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Tuesday, October 29, 2019 / 6:14 PM / By CSL Research / Header Image Credit: LBS
Sterling's
Interest Income grew 2% y/y and 5% q/q. In line with the trend we observed
across most banks, the growth in Interest Income was driven by the improvement
in Interest earned on loans and advances (4% y/y to N73.3bn) following the
marginal growth in loan book (Net loans to Customers grew 2.3% YTD).
Interest
Expense on the other hand, showed a steep decline, down 12% y/y despite an
18% y/y increase in Customer Deposits. On a quarterly basis
however, Interest Expense was flat. Consequently, Net Interest Income grew
strongly, up 19% y/y and 11% q/q. The bank appears to be making progress in
improving its deposit mix as CASA ratio improved to 59% in 9M 2019 from
54% in 9M 2018.
Net Fee and
Commission Income grew strongly y/y (up 30% to N14.0bn in 9M
2019) but declined 15% in Q3 compared to Q2. The y/y growth was driven mainly
by the growth in e-business fees and commissions (up 48% y/y) and other fees
and commissions (up 85% y/y). These income lines
however weakened in Q3, declining by 5% q/q and 36% q/q
respectively.
Other Income
(Net trading Income and Other Operating Income) fell sharply, down 62% y/y
driven mainly by a steep decline in FX trading Income (N364m in 9M 2019
compared to N4.5bn in 9M 2018) and zero FX revaluation gains in 9M 2019 compared
to N2.1bn realised in 9M 2018.
Impairment
Charge grew 8% y/y to N3.9bn in 9M 2019, bringing Cost of Risk (COR) to
0.8% compared to 0.7% in 9M 2018.
Operating
Expenses grew 11% y/y and 10% q/q. The rise in OPEX was driven by growth
in Personnel costs (up 15%/y), General and administrative expenses (up 7%/y)
and other operating expenses (up 14%/y). The growth in OPEX compared to
Operating Income (+8% y/y) led to a 227bps increase in Cost to Income Ratio
(CIR ex-provisions) to 82.3% in 9M 2019.
The rise in
OPEX impacted on earnings as Pre-tax profit was down 10% y/y and 40% q/q.
Net profits also declined 8% y/y and 21% q/q. We note that
the slower decline in Net profits in Q3 was due to a tax credit of N267m in the
quarter compared to a tax expense of N306m in Q2 2019.
EPS came in at
N0.26 in 9M 2019 compared to N0.29 in 9M 2018. Annualised RoAE declined to 9.7%
in 9M 2019 compared to 10.5% in 9M 2018.
We have a BUY rating
on the Sterling bank with a target price of N2.84/s. Current price: N2.0/s.
Related News
1.
STERLNBANK
Declares N7.58bn PAT in Q3 2019 Results,(SP:N2.00k)
2. STERLNBANK
Appoints Temitayo Adegoke As Company Secretary and Chief Legal Counsel; J. Lewa
Retires
3.
STERLNBANK
Declares N5.66bn PAT in Q2 2019 Results,(SP:N2.24k)
4.
STERLNBANK
Announces the Appointment of Mr. Femi Jaiyeola as CCO of the Company
5.
STERLNBANK
declares N3.24bn PAT in Q1 2019 Results,(SP:N2.70k)
6.
STERLNBANK
Declares N9.22 bn PAT in 2018 Audited Results,(SP:N2.39k)
7.
STERLNBANK
Declares N8.21bn PAT in Q3 2018 Results,(SP:N1.50k)
8.
Sterling Bank
Plc Set to Issue Up to N35bn Series 6 and Series 7 Commercial Paper
9.
STERLNBANK
Declares N6.2bn PAT in Q2 2018 Results,(SP:N1.42k)
10. Sterling Bank
Plc Appoints Mrs Folasade Kilaso and Mr Micheal Ajukwu as Directors
11. STERLNBANK
declares N3.10bn PAT in Q1 2018 Results,(SP:N1.61k)
12. STERLNBANK
Declares N8.52bn PAT in 2017 Audited Results; Proposes 2kobo Final
Dividend,(SP:N1.70k)