Sterling Bank PLC H1 2011 Investor/Creditor Presentation July 2011 - PowerPoint PPT Presentation

Sterling Bank PLC H1 2011 Investor/Creditor Presentation July 2011

Important Information Investor Relations This presentation has been prepared by Sterling Bank PLC. 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’, ‘ see ks’, ‘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. 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, 2010. 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

Agenda 1 Macro-economic & Market Trends 2 Performance Review 3 Outlook 3

1 Macro-economic & Market Trends 4

Economic Indices Bonny Light Spot Prices Nigeria Consumer Price Index / Inflation Rate High: Close FOB ($/Barrel) 29 Apr, 2011 CPI 30 June, 2011 $127.5 $110.2 140.0 13.0 Open/Low: 1 Jan, 2011 120.0 $95.2 12.5 100.0 12.0 80.0 11.5 60.0 11.0 40.0 10.5 20.0 0.0 10.0 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Nigeria Oil Supply: 5-year Range Nigerian Naira / US Dollar Average Exchange Rate 2011 mb/d 2010 Exchange rate Range (2004-2009) 2.7 157 156 2.5 155 2.3 154 153 2.1 152 151 1.9 150 149 1.7 148 1.5 147 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 5

Funding Ecosystem (Industry) Central Bank of Nigeria Monetary Policy Rate Nigerian Interbank Offer Rate (NIBOR) (MPR) 8.50% 16% 8.00% 14% 12% 7.50% 10% Call 7.00% 7-day 8% 6.50% 30-day 6% 60-day 6.00% 4% 90-day 180-day 5.50% 2% 360-day 0% 5.00% Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Deposit Taking – Savings Accounts Deposit Taking – Fixed Deposit 30-day 90-day 180-day Inter-bank call rate Savings Deposite Rate 360-day Prime Lending Rate Max Lending Rate 6% 25.00% 5% 20.00% 4% 15.00% 3% 10.00% 2% 5.00% 1% 0% 0.00% Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 6

Share Price Chart Share Price Movement: Dec 1, 2010 – April 30, 2011 4Jan, 2011 30 Jun, 2011 High: Low: 20Jan, 2011 15Jun, 2011 N2.40 N1.82 4.00 N2.94 N1.65 3.00 2.00 1.00 0.00 Volumes Traded (# Millions) 40.0 30.0 20.0 10.0 - Number of Trades 200 150 100 50 0 Dec Jan Feb Mar Apr May Jun Jul 2010 2011 7

Market Movement: Dec 1, 2010 – July 20, 2011 Sterling Share Price Movement vs. NSE All Share Index Sterling Bank All Share Index High: Low: 50% 4Jan, 2011 20Jan, 2011 15Jun, 2011 30 Jun, 2011 N2.40 40% N2.94 N1.65 N1.82 ANSI: ANSI: ANSI: ANSI: 30% 25102.92 24980.19 27515.24 25471.58 20% 10% 0% -10% -20% -30% -40% Dec 2010 Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Jul 2011 NSE All Share Index vs. the MSCI Frontier Markets Africa Index MSCI FM Africa Index All Share Index 50% 40% 30% 20% 10% 0% -10% Dec 2010 Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Jul 2011 Source: MSCI 8

2 Performance Review 9

Key Trends N‘M Gross Earnings Total Assets Deposits Loans and Advances % Change June 2010 – June 2011 295,992 279,321 280,756 277,111 42% 208,126 209,057 203,075 201,667 195,721 44% 145,546 124,296 109,647 52% 103,754 90,540 81,591 9,055 9,103 11,197 7,992 6,856 Jun 2010 Sep 2010 Dec 2010 Mar 2011 Jun 2011 10

Income Statement highlights H1 2010 Comments H1 2011 11.5%  Growth in gross earnings was driven by 18,158 improvement in non- 16,289 interest income  Increase in operating 12.4% expenses was largely due to inflationary 11,628 pressures 8.4% 10,346  Profit before tax and allowances for risk N’ Millions 8,398 10.8% 14.2% assets grew by 24% to 7,745 N3.2 billion 5,975 -32.7% -33.8% 5,653 demonstrating the 5,394 4,952 underlying strength of 4,170 3,939 our core business. 2,804 2,606  Decline in PBT resulted from N426m provisions for risk assets in June 2011 against net Gross NRFF Other Operating OpEx PBT PAT recoveries of N1.6b as at Earnings Income Income June 2010. 11

Balance Sheet highlights Dec 2010 Comments Jun 2011 7%  Growth on key balance 7% sheet lines was spurred by 295,992 improved economic 277,111 267,268 conditions 250,993 3%  Total assets and N’ Millions contingencies rose 15% to 209,057 203,075 N374.2b from N326.0b in Dec. 2010 20%  Loans and advances grew 124,296 by 20% albeit sale of bad loans to AMCON 103,754  Deposits rose marginally at 10% 3% to N209.1b, while the mix was skewed in favour 28,724 26,118 of stable low cost funds.  Improvement in shareholders funds Total Assets Loans & Total Liabilities Deposits Shareholders' resulted from profit Advances Equity accretion. 12

Key Financial Ratios Comments Dec 2010 H1 2010 Jun 2011 H1 2011  Return on average equity 108% declined but remained at competitive level 85%  Net interest margin 75% remained stable during the period irrespective of high 65% interest rates in the money market 48% 48% 47% 43%  Strong liquidity and capital 34% adequacy ratios above regulatory benchmark 19% 13% 14% 12%  CAR was boosted by the 5% 2% 2% introduction of 7-year non- convertible debenture stock for the sum of N7.5b  NPL ratio was 4.95% in line with our medium term goals, while coverage ratio ROAE ROAA Net Cost- CAR Liquidity NPL Ratio Coverage Interest Income Ratio Ratio stood at 108%. Margin Ratio 13

Revenues Interest Income Revenue Mix Fee-based Income 1,557 18,158 N‘M 781 296 3,019 5,653 215 7,309 H1 2011 4,849 12,505 132 11% 16,289 881 1,856 2,183 32 220 4,952 7,078 H1 2010 2,731 11,337 1,308 Placements Inv. in Govt Loans & Finance Fees & Forex Investment Others Total Grand Total Securities Advances Lease Commissions Income Fees & Commission Loans & Advances Interest Income Mix Fee-based Income Mix Forex Finance Lease Investment Inv. in Govt Securities Others Placements 12% 2% 18% 28% 44% 38% 62% 53% 24% 14% 59% 38% 2% 5% 1% 1% H1 2010 H1 2011 H1 2010 H1 2011 14

Operating income Operating Income 1,557 11,628 N‘M 781 296 3,019 H1 2011 5,975 12% 881 10,346 1,856 2,183 32 5,394 H1 2010 Net Revenues from Fees & Forex Investment Income Others Total Funds Commissions Operating Income Mix NRFF Fees & Commission Forex Investment 9% 13% Others 52% 7% 0.3% 51% 3% 21% 26% H1 2010 H1 2011 15

Operating Efficiency Comments H1 2010 8% H1 2011 15% 10% 8,398  Funding costs were 7,745 impacted by high 75% 6,530 interest rate regime 5,943 N’ Millions that obtained during the first half of the 65% year. However, weighted average cost of funds declined by 150 basis point from 7% to 5.5% Operating Expenses Funding Costs Cost to Income  The rise in cost to income ratio was a reflection of increase Operating Expenses Breakdown in operating expenses Staff Cost and allowances for Other Expenses risk assets. 31% 32%  Steps are being taken to keep costs within limit without compromise for 68% efficiency and 69% business growth. H1 2010 H1 2011 16

Net Earnings Profit /(Loss) Before Tax Comments N’M H1 2010 -33% 4,169  Net earnings were H1 2011 impacted by the sale of 2,804 assets to AMCON as well as provisions for risk assets. However, we are optimistic that the negative growth in earnings will be reversed in Profit /Loss After Tax the remaining half of the N’M -34% year 3,939  Key steps towards 2,606 achieving this include: Acceleration of risk  assets creation - 20% growth achieved as at 1H 2011 Earnings / (Loss) per Share (kobo) Revenue diversification  -32% via trade finance 31 products 21 Deepening retail  penetration for low cost deposit mobilization H1 2010 H1 2011 17