Last Update31 Jul 25
WaneInvestmentHouse made no meaningful changes to valuation assumptions.
Sterling Financial Holdings Company Plc – H1 2025 Performance Review
Thesis: Sterling Financial Holdings Company Plc (Sterling Holdings) demonstrated a strong financial performance in H1 2025, marked by significant growth in profitability and operational efficiency. These results affirm the company's solid fundamentals and robust growth trajectory, supporting a positive investment outlook with moderate caution due to rising cost pressures and macro-financial risks.
Key Strengths
- Strong Earnings Growth
- Profit after tax surged by 157% from ₦16.26 billion in H1 2024 to ₦41.78 billion in H1 2025.
- Quarter-on-quarter, Q2 2025 profit more than doubled to ₦24.54 billion (Q2 2024: ₦8.76 billion).
- Robust Operating Income
- Operating income grew by 61% YoY to ₦142.87 billion, driven by:
- Interest income up by 38% (₦167.16bn vs. ₦120.88bn).
- Fee and commission income rose by 45% to ₦22.07bn.
- Other operating income grew almost 3x, from ₦3.72bn to ₦10.37bn.
- Operating income grew by 61% YoY to ₦142.87 billion, driven by:
- Improved Asset Quality
- Credit loss expense increased marginally by 17% YoY, but remains low relative to asset growth, suggesting healthy loan book quality.
- Loans and advances grew by ₦79.14 billion (+7%) from ₦1.10 trillion to ₦1.18 trillion.
- Balance Sheet Expansion
- Total assets expanded by ₦540 billion (+15%) from ₦3.54 trillion to ₦4.08 trillion.
- Deposits from customers increased by ₦257.7 billion (+10%), reflecting continued customer trust and liquidity inflow.
- Capital Strengthening
- Shareholders' equity grew from ₦305.2 billion to ₦375.1 billion (+23%), driven by retained earnings and share premium accretion.
- EPS increased from 56 kobo to 89 kobo, indicating improved shareholder value.
Key Weaknesses / Risks
- Cost Pressures
- Total operating expenses rose by 37% to ₦92.1 billion, driven by:
- Higher personnel expenses (+73%)
- Rising general and administrative costs (+34%)
- Increased operating and depreciation expenses
- Total operating expenses rose by 37% to ₦92.1 billion, driven by:
- Declining CBN Cash Reserves
- Cash and balances with CBN dropped from ₦867.1 billion to ₦760.7 billion, potentially limiting near-term liquidity buffers.
- Heavy Reliance on Interest Income
- Although diversified, net interest income still represents a large portion (68%) of operating income, exposing earnings to rate and credit cycle risks.
- Rising Leverage
- Borrowed funds rose by ₦32.6 billion (+15%) while debt securities issuance remains unchanged. Funding mix needs careful monitoring.
Sterling Financial Holdings Plc is a fundamentally sound and growing institution with expanding earnings, improving asset quality, and a strengthening balance sheet. Investors seeking exposure to Nigeria’s mid-tier financial sector may consider accumulating the stock at current levels, particularly if trading at modest valuation multiples relative to its earnings trajectory.
However, investors should monitor cost escalation trends and regulatory risks tied to liquidity ratios and capital requirements.
Valuation Catalyst: With earnings per share at ₦0.89 in H1, annualized EPS may exceed ₦1.70, providing a compelling case if the stock trades below 8x forward P/E or 1.2x book value.
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Disclaimer
The user WaneInvestmentHouse holds no position in NGSE:STERLINGNG. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.