Chief Executive Officer, Sterling Bank Plc, Mr. Abubakar Suleiman, during the bank’s Facts-behind-the-figures forum at the Nigerian Stock Exchange last week, said Sterling Bank was strong enough to grow consumer lending by about N25bn this year alone. NGOZI AMUCHE was at the session. Excerpts:
In the last 10 years, government has been talking about diversification in the real sector such as the oil and gas, real estate, mining, and manufacturing sector. Why are you not looking towards this direction to boost your bottom-line?
My first answer is that we have actually resolved all issues concerning the oil and gas sector. We believe that our work in the last five years was a major transformation in the sector. First and foremost, the sale of significant oil and gas assets by the Nigerian operators was part of it. At one point, we had over 40 per cent of our loan book in Oil and Gas. One of our particular assets increased from 20 barrels per day to over 80 barrels per day. This is because we put in money to support them. We are now working towards pushing them to 150 barrels per day in the 2018 financial year, hopefully. So, the work in Oil and Gas is largely done. Oil and Gas, for us, is a place where there is enough capital, both locally and internationally.
You talked about mining; yes there are opportunities in mining; but like everything else, policy must come first before the capital. If the environmental policy is not conducive, then the purpose of the whole thing is defeated.
You mentioned five sectors, namely: health, education, agriculture, renewable energy and transport, which you said you would like to focus on as a bank. Are you so confident that these areas will take the bank to the next level in terms of growth trajectory?
You will recall that I mentioned that Agriculture was about 10 per cent of our loan book in 2017; the impact of that is very significant. Apart from actually lending to the sector, what we have always seen is that, our retail business is driven from that sector.
For instance, we acquired over a million customers in our micro financing last year, and a lot of that was driven by the agricultural sector. We are not a sector that runs as a charity; we don’t believe in sustainable growth by running as a charity. We must study the business dimensions before we do it. We have enough data on that, to prove that the sector had contributed more and in the coming months, we will be able to show more information, as regards that.
Our capital is now a N100 billion, which is four times the regulatory requirement that ushered us into consolidation in 2006. We are beginning to see our deposit grow 10 ten times bigger
How do you expect to take the lead in smart-credit, to boost your bottom-line; because, this is now a trend dominating modern economy?
I agree with you. Credit is very critical as to how we grow our economy. This year alone, we have a commitment to grow our consumer lending book by 10 folds. We actually have the management’s (approval) to grow consumer lending, by about N25 billion, just for this year alone. The reason consumer lending has not grown in the past is that, on the one hand, we did not have the data and the capacity. And in a few instances, we grew lending without that. So, it was very important that two things happened in the sector. The first one was the credit bureau that has now given us some data to operate with, and the second thing that we don’t have was, identity, which the BVN has resolved. The second side to consumer lending is that, because they are micro to medium size lending, you cannot use a traditional lending method. Your cost of operation will be too high for the transaction to be profitable. So, we created technology platform that addresses both problems.
How have you chosen your five sectors?
We chose our five sectors by looking at a couple of things. We believe that they are all sectors that have room for major economic growth; they are all sectors that have significant economic impacts. And we have people who participate in the sectors. We chose them because they all have room for productivity. If you want to put capital in a place, you must unlock productivity. We also chose them because every one of them has commitment tied to our environment. So, they were sectors that were carefully chosen.
Can you give us a brief illustration of your figures from 2017 and your projections for the 2018 financial year?
In 2017, we demonstrated resilience amidst macro-economic challenges that weigh on credit expansion, asset quality and capital adequacy to record a large positive performance for the year. Although, the interest rate environment last year was also very unfriendly as a result of aggressive monetary policy, we nonetheless saw an improvement on our return on equity, which was nine per cent in 2017; and we also saw other numbers which have grown to 12 per cent, and we believe that the trend will continue throughout the year. We also saw significant improvement in our liquidity, which drives our ability to continue to earn.
2017 was 33 per cent; at the end of the third quarter of this year, it was 39 per cent. We have also seen cost-to-income ratio, as a result of the investment we are doing. It has been above 70, and our expectation is to bring it down to less than 75 per cent in the course of our journey to 2018.
The numbers for first quarter, when you put them against 2017 numbers, are an indicative of the fact that we are now at The Point whereby the work we have done will begin to deliver results. You saw a gross earnings’ growth of 20 per cent in 2017; we believe that if we continue with the first quarter’s trend, that growth will be closer to 40 per cent, than
20 per cent.
In the first quarter, the gross earning was under 40 per cent. We have also seen five per cent growth in deposit; we estimate that the growth will cross over to 15 per cent in 2018. Moving away from that to the composition of our income, as you are aware, the interest rate environment last year was very unfriendly, as a result of aggressive monetary policy.
How would you assess the contributions of advancing technology to your growth trajectory?
We made a major investment in our technology platform that changed our core banking status. In the last two years, we have not only stabilised that platform, but have a stable platform in the industry. We are now at The Point where we are extending that to our customer’s experience. And you will see a massive investment we have made, ranging from payment platform to lending platform and to banking-transaction platforms that will improve our customers in 2018, and the years ahead.
We have also seen significant improvement this year, which informed our decision to begin to consider returning to the Market. We also have material improvement in our non-interest income. Two important lines have improved, and the first one is trading income where in the first quarter alone, we have had a higher profit in the entire 2017. We have also seen material improvement in our transaction income, which is on the back of the investment we have made in technology.
If you remember very well, when the mergers and acquisition happened in 2006, we were a bank that had a total asset of about N100 billion, from N100 million, meaning that in the period of 10 years, we have grown 10 times that size. This is also true of other important data, such as our growth earnings, which is also about 10 times of what it used to be.
Our capital is now a N100 billion, which is four times the regulatory requirement that ushered us into consolidation in 2006.
We are beginning to see our deposit grow 10 times bigger. One of the most important data and good news is that we closed 2017 with more than three million customers. This was about 300,000 when we started this journey.
So for us, the data is not just how well did we perform in 2017, but how well did we deliver on our commitment to our shareholders and numerous investors.
And in the last 10 years, it has been a story of consistency, meeting those commitments.
