#11. Sterling Bank The one-customer bank. Sterling Bank PLC FY 2010 Investor/Creditor Presentation April 2011#22 Important Information Investor Relations This presentation has been prepared by Sterling Bank PLC. It is intended for an audience of professional and institutional investors who are aware of the risks of investing in the shares of publicly traded companies. The presentation is for information purposes only and should not be construed as an offer or solicitation to acquire, or dispose of any securities or issues mentioned in this presentation. Certain sections of this presentation reference forward-looking statements which reflect Sterling Bank's current views with respect to, among other things, the Bank's operations and financial performance. These forward-looking statements may be identified by the use of words such as 'outlook', 'believes', 'expects', 'potential', 'continues', 'may', 'will', 'should', 'seeks', 'approximately', 'predicts', 'intends', 'plans', 'estimates', 'anticipates' or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Sterling Bank believes these factors include but are not limited to those described in its Annual Report for the financial year ended December 31, 2009. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release. Sterling Bank undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. 1. Sterling Bank The one-customer bank.#33 Agenda 1 Corporate Information 2 Macro-economic Trends 3 Financial Highlights 4 5 Earnings Profile Balance Sheet Analysis 6 Liquidity 1. Sterling Bank The one-customer bank.#4Sterling Bank at a Glance FY 2010 FY 2009 Description (N'B) (N'B) Total Assets 277.1 221.3 Customer Deposits 203.1 161.3 Net Loans 103.8 82.9 Shareholders' Fund 26.1 21.1 Common shares 12.5 12.5 outstanding 12.7% 12.0% Capital Adequacy Ratio (%) Profit before Tax FY 2010 FY 2009* 5.OB (7.2)B 40k (72)k 211.5% Earnings per Share Cost/Income Ratio** 76.3% Return on Average Equity 21% (27)% Our Identity ■ Nigeria's pre-eminent investment banking franchise ■ Growing presence in retail banking Strong leadership brands across all financial services segments ■ Sound Corporate governance model ■ Excellent technology infrastructure and innovative products People-oriented customer-focused institution 'One Customer' Bank. ■ Scale with clear intent. Managed. diversification of the business model ■ Long-term stable ownership base to support strategy + * 2009 P&L figures annualized **Including Allowances for Risk Assets 1. Sterling Bank The one-customer bank.#55 14-Month Share Price Chart Share Price Movement: Dec 1, 2009 - Jan 31, 2011 4.00 3.00 2.00 1.00 0.00 1 Dec, 2009 1.15 Volumes Traded 50.0 40.0 30.0 20.0 10.0 Number of Trades 31 Jan, 2011 2.75 300 250 200 150 100 50 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2009 2010 2011 1. Sterling Bank The one-customer bank.#6a National Branch Network Oyo Ogun Lagos Sokoto Katsina Kebbi Zamfara Osun Niger Ondo Kogi Ekiti Yobe Jigawa Borno Kano Gombe Bauchi Kaduna FCT Nassarawa Benue Plateau Taraba Adamawa Lagos Region: 46 South-South Region: 11 North-West Region: 12 North-Central Region: 9 South West Region: 8 South-East Region: 7 North-East Region: 2 Branches in consideration National Branch Distribution EN Edo AN EB Cross-River IM AB Delta 10% Bayelsa Rivers Akwa Ibom 11% 6% 2% 9% 13% 49% 5.1 Sterling Bank The one-customer bank.#77 Market Focus We provide a wide range of financial services to a rich customer base with a focus on three major market segments Small & Medium Scale Businesses Lending & Deposit Products Financial Advisory Services Government (Federal, State & Local Councils) ■ Collections & Ancillary Services ■Mid-Cap Infrastructure Finance Consumer Banking Asset-based and Personal Finance 1. Sterling Bank The one-customer bank.#8Strategic Priorities Short-term (2010-2012) ■ Equity Injection - Minimum US$100mn excl. organic accretion ■ Tap wholesale markets for debt to improve efficiency of capital structure ■ Double asset market share primarily through organic growth in local corporate loan book ■ Work to bring NPL levels to <10% ■ Improve liability generation through the expansion of retail distribution footprint ■> 20% Return on Equity Long-term (2015+) ■ Globally competitive financial services franchise ■ Fully scaled business model with institutionalized processes beyond the stewardship of current owners and managers ■ Systemically important operator materially impacting all our sectors of business participation 80 2010 2011 2012 2013 2014 2015 Mid-term (2013-2015) 3-5% market share measured by assets ■ Leading consumer banking franchise (bank of choice for customers in our target markets) ■Low single digit cost of funds ■ Diverse retail funding base ■ <5% in non-performing loans ■ Diversified income streams with top quartile position in all our operating areas ■ Investment grade credit rating ■ Double digit revenue growth Y-o-Y 1. Sterling Bank The one-customer bank.#9Macro-economic Trends a 1. Sterling Bank The one-customer bank.#1010 Economic Indices Bonny Light Spot Prices FOB ($/Barrel) 160 140 120 100 80 60 40 18 16 14 12 10 8 6 4- Nigeria Consumer Price Index / Inflation Rate 2011 2010 2009 2008 20 2 0 0 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec. Nigeria Oil Supply: 5-year Range mb/d Nigerian Naira / US Dollar Average Exchange Rate 2009 2010 Range 2.7 2010 2009 2008 (2004-2009) 160 2.5 2.3 2.1 1.9 1.7 1.5 15 150 140 130 120 110 100 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 1. Sterling Bank The one-customer bank.#1111 Funding Ecosystem (Industry) Central Bank of Nigeria Monetary Policy Rate (MPR) Nigerian Interbank Offer Rate (NIBOR) Call 7-day 30-day 16% 60-day 90-day 14% 6.40% 6.20% 6.00% 5.80% 5.60% 5.40% 5.20% 5.00% Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2010 12% 10% 8% 6% 4% 2% 0% Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2010 Deposit Taking - Savings Accounts Deposit Taking - Fixed Deposit Call 7-day 30-day 60-day 14% 12% 10% 8% 6% 90-day 180-day 270-day 360-day 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 4% 9999 0.50% 2% 0.00% Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 0% 2010 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2010 1. Sterling Bank The one-customer bank.#1212 Financial Highlights 1. Sterling Bank The one-customer bank.#1313 Key Trends: 5 Year Review Gross earnings -Total Assets --Deposits CAGR: 22% CAGR: 20% CAGR: 24% -Loans & Advances CAGR: 21% N'Bn 249.85 221.32 A 203.07 176.92 156.74 161.28 277.11 34.34 Dec 2010 Comments ■ 2010 performance was a reflection of the gradual improvement in economic conditions given that the banking sector was still recovering from the difficult operating conditions of 2009 ■ Total assets and net loans and advances (including advances under finance lease) grew by 25% respectively, while deposits grew by 26%. ■ However, earnings potential was constrained in 2010 due to the low interest rate regime and fewer profitable outlets to invest excess liquidity. 111.77 99.22 82.93 X 103.75 70.25 68.95 49.35 40.13 36.13 37.37 12.86 23.86 Sep 2006 Sep 2007 Sep 2008 Dec 2009 1. Sterling Bank The one-customer bank.#1414 Key Trends: Q on Q Analysis N'M Gross Earnings Total Assets --Deposits Loans and Advances 201,679 279,321 277,111 208,126 195,721 203,075 145,546 138,891 91,054 81,591 90,540 103,754 8,297 23,145 16,289 34,342 Q1 2010 Q2 2010 Q3 2010 Q4 2010 1. Sterling Bank The one-customer bank.#1515 N' Millions Income Statement -8% 37,374 34,342 Gross Earnings *Annualized 11.4% -10.6% 23,265 20,883 31.7% ----- -10.0% 17,655 1- 14,111 15,783 ------- 10,717 10,166 9,154 FY 2009* FY 2010 4,955 5,044 (7,215) (9,306) NRFF Other Operating OpEx Income Income PBT PAT Comments Revenue decline (8%) was driven by the low interest rate regime experienced for the greater part of the year ■ Operating income increased 11% on the back of improved margins O Operating Expenses declined 11% reflecting progress in the Bank's cost discipline and efficiency programs introduced in 2009 ■ Sustained profitability achieved in the third quarter Sterling Bank The one-customer bank.#1616 N' Millions Balance Sheet 221,318 25% 277,111 Total Assets 25% | 103,754 82,935 Loans & Advances I 25% | 250,993 26% 200,245 161,277 203,075 FY 2009 FY 2010 24% 21,074 26,118 Comments Recorded growth on all key balance sheet lines ■ Growth spurred by slightly improved economic conditions ■ Improvement in Equity boosted by profit accretion. ■ Commenced the process of introducing tier 2 capital to further boost capital position, while pursuing various options to strengthen tier 1 capital Total Liabilities Deposits Shareholders' Equity 1. Sterling Bank The one-customer bank.#1717 Key Financial Ratios FY 2009* FY 2010 21% 2% -4% 39% 56% 212% 76% 50% 47% 24% 12% 13% 12% -27% ROAE ROAA Net Cost- Interest Income Margin Ratio CAR *Annualized Not drawn to scale FY 2009 FY 2010 82% 85% Liquidity NPL Ratio Coverage Ratio Ratio ☐ ■ Comments Return on Average Equity (ROAE) in the first rank percentile among all banks Strong liquidity and improved capital position to support business growth O Drop in Cost-to-income ratio reinforcing improvement in operating efficiency ■ Achieved significant improvement in asset quality. 1. Sterling Bank The one-customer bank.#1818 Earnings Profile 1. Sterling Bank The one-customer bank.#1919 Revenues Revenue Mix N'M Interest Income Fee Income 6,099 (12) 671 2,395 34,341 14,480 269 9,153 8,608 FY 2009* FY 2010 1,831 25,188 4,869 796 2,135 2,367 37,375 14,571 662 10,167 10,060 27,208 1,915 Placements Inv. in Govt Securities Loans & Advances Finance Lease Fees & Commissions Forex Investment Income Others Total Grand Total Fee-based Income Mix Fees & Commission Forex Interest Income Mix Investment Others Loans & Advances Finance Lease Inv. in Govt Securities Placements 26% 23% 48% 21% 8% FY 2009* 7% 0% FY 2010 67% 37% 7% 54% 34% 7% 2% 1% FY 2009* FY 2010 58% 1. Sterling Bank The one-customer bank.#2020 20 Operating income Operating Income N'M 14,111 FY 2009* FY 2010 2,395 23,264 6,099 (12) 671 2,367 20,884 2,135 4,869 796 10,717 Net Revenues from Funds Fees & Commissions Forex Investment Income Others Operating Income Mix 10% 4% 23% 11% FY 2009* 10% 3% 0.1% 51% 26% FY 2010 61% NRFF Total Fees & Commission Forex Investment Others 11% 1. Sterling Bank The one-customer bank.#2121 Operating Efficiency N' Millions -11% -33% 17,655 16,491 115,783 FY 2009* -64% FY 2010 212% 11,076 76% Operating Expenses Funding Cost Cost to Income Operating Expenses Breakdown 29% O 71% Staff Cost Other Expenses 30% O 70% Comments Operating expenses declined 11% to N15.8b ■ Funding cost declined 33% feeding through improvement in Net Interest Margins ■ Significant improvement in relative efficiency on the back of lower provisioning and reduction in operating expenses FY 2009* FY 2010 1. Sterling Bank The one-customer bank.#2222 22 Profitability Profit/(Loss) Before Tax N'M 2009* 4,169 5,674 4,955 592 1,407 Profit/Loss After Tax N'M (6,858) (6,515) (9,306) 2010 Comments Return to profitability achieved in Q1 2010 was sustained through the year However, full year profitability was affected by allowances for risk assets which moved into negative territory by N2.6 billion 3,939 5,343 5,045 482 1,272 Earnings (Loss) per Share (kobo) 4 10 (6,723) (6,196) (7,216) 31 43 (54) (54) Q1 Q2 Q3 (57) Q4 40 1. Sterling Bank The one-customer bank.#2323 Balance Sheet Analysis 1. Sterling Bank The one-customer bank.#2424 Asset Decomposition N' Millions 103,520 37% 142,105 82,935 25% 103,754 Liquid Assets Loans & Advances Asset Mix 2% 13% 37% FY 2009 -13% 5,213 4,527 FY 2009 FY 2010 -10% 29,650 26,725 Fixed Assets Other Assets 10% 2% 47% 37% FY 2010 51% Liquid Assets Loans & Advances Fixed Assets Other Assets 1. Sterling Bank The one-customer bank.#2525 Assets Funding Mix N' Millions 161,277 26% 203,075 FY 2009 FY 2010 Comments ■ Diversified funding base with deposits as the major funding source ■ Deposits funded 73% of total assets ■ To keep funding costs low, deposit mobilization was skewed in favour of stable low cost deposits -8% 76% 24% I 25,058 14,202 24,766 22,860 26,118 21,074 Deposits Long-term Borrowing Other Liabilities Equity Asset Funding Mix 10% 11% 6% FY 2009 73% 9% 9% 8% FY 2010 73% Deposits Long-term Borrowing Other Liabilities Equity 1. Sterling Bank The one-customer bank.#2626 Deposits Deposit breakdown N'M FY 2009 FY 2010 38,965 203,074 15,499 71,884 9,580 67,146 26% 47,934 7,591 12,975 161,277 85,846 6,931 Time Savings Demand Domiciliary Interbank Total Deposit Mix 30% 5% 8% 4% FY 2009 53% 8% 19% 33% 35% FY 2010 5% Time Savings Demand Domiciliary Interbank 1. Sterling Bank The one-customer bank.#2727 Gross Loans by Type Loans & Advances N'M 13% = 100% 114,765 = 100% 101,306 3,121 4,556 22,303 16,735 38,899 61,745 41,116 FY 2009 Loans & Advances by Type 17% 4% 27,597 FY 2010 19% 41% Overdraft Term Loan Others Finance Lease Comments ■ Gross loans and advances improved 13% reflecting gradual return of risk appetite limited by fewer lending opportunities ■ Term loans grew 59% and accounted for 54% of gross loans 3% 24% Overdraft Term Loan Others Finance Lease 38% 54% FY 2009 FY 2010 1. Sterling Bank The one-customer bank.#2828 2009 2010 Gross Loans by Sector Gross Loans FY 2010 Real Estate & Construction, 33% Manufacturing, 12% N'B Finance & Insurance, 4% Transport, 3% Capital Market Operators, 2% Consumer Credit, 0.002% ■ Power, 1% 130% 37.7 122% 4% 18.7 16.4 8.4 12.5 5.9 -58% Oil & Gas, 16% I Government & Other Public Utilities, 4% Telecoms, 1% ■Education, 0.2% Mortgage, 2% Agriculture, 2% General/Others, 20% 1.2 0.2 0.6 0.0 13.0 -22% 148% -33% -5% 2.5 4.6 3.0 A -81% 5.9 4.4 0.5 0.3 14.7 2.8 2.3 2.0 23.2 0 000 0 3.8 4.6 0.7 0.0 18.6 Comment ▪ Diversified Loan book with focus on Oil & Gas, Real Estate & Construction and Manufacturing sectors 11. Sterling Bank The one-customer bank.#2929 2009 2010 Non Performing Loans (NPL) by Sector Gross Loans FY 2010 N'B Oil and Gas, 18% Real Estate, 5% Mortgage, 3% | Agriculture, 0.6% Manufacturing, 16% Communication, 3% Finance and Insurance, 2% Education, 0.1% Capital Market, 7% Transportation, 3% ■Consumer Credits, 1.4% Others, 41% 13% 20.6 FY2009 ■FY2010 -29% 23.2 -3% 20.2 9.0 6.9 4.3 4.1 3.8 -92% 0.7 0.1 52.7 12.89 0 00 000000 20.8 108.3 7.0 7.2 10.9 0.8 0.6 0.3 0.7 0.3 NPL Breakdown -75% -16% 10,132 10,624 8,904 2,087 1,485 2,499 Sub-standard Doubtful 50.7 22.84 -44% 22,843 12,888 Lost Total NPLs 1. Sterling Bank The one-customer bank.#30Asset Quality 23.6% -50% 11.5% 4% 82.0% 85.4% -44% 18.0% 10.0% FY 2009 FY 2010 NPL Ratio Coverage Ratio Provision to Gross Loans Loans by Performance 23.6% 30 FY 2009 76.4% 11.5% FY 2010 88.5% Comments Improvement in asset quality driven by the purchase of bad loans by AMCON and internal loan recovery initiatives. ■ Coverage ratio also improved from 82% at FY 2009 to 85% Performing Non-Performing 1. Sterling Bank The one-customer bank.#3131 Liquidity 1. Sterling Bank The one-customer bank.#3232 FY 2009 Liquidity Profile Liquid Assets breakdown N'M FY 2010 6,024 6,660 9,608 8,574 25,099 104,323 142,106 37% 27,506 103,521 57,833 Cash Treasury Bills Interbank Investment Securities Total 1. Sterling Bank The one-customer bank.#3333 33 Strong Liquidity position -5% 10% 50% 51% 47% 47% Liquidity Ratio Liquid Assets Split 27% 9% FY 2009 8% Liquidity Assets Ratio 73% 56% FY 2009 FY 2010 5% 18% FY 2010 4% ■ Comments Liquidity ratio of 47% above regulatory benchmark of 30% ■ Investment Securities rose on the back fewer opportunities for quality risk asset creation. Cash Interbank Treasury Bills Investment Securities 1. Sterling Bank The one-customer bank.#3434 Thank You 1. Sterling Bank The one-customer bank.#3535 Contacts Office 20 Marina, Lagos, Nigeria Tel: 234-(01) 2600420-9; Fax No: 234-(01) 2702310 Website: www.sterlingbankng.com Investor Contacts Yemi Odubiyi Chief Strategy Officer +234 803 535 0991 [email protected] Abubakar Suleiman Group Treasurer / Financial Markets Head +234 803 535 1172 [email protected] 1. Sterling Bank The one-customer bank.