Investors & Analysts Presentation FY 2019
Disclaimer ▪ This presentation has been prepared by Sterling Bank Plc (hereafter refereed to as “Sterling Bank”, “the Bank”, “We”) . It is intended for an audience of professional and institutional investors who are aware of the risks of investing in the shares of publicly traded companies. ▪ The presentation is for information purposes only and should not be construed as an offer or solicitation to acquire, or dispose of any securities or issues mentioned in this presentation. ▪ Certain sections of this presentation reference forward-looking statements which reflect Sterling Bank’s current views with respect to, among other things, the Bank’s operations and financial performance. These forward- looking statements may be identified by the use of words such as ‘outlook’, ‘believes’, ‘expects’, ‘potential’, ‘continues’, ‘may’, ‘will’, ‘should’, ‘seeks’, ‘approximately’, ‘predicts’, ‘intends’, ‘plans’, ‘estimates’, ‘anticipates’ or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. In other cases, they may depend on the approval of the Central Bank of Nigeria, Nigerian Stock Exchange, and the Securities and Exchange Commission. ▪ Accordingly, there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Sterling Bank believes these factors include but are not limited to those described in its Annual Report for the financial year ended December 31, 2018. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release. ▪ Sterling Bank undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. 2
Content 1. Performance Snapshot (FY 2019) 2. Operating Performance (FY 2019) 3. 2019 Scorecard 4. Appendix
Financial & Non-Financial Highlights We delivered solid growth across key metrics during the year reflecting positive results of strategic decisions and investments in our focus areas. Financials (N’ millions) Ratings Total Assets Gross Earnings Net Interest Income Net Operating Income 1,182,685 150,195 64,699 81,765 B2 B- 7.2% 1.0% 17.0% 12.0% from FY 2019 from FY 2019 from FY 2019 from Q3 2018 Loans & Advances Total Deposits Total Assets CASA Deposits Profit After Tax 618,732 892,660 538,089 10,602 0.4% 17.4% 19.4% 15.0% BBB BBB+ from FY 2019 from FY 2019 from FY 2019 from Q3 2018 Channels USSD Professional POS ATM Branches Customers Users Staff 10,667 858 >1.1M 161 >3M 2,401 4
Performance snapshot (1/2) Despite a marginal growth in earnings, we delivered double digit growth in our bottom-line through a concerted effort in improving the quality of our funding base 5
Performance Snapshot (2/2) A healthy growth in customer deposits, contributed majorly in strengthening our financial position during the period 7.2% Total Liabilities & Equity ( N’bn ) 1,183 1,103 1,072 834 801 893 696 761 609 592 103 98 120 86 47 13 38 96 87 45 42 43 213 48 15 5 120 82 83 60 2015 2016 2017 2018 2019 Borrowings Debt Securities Other Liabilities Equity Deposits Total Assets ( N’bn ) 1,183 1,103 1,072 834 801 619 621 598 339 468 51 28 43 22 269 31 239 256 260 181 18 15 16 17 15 225 183 174 161 139 2015 2016 2017 2018 2019 Cash & short term investments Fixed Assets Government Securities Other Assets Loans & Advances Total 6
Content 1. Performance Snapshot (FY 2019) 2. Operating Performance (FY 2019) 3. 2019 Scorecard 4. Appendix
Revenue Evolution Our commitment to lower funding costs and ramp up transactional income continues to sustain top-line earnings, despite a slow growth in interest income and dip in trading activities Interest Income Non- Interest Income 1.0% Gross Earnings ( N’bn ) FY 2019 1% 14% Interest Income 22% 1% 13% Non - Interest Income 23% 150.2 148.7 133.4 23 50% 24 22% 111.4 110.2 23 37% 12 64% 29 76% 127 77% 125 110 99 FY 2018 81 due to Cash & Cash Eqv. Fees and commission income due to Loans & Advances Net trading income Other operating income due to Investment Securities 2015 2016 2017 2018 2019 Net Interest Income ( N’bn ) 17.0% Gross earnings grew marginally by 1.0% to N150.2 ▪ billion; 65 A combination of a 1.7% growth in interest income; ▪ a 10.4% decline in interest expense; a 24.3% growth 56 55 in fees & commission income; and a 41.3% decline 50 in net trading income resulted in an 11.1% growth 39.5 operating income; Contribution of Fees & Commission to the non- ▪ interest income grew to 64% from 50% as at 2018. 2015 2016 2017 2018 2019 8
Funding & Liquidity (1/2) Increased traction in the mobilization and retention of low-cost deposits contributed to a 10.4% decline in interest expense, as we continue to drive funding costs down Customer Deposits (N'b) 17.4% FY 2018 FY 2019 892 8% 10% 70 761 75 284 585 554 8 47% 234 47% 32% CASA:60% CASA:59% 31% 79 202 121 90 188 52 55 417 361 322 12% 14% 233 2016 2017 2018 2019 Current Savings Term Pedged Total Cost of Funds (%) We continued to improve the quality of our funding ▪ base, with current and savings (CASA) deposits 7.4% 7.4% growing by 19.4% contributing to the growth in customer deposits to reach N892.7bn. While term 6.3% 6.3% 6.1% deposits grew by 21.2%, we recorded a 60% CASA mix at the end of the year; Consequently, cost of funds declined by 130 bps to ▪ 6.3% as net interest margin improved to 7.9% (6.6% FY 2018); The bank maintained a healthy liquidity position at ▪ 39.5% well above minimum regulatory requirement 9 FY 15 FY 16 FY 17 FY 18 FY' 19
Funding & Liquidity (2/2) Overall, we recorded an improved equity position and an increase in CAR in 2019 Equity ( N’bn ) 22.2% 119.8 101.7 97.8 95.0 85.7 56 37 28 44 22 10 7 6 6 43 43 43 43 43 14 14 14 14 14 Dec' 15 Dec' 16 Dec' 17 Dec' 18 Dec' 19 Share capital Share premium Retained earnings Others Items ( N’mn ) Dec. 2019 Dec. 2018 % Growth Incremental contribution to retained earnings ▪ Tier 1 capital* 82,494 71,317 15.67% (year-to-date) has supported growth in shareholders funds by 22.2% to N119.8 billion (FY Tier 2 capital ** 27,498 23,772 15.67% 2018: N97.8 billion); 109,992 95,089 15.67% Total regulatory capital Our improved equity position was also driven by ▪ the 3.5x growth in Comprehensive Income as a 748,119 712,274 5.03% Risk-weighted assets result of gains recorded from investments in debt securities; Tier 1 ratio 11.03% 10.01% 1.02% Overall, the Bank’s capital adequacy grew to ▪ 3.68% 3.34% 0.3% Tier 2 ratio 14.70% Capital adequacy ratio 14.70% 13.35% 1.35% Notes: *Tier 1 capital includes ordinary share capital, share premium, retained earnings, intangible assets, and other regulatory adjustments relating to items that are included in equity but are treated differently for capital adequacy purposes. **Tier 2 Capital includes qualifying subordinated liabilities, allowances and element of the fair value reserve relating to unrealized gains on equity instruments classified as Fair Value Through Other Comprehensive Income. 10
Loans and Advances by Sector We recorded significant growth in our consumer loans portfolio and a wind down of our Oil & Gas portfolio in line with our strategic targets . . . Gross Loans & Advances by Sector Dec-2019 Dec-2018 Growth Sectors N'm % of Total N'm % of Total % Agriculture 50,477 8.0% 55,073 8.6% (8.3%) Communication 15,505 2.5% 16,653 2.6% (6.9%) 45,932 11,914 Consumer 7.3% 1.9% 285.5% 783 646 Education 0.1% 0.1% 21.2% Finance and insurance 28,922 4.6% 32,096 5.0% -9.9% Government 68,078 10.8% 42,260 11.6% 61.1% 5,754 4,078 Manufacturing 0.9% 0.6% 41.1% Mortgage 4,407 0.7% 5,857 0.9% (24.8%) 58,998 53,152 Oil & Gas – downstream 9.3% 8.3% 11.0% Oil & Gas – upstream 80,081 12.7% 120,962 18.9% (33.8%) 76,336 100,019 Oil & Gas – Services 12.1% 15.6% (23.7%) Others 42,349 6.7% 57,140 8.9% (25.9%) 23,875 16,638 Power 3.8% 2.6% 43.5% Real Estate & Construction 70,383 11.1% 56,531 8.8% 24.5% Transportation 37,777 6.0% 32,226 5.0% 17.2% 25,038 35,168 Non-interest banking 4.0% 5.5% (28.8%) TOTAL 631,698 100.0% 640,412 100.0% (1.4%) 11
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