GCR Upgrades Sterling Bank’s Ratings with Stable Outlook
GCR Ratings has upgraded Sterling Bank Limited’s national scale long and short-term issuer ratings to BBB+(NG) and A2(NG) from BBB(NG) and A3(NG), respectively.
The African focused rating agency also upgraded Sterling Investment Management SPV Plc’s Series 2 NGN32.89 billion Fixed Rate Senior Unsecured Bond rating to BBB(NG) from BBB-(NG).
Outlooks on the ratings are maintained as stable, GCR said, adding that the ratings of Sterling Bank Limited reflect the strengths and weaknesses of the non-operating consolidated group, Sterling Financial Holdings Company Plc.
Ratings analysts highlighted that the Group comprises Sterling Bank, Sterling FI Wealth Management Limited and The Alternative Bank.
However, Sterling Bank remains the core operating entity within the Group, accounting for 88.4% and 88.7% of total assets and operating revenue, respectively, as of the 2024 fiscal year.
In the rating note, GCR stated that Sterling Bank’s ratings are equalised to the Group’s Anchor Credit Evaluator. “The ratings upgrade reflects Sterling Bank’s improved capitalisation assessment following successful equity injections.
“The ratings also reflect the bank’s sound funding structure, adequate liquidity, good risk position and modest competitive position”. According to GCR, Sterling Bank operates as a mid-tier player within the Nigerian banking sector, accounting for about 2.0% of total assets as of 31 December 2024.
“The bank provides a broad range of banking and financial services to retail, commercial, corporate and institutional clients, serving a customer base of approximately 5 million through its nationwide branch network, agency banking outlets and digital channels.
“The Group’s conventional banking operation is further complemented by its non-interest banking and asset management subsidiaries, which are strategically positioned to drive improved value proposition and competitiveness within the Nigerian financial services segment through digitalisation and partnerships.
“Looking ahead, the growth of these subsidiaries could enhance franchise strength and earnings diversification over the outlook period.
“Sterling Bank’s capitalisation improved over the last 12 months, supported by equity injection and good internal capital generation”.
Ratings analysts said as part of efforts to comply with the new minimum capital requirements for its license category, the bank successfully raised NGN106.0 billion through a combination of rights issue and private placement.
As a result, the GCR core capital ratio improved to 16.0% as of 30 June 2025 from 14.8% in December 2024. Analysts expect the GCR core capital to range between 14% to 16%, balancing the anticipated growth in the loan book against further earnings accretion and the planned NGN53 billion capital raise via public offer.
Sterling Bank’s risk profile remains positive to the ratings, according to details from the rating note.
However, the asset quality metrics reflected some strains over the past 18 months due to the challenging macroeconomic conditions, which adversely impacted the bank’s retail loan book.
The bank’s non-performing loans (NPL) ratio increased to 5.4% as of 31 December 2024 from 5.1% in 2023 and 3.9% in 2022, with retail loans accounting for 53.4% of NPLs at that date.
Ratings analysts noted that counterparty concentration risk reduced somewhat as of 31 December 2024, with the top twenty obligors accounting for a lower 49.0% of gross loans versus 62.0% in 2023 due to paydowns and restructuring of foreign currency exposures.
“While the bank reported two obligors in breach of the single obligor limit as of 31 December 2024, the capital injected in 2025 is expected to regularise this position.
“We expect the bank’s risk profile to remain at current levels over the next 12 to 18 months; however, we could lower the score if the NPL ratio weakens significantly compared to peers and the industry average”, GCR said.
The rating note also identified Sterling Bank’s funding structure and liquidity profile to be considered sound. GCR said the bank is largely funded by customer deposits, which have historically accounted for about 85.0% of the funding base.
“These deposits are predominantly made up of current and savings deposits that support the bank’s lower funding costs.
“Although bank’s cost of funds increased to 5.1% as of 31 December 2024 (31 December 2023: 3.6%) due to the high interest rates, it continues to compare well with peers.
“Depositor concentration remains low, with the single largest and top twenty depositors accounting for 6.5% and 15.5% of customers deposits book respectively as of 31 December 2024 (31 December 2023: 7.0% and 20.3% respectively)”.
Sterling Bank’s liquidity position is well managed, GCR stated in the rating note, with the regulatory liquidity ratio registering at 35.1% as of 31 December 2024 from 32.4% in 2023 – above the minimum requirement of 30.0%.
Also, the bank’s liquid assets covered its total wholesale funding and customer deposits by 5.2x and 50.7% respectively at that date.
Ratings analysts expect the bank’s funding and liquidity profile to remain at current sound levels over the next 12-18 months.
GCR said the Series 2 NGN32.89 billion Fixed Rate Senior Unsecured Bond was issued under Sterling Investment Management SPV Plc’s NGN65 billion Debt Issuance Programme in 2018, and it constitutes direct, unsecured, and senior obligations of the Issuer and rank pari passu without any preference among themselves and with every other senior obligation of the Issuer.
“While the Issuer is Sterling SPV, repayment of the obligations under the Issues ultimately depends on the performance of the Sponsor, as the direct obligor of the Series 2 Bond.
“Thus, the accorded rating is linked to Sterling’s credit profile and financial position, and, as such, a notch below the Sponsor’s long-term issuer credit rating because the Series 2 Bond largely ranks alongside the Subordinated Notes issued by Sterling”.
GCR noted that the Issuer met all its obligations on a timely basis on the Bonds, as reported by the Trustees. The principal will be repaid as a bullet upon maturity in October 2025, the rating note added.
The stable outlook reflects expectation that Sterling’s GCR core capital would remain at similar levels and range between 14.0% and 16.0% over the outlook period, balancing earnings accretion and equity injection with risk-weighted asset growth.
“We also expect the bank’s funding and liquidity profile to remain good, while asset quality metrics are maintained”, GCR said. Zenith Bank Gains as Investors Queue for Interim Dividend
