Despite its experience and established presence, Sterling Bank remains a laggard in the banking sector. This article explores the laggard attitudes that are holding Sterling Bank back from realizing its full potential and achieving its goals.
As the scripture says, ‘by their fruits you shall know them.’ This wisdom also holds true in the corporate world. A company’s character and potential for success can be gauged by its attitudes and actions.
Corporate champions stand out with strong values, impressive track records, and clear visions. They pursue growth and new business development with passion, focusing on innovation and improvement efforts that create new advantages. With a balance between hope and anxiety, they strike a balance between confidence in future opportunities and concern about maintaining competitiveness in traditional businesses.
In the Nigerian banking industry, Zenith Bank, Guaranty Trust Bank, and Access Bank have taken the lead with these qualities. They have a well-defined and widely shared understanding of the industry’s future, and their leaders regularly define new ways of doing business, build new capabilities, and set new standards of customer satisfaction.
However, Sterling Bank hasn’t been lucky enough to have leadership with those sterling qualities behind it. When one peeps into its operations, what stares one in the face are traits not different from those of a corporate laggard. Analysts liken it to a company whose stake in the past or in the present, or at both levels, is bigger than its stake in the future.
This is because Sterling Bank’s leadership focuses on cost-cutting and efficiency, with priorities on short-term cost savings over long-term growth and innovation. Its leaders go for defensive transformation agendas, reacting to competitors’ actions rather than driving change through proactive innovation. They emphasize catching up, focusing on benchmarking and replicating competitors’ successes rather than creating new advantages. Known for a maintenance-oriented mindset, they prioritize maintaining current business operations over imagining and creating new businesses and prefer risk aversion.
The consequence of the above laxities is Sterling Bank’s current miserable and uninspiring status in the industry, and its leaders are all culpable. Its weak fundamentals and profit engine expose its laggard status. Rebuilding its profit engine requires a fundamental transformation of its business model, assets, skills, and administrative systems. It is doubtful whether the leadership of Sterling Bank is equipped to handle the above imperatives.
The Figures Tell the Story
The figures indeed tell a story of underwhelming performance of Sterling Bank , particularly during Yemi Adeola’s leadership at Sterling Bank from 2007 to 2018. Despite a promising start, with profit skyrocketing from ₦621 million in 2007 to ₦6.5 billion in 2008, the bank failed to sustain this momentum.
The bank’s profitability stagnated in the first five years, with a significant loss of ₦6 billion in 2009. Although it recovered slightly to ₦4 billion in 2010, this was still a far cry from the ₦6.5 billion achieved in 2008. The bank’s profit picked up in 2011, reaching ₦6.6 billion, likely due to the acquisition and integration of Equatorial Trust Bank.
However, between 2012 and 2016, the bank’s growth was sluggish, increasing from approximately ₦7 billion to ₦8.3 billion, ₦9 billion, and ₦10.3 billion, before plummeting to ₦5.2 billion. This lackluster performance raises questions about Adeola’s leadership and strategic vision, despite his impressive professional pedigree.
Under Adeola’s leadership, the bank’s performance continued its erratic trend, with a profit of ₦13.5 billion in 2017, followed by a decline to ₦9 billion in 2018, before he departed from the bank. Similarly, the bank’s total assets, deposits, and shareholder funds also followed a downward trend, characterized by sluggish growth.
Sterling Bank’s profit after tax increased between the 2019 and 2020 financial years. In 2019, the profit after tax was N10.602 billion, while in 2020 it was N11.242 billion, according to their annual report. This represents a growth of about 5.9%. Its profit after tax (PAT) showed an increase between 2021 and 2022, with a 28.5% growth from N15.0 billion in 2021 to N19.3 billion in 2022.
Its 2024 financials appear impressive at first glance, with gross earnings of N328 billion and a profit after tax of N37.522 billion. However, this façade crumbles when considering the current inflation and exchange rates. In reality, the bank’s performance is lackluster, especially when compared to its peers. Stanbic IBTC, Fidelity Bank, and FCMB reported significantly higher gross earnings, with N823.3 billion, N1.043 trillion, and N794.8 billion, respectively. Their post-tax profits also dwarfed Sterling Bank’s, with Stanbic IBTC at N225.311 billion, Fidelity Bank at N278.106 billion, and FCMB at N107.9 billion.
The most alarming indicator of Sterling Bank’s struggles is its post-tax profit margin, which raises serious questions about the leadership’s capability.Except in the 2024 financial year when it delivered approximately N20 as profit from every N100 made at the top line , the bank had consistently recorded embarrassing figures.Between 2018 and 2023 it has recorded N6, N7 ,N8, N10 , N11 and N9.70k respectively from every N100 made at the top line. The implications of this scenario are indeed alarming.
The shareholders have borne the brunt, watching in dismay as their hard-earned investments have become a burden, an albatross of sorts without receiving competitive dividends.A consistent track record of paying dividends makes stocks more attractive to investors. However, the unimpressive dividend and capital gains available to Sterling Bank stock investors are a glaring stigma that could deter serious investors.
Ironically, the disconnect between the bank’s poor performance and its leaders’ lavish lifestyles is stark, leaving investors feeling disenchanted and betrayed. ‘Why are we not seeing the returns on our investment?’ they ask, as the bank’s financials falter and its market value stagnates. The sense of injustice is palpable, with investors wondering if the leaders are more interested in lining their own pockets than in driving growth and profitability for the bank”, a shareholder lamented .That is the frustration and disillusionment that simmer among investors as they watch Sterling Bank’s leaders live in affluence while the company lags behind
The current fate of Sterling Bank is aversed to the hope and confidence reposed on.Yemi Adeola its maiden CEO.Though from its inception, Sterling Bank Plc , now Sterling Holdings, an amalgam of some weaklings in the Nigerian banking industry like NAL Bank,Indo-Nigeria Merchant Bank, Magnum Trust Bank, NBM Bank and Trust Bank of Africa , was believed to be lincesed by the regulatory authrities to save those banks from extinction , the appointment of Yemi Adeola in 2007 was expected to have led to its turnaround despite Sterling Bank initial limitations.
He was believed to have the wherewithal to grow its meagre resources then and carry out necessary surgery on its heavy burden of toxic loans, not only to sustain its as a going concern but to make it competitive in the industry.
Some analysts and industry observers viewed him as an ideal candidate for that position in Nigeria’s high-pressure banking sector;his curriculum vitae was , indeed , intimidating, showcasing the credentials necessary to succeed and elevate any bank to great heights in the corporate world. Academically, he was exceptionally well-qualified. With years of experience in banking, finance, law, and corporate consultancy, he possessed a unique blend of skills.
But after more than a decade at the helm of affairs , the hope appeared to have collapsed. The story of Sterling Bank has been one of disappointment and frustration, a narrative of missed opportunities and stunted growth, with the bank’s shareholders bearing the brunt.Moreover, the hope of its turnaround remains uncertain.Its uninspiring performance becomes more palpable when compared to its peers .
Two things are responsible for the above miserable performance of Sterling Bank relative to its tier two peers : the leadership inability to grow its resources and absence operational efficiency. Not only Adeola ,other senior management and board leaders failed to lift the bank from the treadmill.
The above analysts’ view may be farfetched. People are the heart of any strategic success .Without the corporate champion mindsets backed up by substantial and sustained intellectual energy highlighted above , Sterling Bank can never get off the treadmill .
Gaining industry leadership position is not for 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 . Unfortunately, the leadership of Sterling Bank has failed to live up to the above expectations .
The Road to Industry Leadership
Becoming an industry leader is a challenging journey that unfolds in three stages: foresight and intellectual leadership, shaping industry development, and battling for market share and position. Sterling Bank has been bypassed by its rivals due to its lack of prescience and distinctive point of view about the future.
Stage 1: Foresight and Intellectual Leadership
Corporate champions conceive new industry structures or opportunity arenas, out-thinking and out-imagining competitors. They gain a deeper understanding of trends and discontinuities that can transform industry boundaries and create new competitive space. This stage is a competition to imagine the future.
Stage 2: Shaping Industry Development
Companies accumulate necessary competencies, test product and service concepts, attract coalition partners, and construct infrastructure. This stage is a race to shape the emergence of the future industry structure to one’s advantage.
Stage 3: Battling for Market Share and Position
The final stage is a battle for market power and position with well-defined parameters of value, price, cost, and service. Unfortunately, Sterling Bank is currently focused on this stage, while the first two stages determine ultimate industry leadership.
To succeed, Sterling Bank needs to transform the industry structure, not just follow existing practices. This requires foresight, stretch, and leverage. The bank’s leadership must be armed with strategic foresight, architecture, intent, and leverage. Without these, it will be difficult for Sterling Bank to change its current strategic position.
The key to success lies in mobilizing emotional and creative energy, demonstrating the ability to do more with less, and building core competencies. Strategic architecture provides the map, while strategic intent and core competencies provide the fuel for the journey. Sterling Bank’s leadership must co-opt the energy of its employees and demonstrate the ability to leverage core competencies to capture future opportunities.
What The Leadership is Doing More than Creating the Future
Though the leadership of Sterling Bank continues to sustain the bank’s going concern, without the above initiatives, to fulfil its strategic purposes might be difficult .Only by competing for the future can a company gain an industry leadership.
The leadership of any company that fails to develop prescient and distinctive point of view about the future is usually boxed to a tight corner. Without the above corporate attitudes , what occupies the senior managers of such a player like Sterling Bank lattention are : restructuring or downsizing and reengineering or core process redesign . But the problem is that in this situation ,the urgent usually drives out the important; the future goes largely unexplored and the capacity to act ,rather than the capacity to think and imagine ,become the sole measure of leadership .
Although the two are legitimate and important tasks but they have more to do with shoring up today businesses than creating tomorrow industries , they are no substitute for imaging and creating the future , they don’t ensure continued success if the company fails to regenerate its strategies .
.A company that succeeds at restructuring and reengineering but fails to create the markets of the future will find itself on a treadmill, trying to keep one strong step ahead of the steadily declining margins and profit of yesterday’s businesses.
The ugly fate of Sterling Bank should not springany surprise. . When a company is run by managers not leaders ,by maintenance engineer, not architect such a company is usually at the mercy of the accelerating pace of industry change. This has been the biggest challenge of Sterling Bank .
For lacking an architect at its driver’s seat , Sterling Bank leadership’s choice of restructuring and reengineering options over the years appear to be its survival strategy .
However , this survival strategy adopted to cover up its failure to keep up with the accelerating pace of industry change prompted by the tides of technological, demographic, regulatory change and order of magnitude productivity and quality gains made by non-traditional competitors or to compete for the future is dangerous.
This is because,buffeted by above forces, only few are seem to be in control of their own destiny while many others saw their success eroded or destroyed. This has been the fate of Sterling Bank.
The Dilemma of Restructuring and Reengineering
Sterling Bank’s leadership is indeed in a dilemma. With no leader possessing foresight at the helm, embarking on restructuring and reengineering appears to be the only option for its survival, essentially resorting to denominator management. Any company that fails to drive change and adapt to industry realities risks becoming obsolete.
The discrepancy between the rapidly changing industry environment and the bank’s internal pace of change necessitates organizational transformation. This typically involves downsizing, overhead reduction, employee empowerment, process redesign, and portfolio rationalization. However, the bank’s past foundations have been shaken and fractured due to the industry’s rapid evolution, outpacing the top management’s ability to refashion its basic beliefs and assumptions.
To address stagnant growth, declining margins, and falling market share, restructuring and reengineering have become inevitable. Most corporate organizations respond by launching brutal restructuring programs aimed at carving away corporate xçnfat, jettisoning underperforming businesses, and boosting asset productivity. Their primary goals are to enhance return on capital employed, shareholder value, and revenue per employee.
To achieve this, leadership often focuses on improving return on investment (ROI), which comprises two components: net income (numerator) and investment (denominator). In a service industry, headcount may be an appropriate denominator. However, most restructurersis equires anticipating changing customer needs, investing in new competencies, and identifying new opportunities.
The Limits of Denominator Management: Why Cutting Costs Isn’t Enough
In today’s fast-paced business environment, companies are under intense pressure to improve their return on investment (ROI) and increase productivity. However, in their zeal to cut costs and improve efficiency, many companies have become overly focused on reducing their denominators – that is, their assets, headcount, and capital employed. While denominator management can bring short-term gains, it is a limited approach that can ultimately harm a company’s long-term prospects.
The consequences of denominator management can be severe. Companies that focus too heavily on cutting costs can find themselves unable to invest in new opportunities, research and development, and employee development. This can lead to a lack of innovation, a decline in product quality, and a loss of market shar
A Better Approach: Focus on Growth
Rather than focusing solely on denominator management, companies should focus on driving growth and increasing revenue. This approach requires a more nuanced understanding of the market and the company’s place in it. By investing in new opportunities, building new competencies, and anticipating changing customer needs, companies can create a sustainable competitive advantage and drive long-term growth.
A growth-oriented approach can bring many benefits, including increased revenue, improved profitability, and a stronger competitive position. By focusing on growth, companies can also create new opportunities for employees, invest in research and development, and build a more sustainable business model.
A Hopeless Cloud Over Sterling Bank’s Turnaround
The fear surrounding Sterling Bank is its poor probability of reinventing itself for better and competitive performance due to its leadership capability. To achieve a turnaround, corporate organizations typically deploy strategic weapons or choices, such as competing on cost, differentiation, flexibility, or cooperation. However, Sterling Bank’s leadership seems unable to deliver competitive advantages despite knowing these options.
Several factors could hinder the success of these strategic choices, including inadequate resources, incompetent leadership, and poor implementation. Even with appropriate strategies, strong corporate leadership is crucial for success. The less inspiring position of Sterling Bank can be attributed to the qualities of its resources and leadership competencies.
A major concern is that Sterling Bank may remain stagnant without resolving these critical issues. Strategy concerns an organization’s long-term direction, but people are at the heart of strategy. The knowledge and experience of people can enable or hinder strategy success. Strategic capability is concerned with how resources are deployed, managed, and controlled.
Given the overwhelming role of people in strategy success, analysts believe it may be difficult for Sterling Bank to gain competitive advantages against its competitors with better leadership and scale advantages. The only escape routes for Sterling Bank are to be a niche player or rewrite the rules of the game, but these options require a leadership with necessary skills. Unfortunately, bigger banks are also operating in these niche areas with more resources and better competences.
Sterling Holdings Escape Route
Sterling Bank’s only option is to grow its resources competitively and manage them competently. This requires a leadership well-versed in strategic entrepreneurship, combining strategy and entrepreneurship to create competitive value. The leader’s entrepreneurship skill should identify new opportunities, innovate, and create value for customers, driving organizational growth and prosperity.
Reinforcing Sterling Bank’s strategic position requires a leader who can build a company competing for the future, not just follow established practices. This leader must be committed to rewriting the rules of the game, building rather than cutting, and making a difference rather than advancing their career.
To be competitive, Sterling Bank must win a three-stage battle for the future. While the bank has been reengineering its processes, it needs to demonstrate the capability to reinvent its industry. This requires regenerating its strategy, changing the rules of engagement, and creating new industries to its advantage. The capacity to invent new industries and reinvent old ones is crucial for getting to the future first and staying ahead.