Sterling Bank to Raise N27b From Money Market

Sterling Bank has disclosed plans to issue a N27 billion ($88.74 million) bond this year to boost lending.
The bank also announced that it has dumped the planned acquisition of another bank and will, instead, focus on increasing its retail customer base to drive organic growth.
Sterling’s Chief Financial Officer, Abubakar Suleiman, told Reuters the bank expected to get clarity on the economy by the end of the quarter, including interest rates.
He disclosed that the bank raised only eight billion naira last year via bonds because of high interest rates.
The central bank has kept interest rates high to support the naira, but the government has been selling debt at yields below inflation to reduce its borrowing costs, making it difficult for companies to issue bonds.
Suleiman said Sterling would set a loan growth target for 2017 after the bond sale but would look at between five and 10 percent.
The bank, according to Suleiman, decided to abandon its initial plans because of the high costs of doing an acquisition.
Sterling’s strategic plan had been to buy another Nigerian bank, based on the expectation that a 30 percent fall in the value of the naira last year would put pressure on banks to consolidate to recapitalise.
Suleiman said Sterling was now pursuing organic-led growth as most rivals were too expensive and did not offer many merger benefits that would add value.
The bank ended talks to buy Keystone Bank last year, but said at the time it wanted to raise funds as it looked at other targets.
“I don’t see any candidate right now. Besides, nobody is selling cheap, so it’s probably easier to grow organically,” Suleiman reportedly said.
Several other Nigerian banks have also shifted their business models after low crude prices helped to push the economy into its first recession in a quarter of a century.
Sterling had hoped that an official naira devaluation would push rivals to seek fresh equity capital. But “no material devaluation has happened yet,” Suleiman said, adding that it was now unlikely assuming Nigeria continues to build reserves.
He said the bank planned to generate half of its deposits from retail customers by the end of next year from around 35 percent now.
He further disclosed that the bank was targeting five million retail customers by 2020 using digital banking from 1.4 million accounts now.
“A big part of our investment is driven by retail. We are rebalancing the business mix,” he added.