Sterling Bank joins Elite holding companies

Sterling Bank restructures to join bandwagon of holding companies

Sterling Bank Plc , a mid-level lender in Nigeria, will soon join other banks that have restructured to HoldCo.

To this effect,  the bank has obtained an approval-in-principle by the Central Bank of Nigeria for its proposed non-interest banking business known as Alternative Bank Limited.

 The overall business will focus on social impact, corporate responsibility, and ensure religious compliance in all its dealings.

 The Company Secretary, Temitayo Adegoke, who stated this in a statement on Wednesday, said the non-interest service will operate as a standalone bank.

Adegoke said a non-Interest banking business engages in trading, investment and commercial activities as well as the provision of financial products and services without the conventional interest charges.

The approval is one of the foremost consents required to obtain final approval from the CBN, subject to the fulfilment of other stipulated conditions.

“The approval is sequel to the approval-in-principle granted to the Bank for the restructuring as a holding company (HoldCo) and subject to the fulfilment of conditions as stipulated by the CBN,” the statement reads.

“The Alternative Bank Limited will focus on building partnerships that connect individuals and businesses leveraging technology to create business optimisation while solving an individual’s daily financial needs,” said .

Since  2020,  a new trend  has emerged  in the Nigerian banking sector. After prioritising their core banking services for nearly a decade, some Nigerian banks are restructuring to diversify their revenue base and remain competitive with other financial services. With this drive, some banks are adopting the holding company structure.

Now, to be clear, holding companies are neither new nor rare among Nigerian banks. It dates back to 2011 when the Central Bank of Nigeria (CBN) forced banks to give up their non-banking businesses or restructure into a holding structure.

The regulator, like its peers globally, believed that it was an important risk management strategy to separate lenders from entangling with other financial services like insurance or investments.

Following that regulation in 2011, several banks among them UBA Group, First City Monument Bank (FCMB), Stanbic IBTC Bank , FirstBank  Guaranty Trust Bank  (GTBank)  adopted the holding company structure. The decision was simple that the other businesses represented a sizable percentage of the bank’s revenue.

In the last seven months, two more banks have made strong moves to restructure into holding companies.  Sterling Bank and Access Bank have either secured or are in the process of securing regulatory approvals for their (HoldCos).

For Sterling Bank, the HoldCo structure supports a different kind of ambition. The bank’s Managing Director, Abubakar Suleiman explained to TechCabal that he is not looking to compete with fintechs.

“We want to be number one for risk underwriting,” Suleiman said on the call.

 “We want to develop a capacity for risk underwriting at a level that no one can compete with. That’s our intention. I think the role of the bank above all else is to underwrite risks so that capital can flow and the economy will grow.”

Sterling Bank says the HoldCo route will help channel its focus on wealth creation and the use of technology to improve lending and investment opportunities for customers.

“Our end-to-end plan is that we want to significantly leverage technology to become the major financial adviser and lender in specific sectors,” Suleiman tells TechCabal.

“And the reason we’re leveraging technology is that we feel that it is very difficult for a bank to make money unless they actually help the customers to create wealth.”

This emphasis on wealth creation and lending is not just a core focus on the bank in recent years, it was the focus on the Sterling Bank when it was founded 60 years ago.

Incorporated in 1960 as Nigeria Acceptances Limited (NAL), the bank was licenced as an investment bank in 1969. NAL was mostly foreign-owned and was focused on wealth management, corporate finance and international trade.

In the 1970s it became a state-owned bank following the indigenization decree of the country’s military government. Although it started trading on the Nigerian Stock Exchange in 1992, it became fully privatised in 2000 after the government sold its stake.

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