Sterling Bank Plc came short of elevated second half earnings targets in 2022 but ended the financial year with a stronger second half nonetheless.
The second half produced up to N10.6 billion or 57 percent of its closing after-tax profit of N18.6 billion for the year.
The bank’s unaudited financial report for the full year ended December 2022 shows both revenue and profit targets for the final quarter were missed as we expected in our review of the bank’s performance at the end of the third quarter.
However, the final quarter contributed nearly N50 billion in gross income and N5.2 billion in after-tax profit, accounting for 29 percent of gross earnings of under N174 billion for the year and 28 percent of the full year profit.
Revenue grew by 26.7 percent quarter-on-quarter in the final quarter, well ahead of the full increase of 17 percent.
Strong revenue growth with some cost saving provided the strength for the improved revenue and profit deliveries in the final quarter. Revenue improvement in the quarter was led by other operating income that jumped by 145.6 per cent quarter-on-quarter to N2.8 billion.
Net trading income rose by 35 percent to N2.5 billion and interest earnings grew by 33.5 percent to N37.7 billion during the quarter. The only revenue weakness in the quarter came from fee and commissions income which went down by 14 percent quarter-on-quarter to N6.8 billion.
Revenue improvement was reinforced by cost savings from a 30 percent drop in credit loss expenses to N2.5 billion during the quarter.
The two other major cost elements of the bank – interest and operating expenses however could not be contained during the quarter. Interest expenses rose by 61 percent quarter-on-quarter to N16.5 billion compared to the 33.5 percent increase in interest income.
The cost of funds in the final quarter accounted for as much as 32 percent of the full year figure of about N52 billion.
The same pattern of the increase occurred in total operating expenses which grew by 22 percent in the final quarter, moving up from 19 percent growth at the end of the third quarter.
The inability to contain the two cost lines kept profit short of target in the final quarter while revenue gains and cost savings elsewhere helped to realise a stronger second half still.
The full year position of the bank shows gross earnings of N173.7 billion at the end of December 2022 – an increase of 17 percent year-on-year. Revenue growth was driven by non-interest income, which grew by 24 percent to N46 billion. Interest earnings improved by 15 percent to N127.7 billion over the same period.
At almost N52 billion at the end of the year, interest expenses changed direction from flat position at the end of the third quarter to an increase of about 15 percent. That still permitted an increase of 15 percent in net interest income to N75.8 billion.
Loan impairment expenses however moved further in the downward direction from flat at the end of the third quarter to a decline of about 13 percent at full year. This enabled a leap of 23 percent in operating income net of the loan impairment charges to over N107 billion.
Total operating expenses grew well ahead of revenue at close to 20 percent at the end of the year to N87 billion, beating the 17 percent increase in gross earnings. The bank’s already high operating cost margin increased further from 49.2 percent in 2021 to 50.2 percent at the end of 2022, a sustaining increase for the fifth year running.
Net profit margin improved from 9.1 percent in 2021 to 10.7 percent at the end of 2022, the highest net profit margin for the bank since 2012.
Sterling Bank earned 65 kobo per share at the end of the 2022 full year, up from 47 kobo per share in 2021. It paid 10 kobo per share in cash dividends to shareholders from the 2021 operations.
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