you all.


Asue Ighodalo.
Chairman, Board of Directors