When Yemi Adeola was appointed Managing Director of Sterling Bank in 2007, some analysts and observers in the financial industry viewed him as an ideal candidate for the position. He had earned a reputation as a master strategist in Nigeria’s high-pressure banking sector. With his impressive operational skills and meticulous attention to detail, Adeola was expected to make a significant impact on both the top-line and bottom-line performance of Sterling Bank. Consequently, many believed that the bank was in capable hands.
Yemi Adeola’s curriculum vitae (CV) is truly intimidating, showcasing the credentials necessary to succeed and elevate any bank to great heights in the corporate world. Academically, he is exceptionally well-qualified.
Mr. Adeola holds a Bachelor of Laws degree from Obafemi Awolowo University. He is a Fellow of the Chartered Institute of Bankers of Nigeria, a Member of the Chartered Institute of Arbitration (CIARB), and a Member of the Board of Trustees of the Association of Banks’ Legal Advisers and Company Secretaries (ABLACS). Furthermore, he is an alumnus of several prestigious institutions, including Harvard Business School, Stanford Business School, the University of Oxford, and the Wharton Business School of the University of Pennsylvania. Notably, he is also a John F. Kennedy Scholar.
His wealth of experience further reinforced the views of his admirers. With years of extensive experience in banking, finance, law, and corporate consultancy, he possessed a unique blend of skills. His professional background includes working as a consultant at PricewaterhouseCoopers, and providing legal and corporate advisory services at Citibank Nigeria, where he rose to the position of Executive Director of Public Sector and Infrastructure Banking. Additionally, he served as Deputy Managing Director at Trust Bank of Africa Ltd from 2003 to 2005. Given his impressive pedigree, Yemi Adeola was believed to be well-equipped with analytical, experiential, and innovative perspectives to develop insightful strategies that could deliver competitive advantages for Sterling Bank.
However, with the bank’s current struggles, the optimists have been proven wrong. This is evident when comparing the bank’s actual performance to the promises made by Sterling Bank’s leadership to its stakeholders, particularly its shareholders, as reflected in its mission and vision statements.
The bank’s mission is to consistently deliver products and services that enhance customers’ financial success, provide solutions that increase stakeholder value, and meet the needs of each customer in the communities it serves. Its vision is to become the financial institution of choice, the preferred destination for investment capital, promote sustainable investing, advance an inclusive and resilient economy, and positively shape Nigeria’s financial landscape.
The bank’s core values include customer focus, integrity, teamwork, and excellence. It has promised to enrich lives, support, and collaborate to improve the lives of people in the communities where it operates.
Gaining insight into a bank’s performance is relatively straightforward, as it often reflects the leadership’s ability satisfy the needs of five key constituencies. Firstly, it must cater to surplus units, which lend to the bank. These units demand competitive interest rates ,flexible maturity structures and maximum liquidity to ensure timely access to their funds. The bank must serve deficit units, which borrow from the bank and seek convenient access to funds when needed and competitive borrowing rates. Like lenders, borrowers also expect the bank to provide maximum liquidity, enabling them to obtain funds as required.
In addition to these two constituencies, the bank must also satisfy its shareholders, who expect maximum or adequate returns on their investments as well as a willingness to provide additional resources when needed. The fourth constituency comprises regulatory authorities, which aim to ensure the bank operates prudently and within regulatory requirements as well as to prevent them from excessive risk-taking. Lastly, the bank owes a responsibility to the community at large, which provides the operating environment. As a good corporate citizen, the bank should maximize opportunities and minimize threats in the environment and contribute to the community’s well-being and prosperity.”
Although Sterling Bank has lived up to the above expectations, however, the fact that it remains a mere threshold player after almost two decades is worrisome. In contrast to its stated strategic purposes, the bank’s expected strategic position has remained a mirage , leaving it not only struggling with size disadvantages in term of deposit ,loan deployed out , revenue as well as the asset and capital at its disposal but an inefficient bank when compared to its peers .
Consequently, for the investors, the story of Sterling Bank has been one of disappointment and frustration, a narrative of missed opportunities and stunted growth. In other words,among all stakeholders, the bank’s shareholders have been the hardest hit.
The figures indeed tell a story of underwhelming performance , particularly under Yemi Adeola’s leadership at Sterling Bank from 2007 to 2018. Despite a promising start, with profit skyrocketing from N621 million in 2007 to N6.5 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 N6 billion in 2009. Although it recovered slightly to N4 billion in 2010, this was still a far cry from the N6.5 billion achieved in 2008. The bank’s profit did pick up in 2011, reaching N6.6 billion, likely due to the acquisition and integration of Equatorial Trust Bank ¹.
However, between 2012 and 2016, the bank’s growth was sluggish, increasing from approximately N7 billion to N8.3 billion, N9 billion, and N10.3 billion, before plummeting to N5.2 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 N13.5 billion in 2017, followed by a decline to N9 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.
Analysts are unsurprised by Sterling Bank’s fate. The bank’s dismal profitability, as evident from the data, can be attributed to its limited influence on the trajectory of industry development. An effective leader strives to maximize their company’s share of influence, recognizing that this is a critical aspect of the competitive battle to secure a larger share of future profits. Moreover, a successful leader understands that a company’s share of influence and future profits is determined by its ability to access and harmonize complementary resources, build core competencies that deliver customer value in emerging markets, accumulate market knowledge, and establish a global presence to stay ahead of competitors. Unfortunately, some analysts alleged that Sterling Bank’s leadership Under Adeola lacked this level of ambition.
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, during his tenure, without receiving any 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.
Sterling Bank Dividend History at a Glance:
The bank’s dividend payments over the years are as follows:
– 2023: 15k
– 2022:10k
– 2021: 0.5k
– 2020: 0.3k
– 2019: 0.6k
– 2016: 0.9k
– 2015: 0.2k
– 2014: 25k
– 2013: 20k
– 2012: 20k
The bank’s shareholders have been disappointed by the inconsistent dividend payments. The pain of these poor dividends could have been mitigated if the company’s stock price had been growing rapidly. However, this has not been the case, as the stock price continues to oscillate without delivering any impressive capital gains
Sterling Bank Nigeria Holdings didn’t pay dividends in 2018. According to the bank’s 2018 Abridged Report and Financial Statements, external consultants recommended that no dividends be paid for the 2018 financial year . Unfortunately, no information is available on the dividend paid in 2017
EPS
The bank’s poor dividend, market value, and capital gain are confirmed by some critical performance indices, particularly its Earnings Per Share (EPS). A good way to determine earnings for investors is the EPS, which represents the monetary share value received from declared earnings. The higher the EPS, the more profitable the bank is.
The Full Year EPS for Sterling Bank over the last five years (2019-2023) is as follows:
– 2023: ₦0.75
– 2022: ₦0.67
– 2021: ₦0.52
– 2020: ₦0.39
– 2019: ₦0.37
When factoring in the prevailing high inflation rate, the EPS values indicate a miserable return on investment for investors.
ROA
From the perspective of asset contribution to profitability, Sterling Bank’s Return on Assets (ROA) tells a similar story of underwhelming value. The ROA measures how efficiently the bank uses its assets to generate profits.
For every ₦1.00 in assets owned by Sterling Bank, the ROA values between 2017 and 2021 are:
– 2017: ₦0.82
– 2018: ₦0.86
– 2019: ₦0.89
– 2020: ₦0.86
– 2021: ₦0.83
In 2022, the ROA stood at ₦1.00 but declined to ₦0.85 in the 2023 financial year. This underwhelming performance can be attributed to the significant rise in assets without a corresponding substantial increase in revenue. These ratios indicate a less-than-impressive asset turnover, as the bank generated less than ₦1.00 for every ₦1.00 asset employed, depicting an inefficient optimization of its available assets.
ROE
The bank’s Return on Equity (ROE) ratio, which measures a company’s ability to return profits to its shareholders, followed a similar trend. Between 2017 and 2021, the ROE ranged from:
– 8.9% (2017)
– 9.0% (2018)
– 9.4% (2019)
– 8.9% (2020)
– 8.3% (2021)
This trend indicates that for every ₦1 invested in Sterling Bank, investors could expect a return of less than 10% per share. In 2022, the ROE increased to 12.5% but decreased to 11.8% in 2023. As a ratio of paramount importance to shareholders, ROE reflects how effectively a company utilizes its shareholders’ funds. Analysts believe that these returns may not send a positive signal to investors seeking hidden-value opportunities for their investments
The above miserable performance scenario has continued to raise serious concerns , and Adeola is allegedly cupable . What excuse did Adeola have for leaving the bank with miserable returns for investors? The only plausible explanation was the relatively smaller size of its financial assets compared to its rivals at the time of the banking consolidation exercise that brought the bank into the system. In other words, the only defense available to him was that if Sterling Bank had more resources, it could have performed better. However, this excuse is insufficient.
What cannot be disputed is that a corporate entity can only suffer this fate when the dominant strategy framework focuses primarily on resource allocation. While it is true that resources are scarce, making allocation a necessary strategy, isn’t it equally the top management’s responsibility to effectively multiply the company’s resource base through creative approaches to resource leverage? Is leverage any less important than allocation? If not, why the almost exclusive preoccupation with allocation under his leadership?
The argument against such a strategy is that when a leader views strategy as a means to stretch and leverage resources, the initial size of resources may not significantly impact the corporate entity’s fortunes. Analysts believe that the problem with leaders like Adeola is not a lack of resources, but rather too many priorities, insufficient stretch, and inadequate creative thinking about how to leverage resources.
Providing more resources without improving their capacity to leverage them would only offer temporary relief from frustrations. Moreover, some analysts questioned why Adeola didn’t grow the bank’s resources competitively. After all, Zenith Bank, Access Bank, and Guaranty Trust Bank grew from scratch to become industry leaders under their founders’ leadership.
A corporate leader is expected to be both a manager and an entrepreneur, capable of driving growth and leveraging resources effectively.
The situation of Sterling Bank becomes more worrisome after Adeola exit as the Ceo .Although Sterling Bank experienced unusual profitability growth after Adeola’s exit, with Suleiman Abubakar at the helm, from ₦15 billion in 2021 to ₦19.3 billion in 2022, the bank has remained a laggard, unchanged from its past performance.
The hepless fate of Sterling Bank is not surprising. When a bank’s leadership devotes too much energy to preserving the past and not enough to creating the future, stagnation is inevitable. As the saying goes, “good companies are not difficult to recognize; by their fruits, you shall know them.” Effective leadership focuses on creating the future, rather than merely preserving the past.
Upon examining Sterling Bank’s recent high-profile initiatives, the issues preoccupying senior management, the criteria and benchmarks for measuring progress, the track record of new business creation, and the dreams and fears of employees, it becomes clear that the bank’s leadership still prioritizes preserving the past over creating the future.
A company with a forward-thinking approach would have:
– A broadly shared understanding of how the industry may evolve in the next ten years
– A vision for the future that shines brighter and farther than its competitors
– A point of view about the future that is clearly reflected in its short-term priorities
– A competitively unique perspective on the future
Unfortunately, Sterling Bank’s leadership appears to be focused on preserving the status quo rather than creating a bold future.
When examining Sterling Bank’s recent high-profile initiatives, senior management’s pressing concerns, progress measurement criteria, new business creation track record, employee sentiments, and the company’s ability to shape the future and sustain success, it’s evident that their leadership prioritizes creating the future over preserving the past.
Key characteristics of this forward-thinking approach include:
– A broadly shared understanding of how the industry may evolve in the next ten years
– A vision for the future that shines brighter and farther than its competitors
– A point of view about the future that is clearly reflected in the company’s short-term priorities
– A competitively unique perspective on the future
They are industry leaders, setting new rules of competition, and continually defining innovative ways of doing business. They:
– Build new capabilities
– Set new standards for customer satisfaction
– Act as rule-makers, rather than rule-takers, within their industry
– Challenge the status quo, rather than protecting it
– Remain vigilant about threats from unconventional rivals
– Reinvent their business model
– Regenerate core strategies while reengineering core processes
– Pursue growth and new business development with the same passion as operational efficiency and downsizing
They possess the ability to:
– Identify future revenue streams
– Recognize areas for cost savings
– Focus improvement efforts on creating new, industry-leading advantages, rather than merely catching up with competitors
– Maintain an agenda that is primarily offensive, rather than defensive.
With their agenda primarily offensive rather than defensive, they are driven by their own view of opportunities, rather than simply reacting to competitors’ actions. They are more like architects, envisioning tomorrow’s businesses, than maintenance engineers focused on keeping today’s business running smoothly.
They possess the ability to:
– Look beyond the present and consider what’s on the horizon
– Balance hope and anxiety, confidence and concern, within the company
– Weigh the sense of opportunity against the sense of vulnerability, both corporately and personally
Their outlook is more optimistic, tilted towards embracing opportunities and growth, rather than being driven by fear or vulnerability.
However, in the case of Sterling Bank, the opposite is true. There are clear indications that the bank is dedicating excessive energy to preserving the past, rather than investing in creating the future. As a result, Sterling Bank remains on a treadmill, struggling to stay ahead of the steadily declining margins and profits of its legacy businesses.
Despite being appointed as Chairman of the Board of Directors, it seems that the individual is still facing challenges. As the Chairman, his role involves presiding over board meetings, ensuring the company’s overall direction, and making key decisions ¹. However, the fact that there’s “no respite yet” suggests that the company’s issues persist, and his leadership has yet to yield significant positive changes.
To better understand the situation, it’s essential to consider the context of his appointment. Was he an internal promotion, or an external hire? What were the expectations surrounding his appointment? Answering these questions might provide insight into why, despite his new role, the company’s challenges remain.
It’s also worth noting that the Chairman’s role is distinct from that of the Managing Director or CEO, although in some cases, one person may hold both positions ². The separation of these roles is intended to provide a system of checks and balances, ensuring that no single individual has too much control over the company.
Ultimately, the success of the Chairman will depend on various factors, including his leadership style, the company’s culture, and the overall economic environment.
A significant hope for Sterling Bank’s turnaround emerged with his election as Chairman of the Board of Directors. However, the most disappointing observation is that, despite his appointment to this strategic position, the bank’s performance has not improved, and its fundamental issues persist.
As Chairman, he was expected to lead the board in overseeing the company’s strategy, direction, and performance. His key responsibilities included:
– Setting the company’s strategic direction
– Approving and monitoring the company’s strategic plan
– Reviewing and evaluating business plans, budgets, and forecasts
– Monitoring performance and making adjustments as needed
– Ensuring governance and compliance with relevant laws, regulations, and industry standards
– Maintaining a robust governance framework, including policies, procedures, and controls
– Overseeing risk management by identifying, assessing, and mitigating potential risks
– Selecting, evaluating, and compensating the CEO
– Ensuring a robust succession planning process for key positions
Despite these critical responsibilities, the bank’s performance has not shown significant improvement, raising concerns about the effectiveness of his leadership.
Unfortunately, his return to the bank’s helm has not yielded the desired impact. The damage inflicted on Sterling Bank’s financial health is starkly evident when comparing its performance over time.
The most glaring and dismal indicator is the bank’s stunted growth. When measured against sector indices, Sterling Bank emerges as a struggling laggard. The comparison becomes even more unfavorable when evaluated against best-in-class indicators, highlighting the bank’s significant underperformance.
A detailed analysis of Sterling Bank’s performance in 2024 reveals a mixed picture. At first glance, it’s tempting to conclude that the bank’s fortunes have improved with the return of Adeola as Chairman of the Board of Directors.
The bank’s financials show:
– Gross earnings of ₦328.349 billion, representing a 54.21% year-over-year (YoY) increase
– Sterling Holdings’ pre-tax profit surged by 97% to ₦44.753 billion in 2024
– Profit after tax (PAT) grew by 73.4% from ₦21.584 billion to ₦37.522 billion
However, a closer examination of the bank’s performance reveals underlying issues that persist despite these improvements.
However, to assume that the bank has turned a corner would be a significant mistake. A closer examination of Sterling Bank’s performance reveals that it remains unchanged, particularly when subjected to critical performance measures.
While a historical analysis may show improvements over time, this can be misleading. For instance, despite the bank’s impressive revenue growth between 2023 and 2024, its market share and profit remain relatively insignificant compared to its peers. The percentage increase has not altered its strategic position or status as a mid-tier bank, struggling to transcend its reputation as a glorified community bank, even among its tier-2 counterparts.
A crucial observation is that Sterling Bank has not gained any significant competitive advantage. Relying solely on historical performance metrics can lead to complacency, as it overlooks the importance of comparative improvement rates with competitors. Some banks use this approach to create an impressive performance narrative for unsuspecting investors and stakeholders.
When compared to its peers among tier-2 banks, Sterling Bank’s insignificant market share and position become apparent. For instance:
– As of December 31, 2024, FCMB Group’s gross earnings were ₦794.8 billion, with a profit after tax of ₦107.9 billion for the same period.
– The revenue and profitability gap between Sterling Bank and its tier-2 peers, such as Fidelity Bank and Stanbic IBTC, is even more striking, highlighting Sterling Bank’s underperformance within its tier.
Benchmarking Sterling Bank against best-in-class performers is not even a viable consideration, given its poor trajectory relative to its tier-2 peers. In essence, the bank’s management has failed to drive growth in both profitability and revenue, hindered not only by limited resources but also by inadequate resource utilization.
This bleak scenario is not unfounded. Investors are interested not only in a company’s profitability but also in its ability to generate value for money, drive growth, and deliver quality services.
The negative market response from stock investors is a clear indication of their dissatisfaction with Sterling Bank’s leadership. As of Friday, March 7, 2025, STERLINGNG closed at ₦5.12 per share on the Nigerian Stock Exchange (NGX), marking a 1.5% decline from its previous closing price of ₦5.20.
Starting the year at ₦5.60, the bank’s share price has since plummeted by 8.57%. This underwhelming performance ranks STERLINGNG 129th on the NGX in terms of year-to-date performance. Furthermore, shareholders’ concerns are exacerbated by the stock’s 14% value loss from February 7th to date.
A peer-based assessment of Sterling Bank’s effectiveness provides insight into investors’ discontent, as reflected in the bank’s share price movements. The bank’s internal operational efficiency remains a significant concern, particularly when evaluating its ability to generate shareholder value and productivity gains, such as cost reduction and efficiency improvements.
One key performance indicator that highlights Sterling Bank’s struggles in value creation is its profit margin. This financial ratio measures the percentage of profit earned relative to revenue, indicating the bank’s ability to generate profit from each naira of revenue.
Between 2023 and 2024, Sterling Bank’s pretax profit margin improved marginally from 10.70% to 13.60%. This means that for every ₦100 in revenue, the bank retained only ₦13.60 at the pretax level. Similarly, its post-tax margin increased from ₦10 to ₦11.43. These modest gains underscore the bank’s ongoing challenges in achieving robust profitability.
Another indicator that highlights Sterling Bank’s inefficiency is its Cost-to-Income Ratio (CIR). This financial metric assesses a company’s operational efficiency by comparing its operating costs to its operating income. The CIR essentially measures how much a company spends to generate one naira of income.
A lower CIR indicates greater efficiency, as the company is spending less to earn revenue. This ratio is commonly used in the banking sector to evaluate how well a bank manages its expenses relative to its income.
Sterling Bank’s CIR stood at 75% in 2023 and decreased slightly to 72% in 2024. Despite this modest improvement, the bank’s CIR remains high, confirming its reputation as a highly inefficient and less resourceful bank.
The reasons for Sterling Bank’s inefficiency are apparent in its financials. Notably:
– Net impairment loss on financial assets stood at ₦9.929 billion
– Total expenses surged by 38.05% to ₦145.194 billion, outpacing operating income growth
– Operating income increased by 42.56% YoY to ₦199.876 billion
Total expenses consumed 76% of net operating income after impairments, indicating elevated cost pressures that eroded profitability despite revenue growth.
Furthermore:
– Customer deposits grew 39.37% to ₦2.568 trillion, reflecting a good liquidity position
– However, interest expenses on these deposits increased by 74% YoY, suggesting the bank is paying more to attract and retain deposits
Despite the sharp rise in interest expenses, the bank’s share of total interest expenses declined slightly by 2% YoY. This implies that other funding sources, such as deposits from other banks, borrowings, or debt securities, may be contributing more to overall costs.
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Implications of Sterling Bank’s Failure on Stakeholders’ Trust and Confidence
The bank’s struggles stem from its leadership’s inability to effectively manage and deploy resources, generating competencies that could outperform competition. This failure has far-reaching consequences for stakeholders’ trust and confidence in the bank.
When a bank fails to meet stakeholders’ expectations across critical areas – surplus, deficit, shareholders, regulatory authorities, and the broader community – it poses a significant risk. Trust and confidence are essential assets for any bank, built on its ability to deliver impressive returns to shareholders.
However, Sterling Bank’s shareholders have not received inspiring shareholder value, failing to meet their expectations for adequate returns on investment. This alone makes it challenging for the bank’s leadership to convince and retain existing shareholders or attract new investors, posing a significant obstacle to the bank’s growth aspirations.
The bank’s inability to deliver inspiring values has had direct and negative consequences. Notably, its share price has remained stagnant, failing to transition from the low-price category to the medium-price tier.
According to Rule 15.29 of The Exchange’s Rulebook (2015), a medium-priced stock is defined as an equity priced above ₦5 per share for at least four of the six most recent months of trading. Sterling Bank has failed to meet this criterion.
In terms of surplus units, depositors expect banks to provide optimal interest rates, maturity structures, and liquidity. During the review period, Sterling Bank’s customer deposits grew by 39.37% to ₦2.568 trillion, indicating some level of trust and confidence. However, this achievement came at a steep cost, as the bank’s interest expenses on customer deposits surged by 74% YoY.
This suggests that the bank had to pay more to attract and retain deposits, effectively buying stakeholders’ confidence and trust at a higher price.
The same expectations resonate with borrowers in the deficit units, who rely on banks for funding. They seek to borrow funds when needed and at the lowest possible cost. Like lenders, borrowers also demand maximum liquidity from banks to ensure access to funds when required.
Sterling Bank met this expectation, with loans and advances to customers increasing by 23.22% YoY to ₦1.104 trillion. However, a bank’s success is measured by its ability to lend safely and profitably. Historically, Sterling Bank’s toxic loans have eroded its profitability, particularly during Adeola’s tenure.
Although the bank’s non-performing loan (NPL) ratio now meets regulatory requirements, the heavy provisions for credit losses continue to impede profitability. Moreover, the bank’s risk aversion strategy is a double-edged sword. While it ensures the bank’s going concern and satisfies regulatory authorities, it also limits profitability.
To maintain stability, Sterling Bank has cautiously allocated its earnings assets, prioritizing security portfolios as a revenue source. This approach, while safe, may constrain the bank’s growth and profitability aspirations.
Although the bank’s asset quality has improved, this has come at the cost against its profitability. Two issues yet to be resolved or its leadership couldn’t resolve are the capability to lend safely and profitably had hindered its fortunes .The bank had to take drastic measures, including writing off bad and delinquent loans, to clean up its books along its journey to present time.Its size disadvantage has continued to worsen these two hindrances.
Currently , as in the past , the size of its capital and assets, remains a big handicap to its value delivery considering the limited level of risk the bank could take.The only way to be competitive in the industry is to grow its resources and improve its competences .The reason for this may not be far to seek. Banking and risk management are inextricably linked. Effective bank management can be distilled to managing risks, including the issues of asset-liability mismatches and borrowing and lending rate disparities.A bank’s leadership must navigate these complexities to ensure stability, profitability, and long-term success due mostly to grow the bank’s resources and improve its competences.
