Sterling Bank Revives Bond-Sale Plan as Nigerian Rates Ease


Lagos-based lender seeking to issue 27 billion naira in 2018
Bank aims to boost capital adequacy ratio to 14% from 11.4%
Sterling Bank Plc revived a plan to sell bonds to shore up its capital levels on expectations that Nigerian borrowing costs will ease.

A “more favorable” outlook for interest rates will allow the company to raise 27 billion naira ($75 million) of debt in the first half of 2018, Abubakar Suleiman, an executive director at the Lagos-based lender, said in an emailed response to questions on Thursday. Sterling Bank will use the proceeds from the sale for its working capital needs and to boost its capital adequacy ratio to 14 percent from 11.4 percent at the end of September, he said.

Sterling Bank abandoned a 65 billion-naira bond program last year after being charged 16.5 percent for 7.9 billion naira of debt, which it considered too high. The lender will focus on local growth industries such as health, education, transport and agriculture in 2018, Suleiman said. It is chasing repayments on maturing oil and gas obligations and selling assets to reduce energy loans by 15 percent to 20 percent next year as it tries to improve the quality of its book, he said.
The lender recovered 3.2 billion naira of bad loans in the nine months through September and expects further recoveries in the fourth quarter, which will help boost profit for 2017, Suleiman said. Non-performing loans ratio as a percentage of total credit declined by 380 basis points to 6.1 percent as at September from 9.9 percent in Dec. 2016, according to presentation on its website.

Small- and medium-sized Nigerian lenders have been struggling to bolster capital buffers and stem a rise in unpaid loans caused by a contraction last year in the economy of Africa’s top oil producer after crude prices plunged. A drop in inflation will allow the central bank to cut interest rates rates from a record 14 percent, central bank Governor Godwin Emefiele said on Wednesday.

Nigeria’s banking regulator allows lenders to count certain classes of debt and equity among the buffers that they need to set aside to survive market turmoil without causing risk to the financial system.