Has Yemi Adeola Given Up ?

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Yemi Adeola has an intimidating Curriculum Vitae,CV, to be successful and to lift any bank from obscurity to a glorious height in the corporate world.

Academically , he was superlatively loaded . Mr. Adeola holds a bachelor’s degree in Law from Obafemi Awolowo University, is a fellow of the Chartered Institute of Bankers of Nigeria, Member Chartered Institute of Arbitration (CIARB) and Member, Board of Trustees, Association of Banks’ Legal Advisers and Company Secretaries (ABLACS). He is an alumnus of Harvard Business School, Stanford Business School, University of Oxford, and the Wharton Business School of the University of Pennsylvania. He is also a John F. Kennedy Scholar.

His wealth of experience also confirmed the view of his admirers. He years of rich experience in banking, finance, law, and corporate consultancy. He worked at PricewaterhouseCoopers as a Consultant, Legal and Corporate Advisory Services at Citibank, Nigeria where he rose to the position of Executive Director, Public Sector, and Infrastructure Banking. He was the Deputy Managing Director in Trust Bank of Africa Ltd from 2003 – 2005.

So when he was appointed the Managing Director of Sterling Bank in 2007 , to some analysts and observers in the financial industry, he was a round peg in a round hole and a fitting candidate to the throne. He had surely earned his stripe in the high intensity, high adrenalin-pumping banking business in Nigeria as he was regarded a master strategist. With operating skills and strong attention to minute details that would make all the difference on both the top line and the bottom line, Sterling Bank was believed to be in a right hand

However, throughout the eleven financial years of his tenure as the Chief Executive Officer of the bank it was a hope gone sour. Despite his impressive CV, his vast experience and exposure,sadly, his performance is not only unimpressive but also at variance with his intimidating credentials going by the facts and figures available to this magazine. Under the leadership of Adeola , the bank has performed below the expectations of investors as a public liability. Sterling Bank under his watch has also failed to create competitive values for its investors.The much anticipated success in the areas of profitability, shareholders’ returns and capital gain haveremainedamirage.

Figures from the bank’s financial statements confirmed this view during the tenure of Mr Adeola between 2007 and 2018 . Though he started well with a supersonic growth of the.bank’s profit from N621m at the end 2007 financial year to N6.5b in the same period in 2008 . But the bank could not sustain this momentum till he left the bank as its CEO in 2018 .

Its profitability became stunted in the first five years under him with a loss N6b in 2009 ; it backtracked in 2010 to N4b compared to 2008 before it achieved N6.6b in 2011, perhaps with the acquisition and integration of Equatorial Trust Bank.Between 2012 and 2016 , the pace followed the same trend , growing in a snail speed from approximately N7b to N8.3b,N9b and N10.3 before it backtracked steeply N5.2b. The bank under Adeola sustained its roller coaster attitude between 2017 with N13.5b profit in 2017 and N9b in 2018 before he exited the bank.

What excuse did Adeola have to have left this bank staunted? The only excuse was the relative smaller size of its financial asset to most of the bank’s rivals as at the time of the consolidation exercise that brought the bank into the system ;the only defence available to him is to say if we had more resources we could have performed better .

But that could have not been enough. What cannot be disputed is that a corporate entity could only suffer this fate where the dominant strategy frame pays much attention to the task of resource allocation . Resources, it is rightly assumed, are scarce .But isn’t it equally top management’s job to effectively multiply a company’s resource base through creative approaches to resource leverage? Is leverage any less than allocation? If not , why the almost exclusive preoccupation with the allocational task ?

This issue is that where a leader views strategy as stretch and leverage, the size of resources at the disposal of a leader may not have wrecked any significant havoc on the fortune of a corporate entity. The problem with most leaders in the shoes of Adeola is not lack of resources but to many priorities, too little stretch and too little creative thinking about how to leverage resources. Analysts believed showering them with more resources, in the absence of a fundamental improvement in their capacity to leverage resources would provide no more than temporary relief of the frustrations .1 Resource is not a good predictor of future industry leadership xxx.

Adeola is also blamed for his inability to competitively grow the bank .The goal for any company intent on capturing a significant share of future profits in a new opportunity arena is to maximize its share of influence over the trajectory of industry development.
Competition to maximize share of influence is part of the broader competitive battle to maximize one’s share of future profits.
A company’s share of influence and share of future profits is determined by four factors: its capacity to build and manage coalitions (accessing and harmonizing complementary resources residing in other companies); its success in building core competencies central to the provision of customer value in the new opportunity arena (only by possessing a critical or “core” competence can one hope to profit from the future); its ability to rapidly accumulate market learning (racing to identify just where the “mother lode” of demand is in an emerging market); and its global “share of mind” or worldwide brand presence.

The above view may not be farfetched. Core competence, the capabilities that underlie leadership in a range of products or services,is a gateway to the future.Sequel to this, a key challenge in competing for the future is to preemptively build the competencies that provide gateways to tomorrow’s opportunities, as well as to find novel applications of current core competencies.

Any company that wants to capture a disproportionate share of profits from tomorrow’s market must build the competencies that will make a disproportionate contribution to future customer value.

Unfortunately ,few companies understand how to leverage existing core competencies beyond the boundaries of current business units to create new competitive space.
;even fewer still have a clear, well-articulated agenda for building entirely new core competencies. Any company that lacks such a point of view is likely to be preempted in the markets of the future. That was the ugly fate under the leadership of Yemi Adeola as the Managing Director of Sterling Bank till he exited the bank in 2018 .

Though with the baton given to Suleiman Abubakar , the bank experienced an unusual profitability growth from N15b in 2021 to N19.3b in 2022 , the biggest jump ever , despite this, Sterling Bank has remained a laggard it was from the begining .

The most embarrassing was that , despite the above unimpressive performance ,Adeola was brought back as the chairman of its board of directors. He was brought back lead the body that is responsible for overseeing the strategy, direction, and performance of a company. The key responsibilities of this body is setting strategic direction ,approving and monitoring the company’s strategic plan;reviewing business plans, evaluating and approving business plans, budgets, and forecasts ; monitoring performance,overseeing the company’s performance and making adjustments as needed;ensuring governance and compliance or ensuring regulatory compliance ,ensuring the company complies with relevant laws, regulations, and industry standard ;maintaining governance framework ,establishing and maintaining a robust governance framework, including policies, procedures, and control and overseeing risk management by identifying, assessing, and mitigating risks that could impact the company.

Most importantly, this body is responsible for selecting, evaluating, and compensating the CEO and ensuring a robust succession planning process is in place for key positions. Even in this new capacity,the bank’s engine room , his return has not made any difference

The damage done to the financial health of Sterling Bank came up vividly when it performances are compared over time. The most audible message the brand continues to echo is stauntedness. A detailed analysis of its performance in 2024 confirmed this as much from various performance perspectives.

Its impaired strategic becomes more clearer when an organisation is bench-marked or subjected to comparisons .First, assessing the bank by historical comparison or how much an organisation is improving over time , in order to identify any significant changes ,indicates a roller coaster performance ;bench marking it to industry norms/ standards by looking at the comparative perspective of the other organisations in the same industry or sector sends out miserable insights associated with a laggard ,and when a world class and ambitious yardstick best in-class practiceis adopted to assess Sterling Bank it raises heavy concerns .

Sterling Bank: 2024 Full year results

From the face value it is tempting to conclude that the fortunes of this bank have improved with return of Adeola as the Chairman,Board of Directors of Sterling Bank. Its Gross earnings hit N328.349 billion , a +54.21% YoY increase .Sterling Holdings pre-tax profit surges by 97% to N44.753 billion in 2024 while its Profit after tax grew by 73.4 % from N21,584b to N37,522b.

But to think so is a big error , the leopard has not changed its spot when Sterling Bank is subjected to certain critical performance measures.A historical comparison could show how much an organisation is improving over time and identify significant changes, but it could be very deceptive. For instance while the bank recorded an impressive jump between2023 and 2024 financial years , its market share and profitability remained insignificant in an absolute term and relative to others ; the percentage jump or increase has not changed its strategic position or status as a glorified community bank even among the tier 2 banks it belongs.

There is no indication that the bank has gained any competitive advantage and it is more likely that it may lose out of the market with a rise in the customer expectations and the performance of competitors. Moreover, the danger in it is that relying on this yardstick to measure performance could lead to complacency since it is the rate of improvement compared with that of competitors that is important.

Its insignificant market share or position in terms of the volume its revenue and profitability becomes clearer when juxtaposed with its peers among the tier 2 banks .As at December 31, 2024, FCMB Group’s gross earnings were N794.8 billion, while its Group’s profit after tax for the year ending December 31, 2024 was N107.9 billion. The gap between Sterling Bank and Fidelity Bank and Stanbic IBTC is more embarrassing in terms of revenue and profitability despite the fact that the two banks are equally classified as tier banks , indicating Sterling Bank is just a dot on the industry map .Other indicators demonstrating its stauntedness are its assets and deposit base.

Benchmarking Sterling Bank against best in class performance wherever it may be found is not even desirable with its poor trajectory relative to its peers among tier 2 banks .

The signals from the management remain its inability to grow the bank both in terms profitability and revenue due not only to its limited resources but incompetence to leverage resources.

The negative impacts of the above managerial ineptitude are not insignificant. Its share price has remained at a miserable class as it has refused to cross to the medium stage .Rule 15.29 of the Rulebook of The Exchange, 2015 (Dealing Members’ Rules) notes that equities priced above N5 per share for at least four of the most recent six months of trading or new security listings priced above N5 per share at the time of listing on NGX are Classified as Medium price stock. Sterling Bank has not been able to satisfy this condition.

The above ugly scenario may not be farfetched. Investors are not only interested in a company’s profitability, they are equally interested in its capability to generate better value for money and service delivery as well .

Measuring Sterling Bank in terms of its effectiveness relative to its peers shows its internal operational efficiency remains its biggest headache .This is particularly so when its shareholder value ,achieved through revenue growth and productivity gains, such as cost reduction and efficiency gains measured by proﬁtability or share- price performance , are considered.

One performance indicator that confirms its weakling position is the profit margin , a financial ratio that measures the percentage of profit earned by a company in relation to its revenue. Expressed as a percentage, it indicates how much profit the company makes for every naira of revenue generated. Between 2023 and 2024 its pretax profit margin improved from N10.70k to N13.60k from every N100 made as its revenue while post tax margin inched N10 to N11.43k indicating about N90 is pent to generate N100

Another indicator that displays its inefficiency is its Cost to income ratio, a financial metric that measures a company’s operational efficiency by comparing its operating costs to its operating income ; a performance yardstick essentially showing how much a company needs to spend to generate one naira of income; a lower ratio indicates greater efficiency, meaning the company is spending less to earn revenue, and is often used primarily in the banking sector to assess how well a bank manages its expenses relative to its income. This ratio which stood at 75 percent in 2023 compared to 72 percent in 2024 is an indication of a highly inefficient and less resourceful bank .

The reason for this may not far to seek in a bank with an abnormal high Net impairment loss on financial assets: N9.929 billion and total expenses of N145.194 billion +38.05% relative to operating income of N199.876 billion an increase of 42.56% YoY.Total expenses rose by 38% YoY to N145 billion, consuming 76% of net operating income after impairments.This indicates elevated cost pressures, which eroded its profitability despite revenue growth.

Moreover, while the bank’s customer Deposit grew at 39.37% to N2.568 trillion reflecting a good liquidity position ,its interest expenses on the same customer deposits increased by 74% YoY, indicating that the bank is paying more to attract and retain deposits.

Despite the sharp rise in interest expenses, its share of total interest expenses declined slightly by 2% YoY, suggesting that other funding sources (such as deposits from other banks, borrowings or debt securities) may be contributing more to overall costs.
Specifically, interest expenses paid on bank’s deposit surged by 403% YoY increasing their contribution to total interest expenses to 17%. The bank’s rising costs demonstrates lack of strategic cost control and operational efficiency improvements that are crucial to sustaining long-term profitability .

The above ugly scenario is not what the bank leadership promised its stakeholders particularly its shareholders . Its mission is to consistently deliver the products and services which enhance their financial success ,to deliver solutions that enhance stakeholders’ value, understand the needs of each customer in the communities we support while its vision is to be the financial institution of choice, become the preferred destination for investment capital,promote sustainable investing ,advance an inclusive and resilient economy and shape Nigeria’s financial landscape for the better.Its core values are customer focus, integrity, teamwork, and excellence and its to enrich lives ,support and collaborate to improve the lives of the people in communities where we do business

However, as opposed to its stated strategic purposes , its strategic position has remained that of a weakling , battling with size disadvantage, inefficient operations, and poor asset quality for almost two decades .

Negative Impacts On Stakeholders’Trust And Confidence.
The implication of its unimpressive performance on stakeholders has heavily impinged the trust and confidence upon which banking is fundamentally built .

The bank’s less competitive capability to effectively manage and deploy resources to generate competencies and outperform competition in some critical areas is the key driver of the weak trust and confidence from its stakeholders.This weak point is confirmed by its inability to generate competitive advantages to outperform competition in profitability and earnings, quality ,asset , high funding cost ,operational efficiency as well as its market dynamic.

The reason for this may not be far to seek. When a bank is unable to deliver up to the expectations of its stakeholders across five critical constituencies , the trust is shaken .In the surplus units individuals and institutions that deposit their funds in banks expect the bank to ensure the best possible term in rates of interest and maturity structures and the maximum liquidity to enable them to have the funds back when they want them , or as agreed.Though its customer deposits hit N2.568 trillion , a +39.37% increase indicating some elements of trust and confidence ,but at what expense? Its interest expenses on customer deposits increased by 74% YoY, indicating that the bank is paying heavily attract and retain depositors . Every bank pays to increase its deposit base , however at a rate like this , the stakeholders confidence and trust is bought at a higher price to increase its deposits .

The same reecho in the deficit units from the borrowers who rely on banks for funding.They want to borrow when they need the funds and as cheaply as possible .Like the lenders ,the borrowers also impose the obligation of maximum liquidity on the banks to enable them to obtain funds when they need them; it indeed lived up to this. Loans and advances to customers inched up to N1.104 trillion ,a+23.22% increase YoY, but a bank is good when it lends money safely and profitably.

For years , particularly under Adeola , a big drawback on the fortune of this bank were heavy loads of toxic loans . Fortunately, in the 2024 financial year, the bank’s non-performing loans ratio has reduced significantly but more to the fact that its management prefer to minimize risks , an option that is double-edged.

However, those worst hit by its uninspiring performance are the shareholders or its investors. They expect maximum or adequate returns on their investments in order to remain invested in the bank and to be willing to continue to provide additional resources and when needed. Bu this has remained a biggest challenge to the bank’s leadership.

Regulatory authorities or the bodies that ensure prudent risk management within the sector, still keep eagle eyes on this bank with high level of loan impairments yearly ;for the community ,the society within which the bank operates its contribution to the to economic stability has only been limited by its resources

Sterling Bank’s Strategic Choices :How Effective?

In a situation like this, a corporate leadership is expected to take some strategic choices to outperform competition and improve his or her company’s strategic position . First , such a leadership could deploy the available competitive strategies to gain advantage and to outperform competition at a business level position in relation to its competitors ; it could compete in a market either on the basis of cost , differentiation, by being more ﬂexible and ﬂeet-of-foot than competitors or on a more cooperative approach to competitors appropriately to gain competitive advantages over ohers .

To change its less impressive strategic position, strategic, it could reshape its current strategic direction in terms of which products, services and markets to pursue. While some choose to focus on just a few products ,services and markets, others could decide to be much broader in scope, perhaps become very diversiﬁed in terms of both prod- ucts (or services) and markets by creating new products or entering new territories by adopting international strategy or transform its operations through innovation and entrepreneurial strategy.

It could also make a choice as regards methods by which to pursue strategies, to either pursue growth independently by organic development or inorganically by acquisitions or strategic alliances with other organizations.

Weak Leadership As A Key Challenge

No doubt , the leadership of Sterling Bank is neither obvious nor ignorant of the about the availability of the above strategic choices that could be used to gain advantage and outperform competition . However, there are several factors that could hinder the success of those options or strategic choices .

Most importantly, the strategic capability of an organization is a decisive factor and this is the only weapon for responding to the challenges or forces in the operating environment . No doubt , in a situation where a company is battling with inadequate resources and incompetent leadership ,negative stakeholder influences and obsolete organization culture, it may be difficult to upturn a badly impaired strategic position.

People are behind strategy ×÷÷

For instance, the expected performance outcomes of certain strategies may not live up to the stakeholders expectations if a strategy doesn’t address the circumstances in which an organisation is operating or its currentstrategicposition; it may not also be feasible if the doesn’t have the resources and competences to deliver a strategy.

To avert the above, knowledgeable strategic leaders ensure their strategic choices, or options, potentially available to their organizations for responding to the positioning issues ,are made in the context of an organisation’s strategic position.

More importantly, whether a strategy is appropriate or not , whether it delivers or not is a question of its implementation because the potential strategic choices will only be revealed in action. In other words ,the most critical factors are what happen at the implementation level of strategy not merely the strategic choices or purposes intended.

Limited Resources and Competences

No doubt , the less inspiring position of Sterling Bank in the industry could be pinned down to the qualities of resources and leadership competencies.

The above unimpressive performance in 2024 financial year and several years before it could be linked to the inability of the bank’s leadership to respond with the above strategic options to the increasingly difficult and changing macroeconomic forces at work from the external environment and internally within the industry, its obsolete historical and cultural values as well stakeholders influences particularly on how the bank is governed with appropriate resources and competences by its leadership .

Strategy concerns an organisation’s long-term direction and one important dimension of this is to create new value and competitive advantages for the future . However, it has been absolutely difficult if not impossible for Sterling Bank to gain competitive advantages against its competitors with bigger assets that continue to enjoy scale advantages on cost .

The only escape route is to be a niche player or to rewrite the rules of the game. Even with these options, only a leadership with necessary skills take that advantage. The bigger banks are equally operating there with bigger resources and better competences. So Sterling Bank is absolutely in a dilemma.

The only option for Sterling Bank is to grow its resources competitively and manage them competently too . This view may not be farfetched. Organisations need not only build competitive advantages in relation to current domestic and international competitors, but to identify growth opportunities for the future identifying opportunities and creating new products and services, technologies, resources and capabilities. This is signiﬁcant both for start-ups in new indus- tries and for established organisations in mature ones.

Consequently ,Sterling Bank is dire need of a leadership with well versed in strategic entrepreneurship ,combining strategy and entrepreneurship with both advantage-seeking strategy activities and opportunity-seeking entrepreneurial activities to create competitive value . While a company’s strategy is expected to support the leadership efforts forming competitive advantages, such a leader’s entrepren- eurship skill is expected to contribute to the identiﬁcation of new opportunities in the market or environment ; entrepreneurs innovate by identifying and exploiting new ideas and inventions that result in innovations.

The strategic entrepreneurship and its outcome, innovation, are essential for the long-term survival and success of all organizations ;entrepreneurship and one of its most central ingredients and outcomes, innovation, are fundamental not only for creating value for customers, organisational growth and prosperity, but also generally for today’s economy ; innovation is also a key aspect of business-level strategy and models with implications for cost, price, differentiation and sustained competitive advantage. Moreover, promoting greater innovation and entrepreneurship is crucial to the improvement of all ﬁrms and public services.

But only a leader that has what it takes to build a company competing for the future could achieve above feat and change a badly impaired strategic position, not dillitantes ; not for a merely intellectually curious but for those not content to follow, who desire to rewrite the rules of the game ,unafraid of orthodoxy, more inclined to build than to cut , those concerned to make the difference than making career and those who absolutely committed to staking out the future first .

To develop a prescient and distinctive point of view about the future or for a company to compete for the future ,a leader must be able to answer fourcriticalquestions:, what new core competencies will we need to build,
what new product concepts should we pioneer, what new alliances will we need to form, what nascent development programs should we protect, and what long-term regulatory initiatives should we pursue.
It takes substantial and sustained intellectual energy to develop high-quality, robust answers to the above critical questions

In the course of answering the above questions a three stage battle would be for in competing for the future: it has to fight for intellectual leadership— developing industry foresight and crafting strategic architecture.
At the first stage the leadership must conceive of an alternate industry structure or a new opportunity arena with a goal to out-think and out-imagine competitors. At another stage such a leader must shape and foreshorten the migration paths between today’s markets and industry structure and tomorrow’s. At this satage , the leadership needs to actively shape the emergence of that future industry structure to the company’s own advantage with a goal to out-flank and outdistance competitors.

Competition to shape migration paths is, like competition for intellectual leadership, premarket or extramarket competition in that there is little or no direct, product-to-product rivalry between firms. However, at the third stage , the competition is for the market power and position once the new opportunities “take off” and the new industry structure begins to form. Here , much of the technical uncertainty has been resolved, there is a tangible product or service to offer, the value chain has taken a definite form, and the complementary roles of buyers and suppliers are more or less clear. At the third stage , though one could knowswho won but could only gained little insight into the training and mental preparation that went on before the race or into the race tactics employed that positioned the winner for the finish.

Specifically, at those three stages of the competion for the future, a leader that expected to transform and outperform competition must be well armed with the powers of strategic foresight, strategic architecture, strategic intent and leverage.These are missing links in the Sterling Bank battle for the industry leadership .

Without a strategic leader with foresight and wherewithal to build a new industry strategic architecture, it will be difficult if not impossible, for Sterling Bank to change from its current uninspiring strategic position
The reason for this may not be far to seek . The current structure only favours the existing industry leaders. A new industry foresight is naturally imperative to get the best and new possible assumption based on the future and thereby develop the prescience needed to proactively shape the new industry evolution ; it is essentially the competition to establish one’s company as the intellectual leader in terms of influence over the direction and shape of industry transformation.

Foresight helps managers to answer three critical questions :What new types of customers benefits should we seek to provide in the a decade or more time ? What new competencies we will need to build or acquire to offer those benefits to customers ? How we will need to reconfigure the customers interface over the next several years ?
In other words, foresight is a point of view about the future , a point of view about benefits.

Moreover , it gives a company the potential to get to the future first and stake out a leadership position ; It informs corporate direction and allows a company to control the evolution of its industry. And thereby its destiny .The trick is to see the future before it arrives.Foresight is what FBN past leadership lost that gave banks like Zenith and GTCO an edge over it .

But the future must not only be imagined by the new leadership of FBNH , it must be built faster or uniquely than its rivals . Just as an architect must be capable of dreaming of things not yet created and also be capable of producing a blueprint for how to turn the dream to reality, Sterling Bank leadership must do the same .
But getting to the future first takes more than thoughtfully conceived strategic architecture; strategic architecture is the map , but what about the fuel? The fuel for the journey is not the money alone, after all ,many resource rich firms have surrendered the future to poorer rivals. To avert this consequence , the leadership of this bank greatly needs to co-opt the emotional and intellectual energy of the employees that provides the fuel for the journey
In other words , its CEO’s ability to mobilize every ounce of emotional and creative energy in the bank is essential. Strategic architecture is the brain; strategic intent which is the heart and implies a significant stretch for the organization is,indeed, very imperative.
Finally , the current leadership must be able to demonstrate that it is possible to do more with less with core competences in critical areas. Core competences, the capabilities that underlie leadership in a range of products or services are what are imperative for the leadership of Sterling . This is because a key challenge in competing for the future is to preemptively build the competencies that provide gateways to tomorrow’s opportunities as well as to find novel applications of current core competencies. Any company that wants to capture a disproportionate share of profits from tomorrow’s markets must build the competencies that will make a disproportionate contribution to future customer value.
The message from the above analysis is simple: to become an industry leader or sustain leadership is not for the dilettantes .
With the above explanations it is not disputable that Sterling Bank must fight and win three -stage related and interdependent battle for the future to be competitive .
First, it needs to develop industry foresight and craft its strategic architecture to gain the industry intellectual leadership just as it has to foreshorten the migration paths to the future. In other words, it has to be in control of what it takes to shape and foreshorten the migration paths between today’s markets and industry structure and tomorrow’s.

This is because it is impossible for a company that lacks the potentials to actively shape the emergence of the future industry structure to its own advantage to capture to clinch industry leadership .Because Sterling failed to do either of the above it has been difficult for the bank to gather competitive power to capture the market power and position ,the third stage in a battle to an industry leadership, relative to its peers .

Although Sterling Bank has been engaging itself in re engineering its processes to some extent to create the future, it has not demonstrated the capability of “re engineer ” its industry. The logic is simple: to extend leadership a company must eventually reinvent leadership, to reinvent leadership it must ultimately reinvent its industry, and to reinvent its industry it must ultimately regenerate its strategy ; surely , the top management’s primary task is reinventing the industry and regenerating strategy, not re engineering processes.
To achieve this , Sterling must change in some fundamental ways the rules of engagement in this long-standing industry, redraw the boundaries between its industry and others ; and/or create entirely a new industry to its advantages. This is more so as the capacity to invent a new industry and reinvent old ones is a prerequisite for getting to the future first and a precondition for staying out in front.
Consequently, Sterling is in a dire need of a leadership that could think differently competitively, organizationally and strategically to regain its industry leadership.
Competitiveness
Sterling Bank is traditionally pro-small biased . This is not abnormal what is important is the capacity to stretch and leverage; even bigness without stretch and leverage is obesity just as smallness without stretch and leverage is impotence.
The current leadership of Sterling must acknowledge that the starting resource positions are a very poor predictor of future industry leadership. A firm can sit atop mountains of cash and command legions of talented people, and still lose its preeminent position. Likewise, a firm can sometimes overcome enormous resource handicaps and successfully scale the heights of industry leadership. In other words, getting to the future first is more a function of resourcefulness than resources.
Moreover , the bank needs to re-strategize , crafting generic strategies like cost containment and niche dominance into supporting approaches that develop uncontested markets . It needs relearning too , letting go of tiresome habits and pick up new processes, procedures, and policies designed to reshape their future.

Organisation
Moreover , as opposed to its highly centralized ,overly bureaucratic control oriented , big brain ,technology led organizational archetypes of the 1960s and 70s, this bank’s leadership must be capable of mobilizing employees at all levels around a strategic intent better , leveraging resources across organizational boundaries ,finding and exploiting white space opportunities , redeploying core competencies, consistently amazing customers , exploiting new competitive space through expeditionary marketing ,and building banner brands .All these require new ways of thinking about the organization .
This is confirmed by the fact that the watchwords of the engineers of modern corporation have changed radically to devolution, empowerment ,focus ,entrepreneurship ,personality accountability and customer led , and Sterling must be adapt itself to this new organizational drive.
In pursuit of governance excellence, a top-to-bottom review of the bank’s people, processes, and procedures from the perspective of tomorrow’s needs that contrasts with today’s wants is imperative . It needs a deliberate acculturation process ;the bank needs to set a new culture that breaks away sufficiently from the past to establish a more professional future considering customers’ experiences and expectations.
Strategy
Last but not the least , Sterling needs a new perspective on what is strategic ; it needs a new perspective on what it means to be strategic ; it is not just how to maximize share and profits in today’s businesses , but what it want to be as a corporation in the future time, how it could reshape this industry to its own advantage ,what new functionalities does it want to create for customers and what new core competence it should be building .It needs a new process for strategy making ,one that is more explanatory and less ritualistic ; it needs to apply new and different resources to the task of strategy making , relying on the creativity of hundred of managers and not just on the wisdom of a few planners . .
Its Board and management is expected to find a way to re imagine the bank’s service delivery proposition and redefine its competitive advantage in a highly competitive financial market space . The fundamental issues needed to be addressed while its service delivery channels and user experiences and interfaces needed some up scaling .

.Without a strategic leader with foresight and wherewithal to build a new industry strategic architecture, it will be difficult if not impossible, for Sterling Bank to change from its current uninspiring strategic position
The reason for this may not be far to seek . The current structure only favours the existing industry leaders. A new industry foresight is naturally imperative to get the best possible assumption based on the future and thereby develop the prescience needed to proactively shape the new industry evolution ; it is essentially the competition to establish one’s company as the intellectual leader in terms of influence over the direction and shape of industry transformation. Foresight helps managers to answer three critical questions :What new types of customers benefits should we seek to provide in the a decade or more time ? What new competencies we will need to build or acquire to offer those benefits to customers ? How we will need to reconfigure the customers interface over the next several years ?
In other words, foresight is a point of view about the future , a point of view about benefits.

Foresight is what FBN past leadership lost that gave banks like Zenith and GTCO an edge over it .

.Unlike the first two stages that require shaping migration paths and gaining the intellectual leadership that are premarket or extramarket battles, this third stage is a market-based competition and the outcomes here expose the performance of every player in the first two battles;it involves a direct product-to-product or service to service rivalry between the banks ;at the third stage , much of the technical uncertainty has been resolved, there is a tangible product or service to offer, the value chain has taken a definite form The fact is that once the new opportunities “take off” and the new industry structure begins to form, what is left is the battle for the market power and position.

Although Sterling Bank has been engaging itself in re engineering its processes to some extent to create the future, it has not demonstrated the capability of “re engineer ” its industry. The logic is simple: to extend leadership a company must eventually reinvent leadership, to reinvent leadership it must ultimately reinvent its industry, and to reinvent its industry it must ultimately regenerate its strategy ; surely , the top management’s primary task is reinventing the industry and regenerating strategy, not re engineering processes.
To achieve this , Sterling must change in some fundamental ways the rules of engagement in this long-standing industry, redraw the boundaries between its industry and others ; and/or create entirely a new industry to its advantages. This is more so as the capacity to invent a new industry and reinvent old ones is a prerequisite for getting to the future first and a precondition for staying out in front.
Consequently, Sterling is in a dire need of a leadership that could think differently competitively, organizationally and strategically to regain its industry leadership.
Competitiveness
FBNH is traditionally pro-small biased . This is not abnormal what is important is the capacity to stretch and leverage; even bigness without stretch and leverage is obesity just as smallness without stretch and leverage is impotence.
The current leadership of Sterling must acknowledge that the starting resource positions are a very poor predictor of future industry leadership. A firm can sit atop mountains of cash and command legions of talented people, and still lose its preeminent position. Likewise, a firm can sometimes overcome enormous resource handicaps and successfully scale the heights of industry leadership. In other words, getting to the future first is more a function of resourcefulness than resources.
Moreover , the bank needs to re-strategize , crafting generic strategies like cost containment and niche dominance into supporting approaches that develop uncontested markets . It needs relearning too , letting go of tiresome habits and pick up new processes, procedures, and policies designed to reshape their future.

In a nutshell,to regain its in industry leadership position and get off the treadmill the management must answer four critical question :what new core competencies will we need to build, what new product concepts should we pioneer, what new alliances will we need to form, what nascent development programs should we protect, and what long-term regulatory initiatives should we pursue.
No doubt , it takes substantial and sustained intellectual energy to develop high-quality, robust answers to the above critical questions

Without a strategic leader with foresight and wherewithal to build a new industry strategic architecture, it will be difficult if not impossible, to answer the above .Moreover, for Sterling Bank to change its current uninspiring strategic position because the current structure only favour the existing industry leaders .

The new industry foresight is naturally to get the best possible assumption based on the future and thereby develop the prescience needed to proactively shape the new industry evolution .It is essentially the competition to establish one’s company as the intellectual leader in terms of influence over the direction and shape of industry transformation. Foresight helps managers to answer three critical questions :What new types of customers benefits should we seek to provide in the a decade or more time ? What new competencies we will need to build or acquire to offer those benefits to customers ? How we will need to reconfigure the customers interface over the next several years ?
In other words, foresight is a point of view about the future is a point of view about benefits,

Moreover , it gives a company the potential to get to the future first and stake out a leadership position ; It informs corporate direction and allows a company to control the evolution of its industry. And thereby its destiny .The trick is to see the future before it arrives.
Foresight is what FBN past leadership lost that gave banks like Zenith and GTCO an edge over it .

However, they must be answered ,otherwise , Sterling will not fare better a company that succeeds at restructuring and reengineering but fails to create the markets of the future; it will remain on a treadmill, trying to keep one strong step ahead of the steadily declining margins and profit of yesterday’s businesses; a bank with senior management not having a clear and broadly shared understanding of how the industry may be different ten years in the future ,“ with headlights not shining farther out than those of competitors, without a competitively unique point of view about the future , less in setting the new rules of competition within its industry ,not regularly defining new ways of doing business, or building new capabilities, and setting new standards of customer satisfaction , less a rule-maker than a rule-taker within its industry ; a bank without intent on challenging the industry status quo than protecting it or with senior management not fully alert to the dangers posed by new, unconventional rivals, with potential threats to the current business model not widely understood ; a bank with senior executives not possessing a keen sense of urgency about the need to reinvent the current business model, less on the task of regenerating core strategies but more much top management attention to the task of reengineering core processes, less at pursuing growth and new business development with as much passion than as it is pursuing operational efficiency and downsizing, with percentage of its improvement efforts less focuses on creating advantages new to the industry, and more percentage focuses on merely catching up to its competitors, with no competitors eager to benchmark it as it is to benchmark them, with its transformation agenda less offensive than defensive and more of a maintenance engineer keeping today’s business humming along, than an architect imagining tomorrow’s businesses.

STERLING BANK : UNEASY CALM OVER THE RETURN OF YEMI ADEOLA

If all an organization needs to gain a competitive advantage over its competitors and convince its investors that it has what it takes to deliver the best value for money were ambitious statements of purpose and vision ,then Sterling Bank Plc would have ranked a world-class corporate entity .

The bank’s statement of purpose on why it is doing what it is doing , why the organization is existing and why it is serving a higher purpose indicated a well articulated ambition as it prides itself in its purpose to ‘Enrich Lives ; even its vision statement on what it will achieve in the future, the results it wants to reach for, the measurable impact it wants to make is clear enough to inspire any investor as its overall business aspirations in its vision is to ‘be the financial institution of choice‘

However ,the above are far from the expectations of corporate stakeholders ;they look beyond these two statements . No matter the degree of glamour around statements of purpose and vision or how beautiful and ambitious such statements may be , no stakeholder take them seriously without some element of fear. To the corporate stakeholders ,particularly investors. the belief is that it is easier to talk the talk than to walk the walk .

What matters to the stakeholders is whether this bank has been able to enriched lives and become the financial institution of choice in the true sense of those statements . Unfortunately , Sterling Bank, when bench marked with its peers in the industry , has remained a corporate laggard .Good for those with that skepticism, a bank like Sterling confirms their fear .

This lacuna is raising questions .Is Sterling Bank Plc under any jinx to remain on treadmill perpetually ? From its inception as a product of the banking consolidation, the bank, an amalgam weaklings saved from extinction by the regulatory authorities, has continued to be uninspiring .The takeover of the distressed Equatorial Trust Bank by it did not help its case . Till today , the inability to turn it around for better competitive value creation has continued to raise serious concerns among its stakeholders. And the blame for this is put on the door step of its successive leaders at the driver seat of the bank that failed to discover the right joker for a much needed turnaround

Its stunted growth profile , miserable non dividend or capital gains delivered to its investors which could be pinned down to its inability to control costs and risk are all the manifestations of its laggard status restricted its progress when bench-marked with its peers and a best in class entity .The unimpressive fate of this bank is .particularly raising deep concerns .

To some observers the ugly fate of Sterling Bank could be traced to its its poor beginning as a bank consummated from four entities regarded as mere weaklings ; but to the others, its uninspiring profile is more a leadership question than any other factor .

Both sides have their reasons . To the former ,the bank was dead on arrival; Sterling Bank truly was poor in resources . But to the latter observers, the blame should be placed squarely on its past leaders who were believed to lack the expected capabilities to deploy the available resources appropriately and gain competitive advantage for the bank .

In fact , in some analysts views ,those in the leadership position of this bank were adjudged to have exhausted themselves of better idea or fast asleep at the switch before they were dropped . Sequel to this , to translate the above vision to reality and create competitive values for its stakeholders has become more difficult .

To those holding the past leaders for its uninspiring history , the excuse of Sterling Bank’s poor beginning is irrational , after all , there so many examples of companies that overcame seemingly insuperable handicaps and built positions of global leadership when they were under better leadership .At the domestic level ,Tony Elumelu achieved this feat by waking up a dead bank and renamed it Standard Trust which took over the old UBA.

For this , the claim of Sterling’s poor begginnig may not be farfetched . Relative to other resources at the disposal of any organization , people ,no doubt , are at the heart of strategy .The knowledge and experience of people can be the key factors enabling the success of strategies , tbut hey can also hinder success too .

For this reason, investors as well as other stakeholders are usually hyper mindful of those who are behind the wheels of the company they are interested in.

Unfortunately ,Sterling Bank has not been lucky to have a strategic leader with the sterling traits enough to deliver the above vision ; even though it needs this more than others going by its peculiar foundation , none of its past CEOs has demonstrated he could change its current uninspiring status quo .

Sequel to the above fact and fear , the recent appointment of Mr Yemi Adeola as the chairman of the Board of Directors of Sterling Bank Plc has been generating heated controversy, albeit a la subterranean .To some analysts , the second coming of Mr Adeola sounded more incredible when judged by his lethargic tenure as the Chief Executive Officer of the same between 2007 and 2018. The grouse is that since the merger was consummated the bank has remained on a treadmill particularly under Yemi Adeola who was in the saddle for more than a decade .

Mr Adeola is not the only issue raising deep seated concerns within and outside Sterling Bank . The removal of Abubakar Suleiman , the immediate former CEO of the bank who came in 2018 and the appointment of Mr Yemi Odubiyi, as the new Group Managing Director/Chief Executive Officer is another issue raising heated storms among its stakeholders

With the above recent development ,the fear is that its future still remains very bleak. The despair could be strictly pinned down to the lack of confidence on the new leadership . Adeola is believed to have exhausted himself . This more so as the bank is believed to have become competitively enfeebled under him ;the fear is that his return signals the continuation of lethargy ,convention and myopia that have become much more real and much more the substantial enemies of the bank’s turnaround .

Analysts believed the bank needs a new leadership with the capability to turn the bank around , and this , in their opinion is not Adeola ,not even in the new capacity as the board chairman regarded as the corporate think tank

The above uninspiring trend in any organization could be pinned down to certain attitudes that are associated with a corporate laggard . First ,when the leadership of a corporate entity is less than fully in control of its company’s future; when what it knows today , the knowledge and experience that justify their position in the corporate pecking order is irrelevant or wrong-headed for the future, this trend is not unexpected

.This could be more so when such a leadership is more of a maintenance engineer working on the present than an architect designing the future ; when the percentage of its advantage-building efforts focuses more on catching up with competitors as against building advantages new to the industry; when a leadership is better at improving operational efficiency than creating fundamentally new businesses and when what is occupying senior management’s attention are more about restructuring and re engineering rather regenerating its core strategies .

The corporate attitude of Sterling Bank is not different from the above . Looking at this bank , the high-profile initiatives that have been launched recently ,issues that are preoccupying its senior management, criteria and benchmarks by which progress is being measured ,track record of new business creation ,dreams and fears on the faces of employees as well s the company’s ability to shape that future and regenerate success again and again in the years and decades to come , all are a semblance of a company more deep neck at preserving the past than competing for the future.

Truly ,this bank’s current circumstance goes beyond what could be handled either by dillittantes or by a leader that is merely intellectually curious.

Sterling Bank , indeed, needs a leader that is not content to follow, the one who desire to rewrite the rules of the game ,unafraid of orthodoxy, more inclined to build than to cut , more concerned to make the difference than making career and one who absolutely committed to staking out the future first that can change the story of Sterling Bank .

From all indications , in the recent years what the bank embark on more than other things are restructuring and re engineering .Though these are important, but a company must be capable of fundamentally re conceiving itself, of regenerating its core strategies and of reinventing its industry and capable of getting different.

.The question now is: does the new CEO brought to replace Abubakar have the capability to outperform his immediate predecessor and turn the bank around ? Time will tell .

STERLING BANK: Staying Too Long on The Treadmill

Is Sterling Bank Plc under any jinx ? From its inception as a product of the banking consolidation, this bank, an amalgam of some weaklings saved from extinction by the regulatory authorities, has continued to display uninspiring and lethargic performance . It has remained on the treadmill perpetually as a glorified community bank .

Even, the takeover of the distressed Equatorial Trust Bank by it did not help its case . Till today , the inability of its successive leaders to turn it around and to create better competitive values has continued to raise serious concerns among its stakeholders; and it seems no hope yet to shake this toga off .

Hiding Under Disingenuous Yardsticks To Survive.

One observation on the embarrassing fate of Sterling Bank is its management desire to hide under a disingenuous yardstick to measure its progress to give the impression that all is well with the bank to its stakeholders.

But one .. of the critical features of a smart investors is consciousness for good and appropriate benchmarking standards for measuring success or progress of an organization.

There are three different bses for benchmarking of performance standards :.improvements on historical performancel, industry (sector) norms /standards and best in class which is beyond the industry in which an organisation currently operates. Of all the above standards , best in class is the feature that every investor prefers as the first two are fraught with potential dangers .

Managers are not oblivious of the strengths and weaknesses of each measuring standards. They give out what will be protect and promote their selfish interests of projecting their companies good image and ignorant and gullible investors are contented with that are projected to them yearly ..

Some investors of Sterling Bank are still operating within this frame of mind .Despite its less inspiring performance of Sterling Bank over the past few decades, the most unfortunate thing is that its miserable performance or weaker industry position relative to its peers is not clear yet to some unsuspecting investors or observers.;they are rather fixated with historical data which its management keeps flaunting year on year basis to sell the brand to its stakeholders. .

This clearly manifests in its profit figures over the past few years . For instance ,between 2017 and 2021 , its profit after income tax rose from N7.95b ,N9.47b ,N10.16b ,N11.11b to N13.40b; Profit after tax stood at N21.60bn in 2023 ,a financial year when virtually every bank delivered superfluous profit ,from N19.3b in 2022 .

It declared N16.3bn PAT in H1 2024 unaudited results compared to N10.7 in the corresponding period of 2023 . To some investors , with the above profitability scenario, the bank is making progress.

But the above narratives could only excite a naive observer or investor . Not everyone is gullible to be comfortable with incremental and leathergic growth of Sterling Bank over the years . The fact remains that yearly financial indicators relative to the previous year are nothing but disingenuous yardsticks

Serious stakeholders measure the progress and corporate performances of corporate entities holistically .They measure their progress relative to their rivals in the industry. .Analysts believed a scorecard by historical data is a ruse when it is not complemented with comparative analysis to determine the corporate position of an organisation’s health . The argument may not be disputable .Truly, when the above figures are compared with its peers and best in class players in the industry , Sterling Bank performance over the years have remained highly uninspiring.

Sequel to this , smart investors look beyond bench marking the performance of an organization in relation to previous years in order to identify any significant changes and to form their opinions on the health of any organization. They know the danger in it : it could lead to complacency on the part of the management.

Moreover, it is the rate of improvement compared with that of competitors that is important. They know some valuable insights about performance could be gleaned by looking at the comparative perspective with other organisations in the same industry or sector as well as when an organisation is compared with the industry best in class .

Those insights are better reflected in some critical success factors or product and service features particularly valued by some groups of stakeholders. Smart investors measure corporate performance by looking at some critical success factors relative to the sector average and industry best in class.

The reason for this may not be farfetched. An organisation’s strategic capability is a relative issue since it concerns the ability to meet and beat the performance of competitors. Sequel to this managers must understand performance standards.

STERLING BANK AND CRITICAL SUCCESS FACTORS : A Merely Treadmill Player

A strong company’s performance is rated not only by delivering threshold values to its stakeholders but by its ability to outperform its rivals in such areas considered as the critical success factors ; it is not by mere its survival .Critical success factors (CSFs) are factors according to Johnson and Scholes , are those components of strategy in which the organization must excel to out-perform competition.

To acihieve superior performance an organisation needs unique resources that critically underpin competitive advantage and that others cannot imitate or obtain – a long-established brand, for example. It is, however, more likely that an organisation achieves competitive advantage because it has dis- tinctive, or core, competences.

For a bank or any other economic agent to be considered competitive , it is expected to be delivering better values for money than its competitors in certain areas regarded as critical factors in its industry. But this has remained a tall ambition for the leadership of Sterling Bank .

Naturally , banking management is coterminous with risk management, a critical success factor that separates the men from the boys . In managing the risks ,a bank has to satisfy five main constituencies. One is the surplus units from which it borrows .These units demand the best possible term in rates of interest and maturity structures and the maximum liquidity to enable them to have the funds back when they want them , or as agreed ; the second constituency is the deficit units which borrow from the banks . They want to borrow when they need the funds and as cheaply as possible .Like the lenders ,the borrowers also impose the obligation of maximum liquidity on the banks to enable them to obtain funds when they need them .

In addition to satisfying the surplus and the deficit sectors ,the shareholders must also be satisfied .These require maximum or adequate returns on their investments in order to remain invested in the bank and to be willing to continue to provide additional resources and when needed .To the above critical success factor is added the fourth constituency , the regulatory authorities ,whose interest is to ensure that the bank does not undertake excessive risks and that it operates prudently and within stipulated regulatory requirements .

Finally , satisfying the community at large is also critical. As the provider of the environment within which it operates , a bank owes an obligation to the community to be a good corporate citizen, capable of maximizing the exploitation of the opportunities available and minimizing the threats in the environment .

The issues highlighted above are considered the critical success factors (CSFs) in banking. They are the product features that are particularly valued by a group of customers and, therefore, where the organization must excel to out-perform competition

However , different stakeholders may value any of the above product/service features to a greater or lesser degree .Consequently, from the potential providers’ viewpoint it is valuable to understand which features are of particular importance to a group of customers (market segment) that are known as the critical success factors.

Truly, Sterling Bank is surviving and living up to its stakeholders expectations on the above issues considered as critical success factors in banking .However, it has remained a threshold bank for decades .

The bank’s leadership inability to competitively grow its resources and deploy even the available ones to generate core competencies in critical areas , particularly to lend safely and profitably in the manner that could deliver superior values to its stakeholders, remains its critical handicap for a long time that hunted it for years . This laxity is worrying and the whole blame is on its weak leadership with its inability to generate competitive values to its shareholders.

This is palpably reflected in its miserable net interest margin, net profit margin, extremely high cost to income ratio and non performing loan ratio,all of which have led to its inability to deliver impressive value to its stakeholders.

More specifically, its share price that has failed to cross over to the medium from its small price category for decades, its uninspiring payout dividend and dividend yield are all sources of serious concerns to its stakeholders. A detailed analysis of the weak points or values delivered by the bank in the last few decades shed more light on the havoc wrecked on its existing investors, a situation that discourages some other potential investors.

UNINSPIRING DIVIDEND TO INVESTORS.

. A dividend is a reward paid to the shareholders for an investment in a company, and it usually is paid out of the company’s net profits ; a steady track record of paying dividends makes stocks more attractive to investors.

But the uninspiring dividend and capital gain available to the Sterling Bank stock investors is the most oblivious stigma that put off serious investors. .

Dividend history at Glance

2023 15k

2022 10k

2021 05k

2020 03k

2019 —-06k

2016 09 k

0 .2k

2014 25k

2013 20k

2012 20k

The pain of its shareholders could have been ameliorated and they would forgiven the bank for its miserable dividend if the company’s stock price is growing rapidly . But this is not case .

NET PROFIT MARGIN

Sterling Bank net profit margin , a metric that helps investors assess if a company’s management is generating enough profit from its revenues and whether operating costs and overhead costs are being contained., remains diminutive.

In the 2023 financial year, all its management could only convert every N100 made at the top line to N9.70k , the worst among the tier 2 banks in Nigeria. In other words , t achieved 9.7% as its net profit margin .

Between 2017 and 2023 it ranged from 9.5%, 8.2% ,7% ,6% 6 %, 11% and 9.7% respectively indicating the bank is converting less than 10% of every N1.00 revenue made at the top line to profit except in 2022 when it recorded 11percent . That is one of the reasons it can’t grow it share price convincingly . Companies that can expand their net margins over time are generally rewarded with share price growth as share price growth is typically highly correlated with earnings growth.

Diminutive Share Price and Market Value.

Failure of Sterling Bank to deliver good dividend or capial gain due to its miserable net profit margin has led to its diminutive share price growth and market value .

Sterling Bank stock has remained a small-price stock for lack of impressive fundamentals to drive it to the medium price stock category .

Rule 15.29 of the Rulebook of The Exchange, 2015 (Dealing Members’ Rules) notes that equities priced above N5 per share for at least four of the most recent six months of trading, or new security listings priced above N5 per share at the time of listing on NGX are Classified as medium price stock.

But Sterling Bank Plc has not traded above the N5.00 mark level and remained above the N5 mark up consistently for four months to be qualified for medium price stock .Therefore, it could not be reclassified from small-price stock to medium-price stock as it happened to FidelityBank last year ,.

STERLINGNG closed its last trading day (Wednesday, September 18, 2024) at 4.00 NGN per share on the Nigerian Stock Exchange (NGX), recording a 0.3% gain over its previous closing price of 3.99 NGN. However, it began the year with a share price of 4.29 NGN but has since lost 6.76% off that price valuation, ranking it 120th on the NGX in terms of year-to-date performance.

The question remains:, is this price fair? One of the most popular valuation metrics that determines an answer to the above question is the price-to-earnings ratio (P/E), which measures the share price of a stock as a multiple of its earnings. The closer this figure is to one or below one, the cheaper the stock. Using Sterling current share price of N3.99 and its trailing twelve months earnings per share (EPS) of N0.94 , the stock has a P/E ratio of 4.5x. This is below the banking sector average of 7.4 x.This lower P/E ratio suggests that the stock is undervalued compared to its peers, indicating that investors are paying less for each unit of earnings relative to other banks.This could be seen as an opportunity for investors if they believe that Sterling earnings will continue to grow.

But the problem with this bank is that its fundamentals are not saying the same thing , so investors may not be inspired to pay more in anticipation for better capital gain or dividend .

EPS

A good way to determine earnings to the investor is the Earning Per Share (EPS), which is the monetary share value, i.e., what every share issued by the bank will receive from declared earnings. The higher the EPS, the more profitable the bank is. Full Year EPS for Sterling Bank in the last five years from 2019 to 2023 comes to about 75k in 2023 from 67k in 2022 to 52k in 2021 ,39k in 2020 from 37k in 2019 . When the prevailing high of inflation is factored into the values given to its investors as mirrored by its EPS, this is nothing but miserable return to investors.

ROA

From the perspective of its assets contribution to its profitability or how efficiently it uses the assets its owns to generate profits , the same message of lethargic value is communicated by the bottom line . For every N1.00 naira in assets owned by Sterling Bank , they earn 0.82k ,0.86k ,0.89k ,0.86k and 0.83k between 2017 and 2021 .In 2022 , it stood at N1 and went down to 0.85 in 2023 financial year.This poor scenario could be linked to the impressive rise in its assets without a simultaneous impressive rise in its top line .These ratios indicate less impressive asset turnover as the bank generated less than one naira for every one naira asset employed and thereby depicting an inefficient optimization of its available assets .

ROE

Its ratio of return on Equity which suggests a company’s ability to return profits to its shareholders is speaking the same language ranging between 8.9 % ,9.0%,,9.4% ,8.9 %,8.3% and 9.6 % from 2017 to 2021 .The indication of the above trend is that for every naira invested in Sterling Bank, its investors would earn less than 10 percent as their return per share . In 2022 it rose to 12.5% but came down to 11.8 in 2023 . RoE,a ratio that holds the highest importance for any shareholder , is an indication of how well a company uses its shareholder’s funds. Analysts believe the above returns may not serve as a signal for investors eyeing hidden-value opportunities

Non performing loan ratio.

In the financial year 2013 , the bank, it would appear, had to reach deep into its maturity transformation mandate to improve interest income in the period under review .In absolute sense the loan increased by 19 % while investment securities increased by 33.6%

However ,when it concerns loans to total assets the bank could be seen to be more cautious with less of the total assets allocated to loan in 2023 compared to 2022 ;the bank’s loan deposit ratio, also fell to 54.10% percent from 56.25% percent. The bank as indicated from those scenarios is risk shy . The implication of this is that less interest income and consequently lower contribution from its loan assets compared to the preceding year to the bottom line.

Its Group’s balance sheet grew by 36.2% year-on-year to N2.5 trillion in 2023 (FY 2022: N1.9 trillion) against the backdrop of a 38.8% rise in customers deposits to N1.8 trillion from N1.3 trillion in 2022 . This had a significant contribution of 72.8% to its funding base

Its Loans and advances rose N895,822, 21.4% higher than a sum of N737,735 in 2022 . However , the amount allocated to loans from the total assets at 35percent in 2023 was lower than 39.7% of the totall assets in 2022 . In other words, greater portion of the total assets was allocated to loans in 2022 than 2023 though its loan was greater in absolute tern in 2023 than 2022 .Also, its Investment securities at N485,952 was slightly reduced to 19.2% of the total assets in 2023 compared to N363,673 19.6% of the total assets in 2022 .However in absolute sense the loan increased by 19 % while investment securities increased by 33.6% in 2023 than 2022 . Though ,its non-performing loans ratio is within the minimum 5 percent regulatory requirement , this quality is after years of loan write -off and expense of generating higher interest income and growing its profitability.

COST OF RISK

Also, the bank’s risk management framework did not show that the cost of risk is reduced . This was because its impairment charges increased by 35 % to N12.34b billion in 2023 , compared to N9.12 b in 2022 , indicating the bank’s less impressive asset quality.

The inability of the leadership of Sterling Bank to acquire unique resources or core competencies in the above critical success factors highlighted above and to respond to the competing pressures from the business environment remains its critical handicap. .

The overall impact of the above laxity has kept its deposit from the customers and the loan s to the customers less competitive while its capability to lend safely and profitably and satisfying the community at large is largely at the threshold level. Consequently , this has led to its unimpressive and less competitive values delivery to its shareholders and its inability to grow the bank . The environment has been tough and dynamic but the leaders of Sterling Bank has been unable douse the fire created intensive competition and the ever-changing industry environment because it lacks unique resources and core competencies to excel and outperform rivals ; and consequently, it has failed to live up to the expectations of its stakeholders.

The blame for the above ugly scenario is put on the door step of its successive leaders at the driver seat of the bank that failed to discover the right joker for a much needed turnaround The issue is that Sterling Bank has not been lucky to have a CEO with strong zeal or ambition of the early 90s. During that period, powers swiftly changed hands among few top players as the Nigerian banking sphere came under strong competitive dynamics . Behind this change were the few new generation banks ceos with brilliant visions and breathtaking guts. Among them were the likes of Fola Adeola ,Guaranty Trust Bank ;Jim Ovia ,Zenith Bank and few others .

In a bid to displace some old banks ,the architect of this change, indeed, slugged it out with the old timers which had dominated the Nigeria bank sphere for many decades in a fierce battle for the industry leadership .They strategically turned themselves the industry rebels and firebrands ;these unorthodox challengers, refused to be dilettantes or merely intellectually curious. . With these attributes, they suddenly changed the leadership equations in the banking industry

To turn the table around to their advantage , they adopted a robust business model, considered to be very difficult for their competitors to replicate. They operate a low cost, revenue efficient model that relies less on manpower but more on prudent risk asset allocation while attracting cheap deposits. .

No leader of Sterling Bank has displayed this . For this lacuna, it has remained nothing but a laggard ;its leaders seem to prefer to be complacent as their watchword than becoming an industry challenger; they are content to follow than rewriting the rules of the game; afraid of orthodoxy and more inclined to cut than build

Though adjudged to be sound by the regulatory authorities, this brand ,no doubt , needs a turnaround. What the management of Sterling Bank does mostly is to play catch up strategy by embarking restructuring and reengineering ;however while this necessary analysts believe this would not turn any company a leader ;a company must be capable of fundamentally re-conceiving itself, of regenerating its core strategies and of reinventing its industry . The absence of this only leads to its inability to deliver competitive values to its investors relative to its peers .

Its leadership inability to turn the bank around for better value delivery could be pinned down to inefficient profit machine, poor risk management and power of industry foresight as well as lack of robust fund transfer pricing ,a method used by bankers to evaluate the profitability of deposits and loans. .

INEFFICIENT PROFIT MACHINE.

The problem with this bank is both resources and resourcefulness. First , the bank’s management has not demonstrated the capability turn around its resource base and to grow the bank . There is no doubt about its strategic move to grow the bank with assets increasing annually,but it is rather too lethargic, keeping it on treadmill and limiting its muscles to compete . Its total assets and shareholders funds remain the least after Wema Bank.

Growing resources and making them unique are critical to outperform in any industry as strategic capability is underpinned by resources available since it is the resources that are deployed into activities of an organization to create competencies.

But the more painful thing with Sterling Bank leadership is its inability to deploy even the available resources in the manner that could generate core competencies in a critical area of cost optimization .

When its performance is juxtaposed with its rivals particularly among Tier 2 banks, Sterling Bank remains the least efficient bank. It is still the worst tier 2 bank in Nigeria after Wema Bank. This poor identity has become its recurring decimals .In 2023 financial year, It also delivered one of the most miserable results, at least relatively to its rivals with its cost to income ratio as a major cause .It cost to income ratio inched up slightly 75% in 2023 from 74.5% in 2022

That is why some analysts believe, the problem with Sterling Bank is not the size of its resources but inefficient profit machine. This argument may not be farfetched. Bigness without stretch and leverage is obesity, smallness without stretch and leverage is impotence.

The banks leadership should be blamed for both inadequacies. After all , facts abound about many companies that overcame seemingly insuperable resource to achieve global leadership ; it all depends on the quality of leadership

RISK MANAGEMENT

Bank management is coterminous with risk management. In other words ,it is no more than managing risks—the risk of mismatches between assets and liabilities and between borrowing and lending rates . Sequel to this , all the technical training a banker receives is heavily geared towards lending .When it is said that one is a good or an astute banker ,what ,in fact , is meant is that one is a shrewd lender . –one who lends money safely and profitably.

Indeed ,risk taking ,which is fundamental nature of banking has remained unchanged and this is inherent in the maturity transformation, another fundamental feature of banking . Similarly ,while other sources exist ,the main source of income and profitability of banking remains the spread or the difference between the rates at which the funds are borrowed and the rate at which they are invested or loaned out .

In the 2023 financial year , interest rates remained elevated and many banks exploited this to grow their exponentially . But Sterling Bank was boxed to a corner as its interest expenses moved at a faster pace than interest income . Interest expense hit N72.7 billion at 39.7 % (FY 2022: N52.0 billion) with interest paid on customers’ deposits, other borrowings and cash from other banks accounting for 55.2%, 41.3% and 3.5%, respectively. However , interest income grew by 21.5% year-on-year to N156.1 billion (FY 2022: N128.4 billion) with interest receipts on loan & advances to customers, investment securities and cash constituting 78.3%, 19.8% and 1.9%, respectively.

Unambitious Leadership

Another critical drawback on Sterling Bank progress and competitiveness is its lack of ambitious leadership with strong foresight like Fola Adeola, Elumelu ,Jim Ovia ,among few others with the capability to change the rules of the engagement . . Company’s strategic choices , or the options for strategy in terms of both the directions in which strategy might move and the methods by which strategy might be pursued , measure the quality of a corporate leadership. Every organisation has a range of strategic directions open to it: it could diversify into new products; enter new international markets; or transform its existing products and markets through radical innovation. These various directions could be pursued by different methods: the organisation could acquire a business already active in the product or market area; it could form alliances with relevant organisations that might help its new strategy; or it could try to pursue its strategies on its own. But not every corporate leader is equipped to do these with dexterity like those mentioned above’ ‘None of .the Sterling Bank has displayed this capability ‘

Only those leaders that are strongly armed with power of foresight together with the power to execute it could gain for their companies the much needed intellectual leadership in terms of influence over the direction and shape of industry transformation.. In fact, lack of leadership with this has denied Sterling Bank’s managers answer three critical questions regarding what new types of customer benefit it should seek to provide in the future, what new competencies it will need to build or acquire to offer those benefits to customers and how it will need to reconfigure the customer interface over the next several years

Sequel to this ,some analysts believed Sterling Bank is in dire need of an architect as it leader who must also be capable of producing a blueprint for how to turn the dream into reality , not only a maintenance engineer ; an architect driven by high powered strategic intent. Their views may not be farfetched. First, building a strategic architecture may point the way to the future, it’s an ambitious and compelling strategic intent that provides the emotional and intellectual energy for the journey. Moreover , strategic architecture is the brain; strategic intent is the heart To transform Sterling Bank , a leader with a strong capability for stretch and the creativity it engenders, the engine and fuel for corporate growth and vitality is needed .

For this ,the bank’s strategy process must be a purposefully created misfit between where the firm is and where it wants to be. Ultimately, such a leader must find a way to close the gap between resources and aspirations that strategic intent opens up. This could be done by leveraging resources, traveling the maximum distance down the road to leadership, using the least possible amount of fuel , a goal that is to challenge its managers to become more ingenious both in multiplying the impact of the firm’s resource base and enlarging it.

STERLING : A BANK Too Difficult To Wake Up From Slumber.

Sterling Bank , no doubt, is in a dire need of a strategic leader who has what it takes to change its status from a glorified community bank to a market and industry leader.

Clearly, Sterling Bank Plc remains unambitious and continues to oscillate, moving back and forth indiscriminately. The only time it sparkled a bit was in 2023 and posted it’s highest profit of N21.5billion. But to some analysts this is still believed to be too cold for comfort

The much anticipated success in the areas of profitability, shareholder s’ returns and capital gain have remained a mirage. A critical analysis of the bank’s competitive wellbeing show unimpressive picture that is troubling.

Sadly, its performance is not only unimpressive but also at variance with the pedigrees of its successive leaders going by the facts and figures available to this magazine.

Mr. Adeola who was the former Managing Director/Chief Executive Officer of Sterling Bank from 2007 – 2018 has failed to deliver to the stakeholders expectations. This is in spite of their loaded pedigree .Adeola had served as the Deputy Managing Director in Trust Bank of Africa Ltd from 2003 – 2005. He is currently the Chairman of Lennox & Blair Group and a partner at Adeyemi Adeola & Co

Under the leadership of Mr. Yemi Adeola, the bank performed most mistrably below the expectations ; it failed to create competitive values for its investors in spite of Mr Adeola impressive CV, his vast experience and exposure ; he has failed to live up to the turnaround expectation of its stakeholders .

Although Adeola and his two successors were able to acquire,retain, and develop resources of at least a threshold standard, however, the strategic capability that is essentially concerned with how these resources are deployed, managed ,controlled and , in case of people, motivated to create competencies in those activities and business processes needed to run the business remains highly uninspiring ; consequently managing for value or making business decisions with the objective of maximizing returns for shareholders or owners, which is critical to providing benefits for all other stakeholders, became a tall ambit

Ironically , Mr. Adeola has been brought back as the chairman of its board of directors despite his unimpactful as the bank’s CEO .

This miserable performance of the bank continued during tenure of Abubakar Sulaiman his immediate successor . As the Chief Executive Officer of Sterling Bank Ltd, his top priority is to optimise the impact of financial intermediation in critical sectors that can catalyse growth and create a future of shared prosperity for all Nigerians. But it became a tall ambition despite his impressive profile .

.Before he was appointed the bank’s CEO , he served as an Executive Director and Chief Financial Officer of the bank and was the executive sponsor of the Bank’s non-interest banking business (Sterling Alternative Finance). Abubakar holds a Bachelor’s Degree (B.Sc) in Economics from the University of Abuja, and a Master of Science (M.Sc.) in Major Programme Management from Said Business School, University of Oxford. He is also an Alumnus of IESE Business School.

Its uninspiring performance in the past few decades could be read from its financial statements on yearly basis when benchmarked with historical figures , sector and best in class yardsticks.

Of all the three yardsticks , Sterling Bank appears to be more interested measuring its performance disingenuously by historical data as its survivival joker.

One embarrassing observation on the fate of Sterling Bank is its management desire to hide under a disingenuous yardstick to measure its progress to give the impression that all is well with the bank to its stakeholders.

But not all investors are gullible .One of the critical features of a smart investors is the consciousness for good and appropriate benchmarking standards for measuring success or progress of an organization.

There are three different bases for benchmarking of performance standards :.improvements on historical performance, industry (sector) norms /standards and best in class which is beyond the industry in which an organisation currently operates. Of all the above standards , best in class is the feature that every investor prefers as the first two are fraught with potential dangers .

It declared N16.3bn PAT in H1 2024 unaudited results compared to N10.7 in the corresponding period of 2023 . To some investors , with the above profitability scenario, the bank is making progress.

STERLING BANK AND CRITICAL SUCCESS FACTORS : A Merely Treadmill Player

To acihieve superior performance an organisation needs unique resources that critically underpin competitive advantage

Amos Adetunji

1 hours read

Amos Adetunji

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