Sterling Holdco boosts recapitalisation with N75bn fresh capital

Sterling Financial Holdings Company PLC, like every other banking group, is not leaving any stone unturned in its bid to meet the new recapitalistion requirement of the Central Bank of Nigeria. (CBN).

This has seen the Holdco take a major step towards recapitalizing its subsidiaries with the infusion of $50 million of fresh capital in a single decisive move.

Sterling Holdco’s flagship subsidiary- Sterling Bank, and its ethical banking arm, The Alternative Bank, are required to raise additional equity capital to meet new capital requirements for banks under the ongoing CBN’s recapitalisation exercise.

The recent capital injection of approximately N75 billion, which is in the final stages of approvals by the regulators, was achieved through a private placement from a consortium of domestic investors and ultra-high-net-worth groups in Lagos.

Speaking at the signing ceremony for the placement, Group Chief Executive Officer, Sterling Financial Holdings Company (Sterling Holdco) Plc, Yemi Odubiyi, said that the capital raise signified the market’s confidence in the vision and potential of the group.

According to him, investors’ decision to entrust the group with their hard-earned capital is built on the group’s ability to challenge the norm in Nigeria’s financial services sector.

“Our investors recognize that beyond the profits declared and dividend payouts, we are an enterprise that has consistently demonstrated capacity for innovation, creating and leveraging new opportunities within and outside the industry to deliver value to all our stakeholders.

“From our modest beginnings as a merchant bank, we have evolved into a dynamic enterprise with a proven track record that extends well beyond conventional banking. Now powered by an embedded technology stack that is flexible to the unique demands of the market, we are more than confident in our ability to capture major growth opportunities in Nigeria and beyond,” Odubiyi said.

He added that the group’s vision, performance, and journey continue to be rewarded with the highest form of investor confidence, as exemplified by the injection of more capital.

“This infusion of funds not only reflects the trust our investors place in us, but also serves as a powerful endorsement of our strategy and future potential. With it, we reaffirm our commitment to driving social, sector, and economic growth beyond banking.

“By investing in and incubating new subsidiaries, we will prioritize value creation that stimulates and sustains growth for both the enterprise and the nation’s economy. Our investment strategy is anchored in sustainable practices that will deliver long-term value for society and consistent returns for investors,” Odubiyi said.

Last year, Sterling Holdco transitioned from a commercial bank to a full-fledged financial holdings company with two subsidiary banks.

Odubiyi expressed optimism that with several key businesses in the pipeline, the holding company is strategically positioned to seize opportunities beyond those available to its peers.

As the banking sector recapitalisation intensifies, some bank chiefs are also betting on their companies by increasing their stakes,  According to an analysis of the director’s dealings with the Nigerian Exchange Limited (NGX) from the end of May to June, bank chiefs have acquired about 1.86 billion shares worth about N39.32bn.

Accordingly, in June, directors and members of the management of Sterling Holdco staked claims in the shares of the company to the tune of N327.79m. The Executive Director of one of the subsidiaries, Sterling Bank Ltd, Tunde Adeola, purchased about 35,041,551 units of shares valued at N148.82m in four days in June.

On June 20, the Divisional Head of Business Growth and Transactional Banking, Sterling Bank Ltd, Ukachukwu Obinna, also acquired five million shares at N4.41 each.

An Executive Director of Sterling Financial Holdings Company Plc, Olayinka Oni; its Group Company Secretary, Temitayo Adegoke; its GMD/CEO, Adeyemi Odubiyi and Non-Executive Director, Suleiman Abubakar, acquired about 37,811,501 units of the group’s shares valued at N156.92m on June 14.

Performance in numbers

According to its latest unaudited financial statement, the earnings of Sterling Holdco rose by 52.8 percent in the first six months of 2024. The group reported an after-tax profit of N16.2 billion in H1 2024 from N10.6 billion in the first half of 2023.

Interest income calculated using the effective interest rate rose to N120.8 billion from N76.3 billion while the bank’s interest expense surged 100 percent to N63.2 billion from N31.6 billion driven by the high-interest rate environment.

Further breakdown of the financial statement disclosed that Sterling’s interest income grew by 57.5 percent in H1, as all major contributory lines recorded an increase in loans and advances to customers (45.9 percent), debt instruments at fair value (23.4 percent), and cash and cash equivalent (509 percent).

The statement also showed that the bank recorded a 33.4 percent growth in net interest income to N57.5 billion in the first half of 2024 from N45.1 billion in the same period of 2023. Net fee and commission income increased to N15.2 billion from N11.6 billion during the period.

Items in fees and commission income include; facility management fees (N2.4 billion), account maintenance fees (N2.8 billion), commission and similar income (N1.4 billion), e-business commission (N4.6 billion), commission on the letter of credit and off-balance sheet transactions (N6.3 billion) and other fees and commission (N2.5 billion) as of June 2024.

The holding company during the period reported that other operating expenses increased to N19.2 billion from N14.9 billion, on the back of an increase in Asset Management Corporation of Nigeria surcharge amounting to N7 billion.

Total expenses in the first half of the year increased by 29.3 percent to N67 billion from N51 billion. Earnings per share increased to N0.56 kobo from N0.37 kobo in the first six months of last year. Total assets grew to N3 trillion from N2.29 trillion on the back of loans and advances to customers amounting to N1.09 trillion.

Deposits from customers totaled N2.16 trillion while deposits from banks increased to N56 million. The holding company’s total liabilities also rose to N2.8 trillion leaving its shareholders fund at N190.3 billion.

Net cash flows from operating activities saw a negative flow to N6.1 billion from a negative N3 million. Net cash flows from/(used in) investing activities recorded a negative of N178 billion from a negative of N106 billion. Net cash flows from/(used in) financing activities recorded a negative of N34 billion from N54 billion. Cash and cash equivalents at the end of the period totaled N262 billion from N265 billion.