October 18, (THEWILL) – Sterling Financial Holdings Company Plc delivered an impressive set of 2026 half-year results, with gross earnings rising by 31.5 percent to N279.6 billion and profit after tax climbing by 20.4 percent to N50.30 billion. Its total assets are approaching the N5 trillion mark, while a successful capital-raising exercise has strengthened its shareholders’ funds.
Yet, beneath the headline growth lies a more troubling development that deserves closer scrutiny: the group’s credit impairment charges soared from N5.21 billion in the first half of 2025 to N23.85 billion in the corresponding period of 2026 — an increase of approximately 358 percent.
The sharp rise in provisions for potential credit losses, alongside a loan book expanding more slowly than customer deposits, raises important questions about the risks accompanying the group’s growth, the sustainability of its earnings and its capacity to translate a stronger balance sheet into productive lending.
The figures do not, by themselves, establish that Sterling Financial has a deteriorating loan portfolio or that its profits are unsustainable. They do, however, expose fault lines that a headline celebration of revenue and profit growth could overlook.
“For investors, depositors, regulators and businesses looking for credit, the central question is no longer simply how quickly Sterling Financial is growing. It is how much of that growth can be sustained without a disproportionate increase in credit risk — and whether the expanding financial institution is delivering sufficient value to the wider economy,” said Mike Akannor, a financial analyst.
Credit impairment as uncomfortable headline
The most consequential figure in Sterling Financial’s H1 results is arguably not the N50.30 billion profit after tax, but the N23.85 billion charge against expected credit losses.
According to the published results, credit impairment charges rose from N5.21 billion in H1 2025 to N23.85 billion in H1 2026, even as the group maintained its reported non-performing loan ratio at 4.7 per cent.
Akannor emphasised that the contrast is striking — with credit impairment charges increasing by approximately N18.64 billion, while profit after tax rose by about N8.52 billion. He noted that these figures should not be interpreted as proof that the bank has lost the entire difference between the two amounts.
He further explained that the profit comparison reflects changes across the entire income statement, including interest income, operating expenses, taxes and other items. Nevertheless, the divergence demonstrates how significantly credit-risk costs have increased relative to the group’s bottom-line growth.
Quicker moves are necessary
The implication is that Sterling Financial must work harder to convert its growing lending business into durable earnings. A larger loan book may generate more interest income, but the benefit diminishes when borrowers fail to meet their obligations or when the expected risk of default requires heavier provisioning.
The group’s impairment charge is not necessarily evidence of realised losses: expected credit loss computation requires banks to recognise anticipated losses before every default becomes final. That is precisely why the increase deserves attention. It provides an early-warning indicator that investors should investigate rather than dismiss.
Looking deeper into the financial statements, the critical questions are what caused the increase, which sectors and borrower categories account for the largest exposures, and whether the additional provisions reflect a handful of large accounts, deteriorating conditions across several industries or a deliberate tightening of the bank’s risk assumptions.
Without that breakdown, investors are left with an aggregate figure that reveals the cost of risk but does not adequately explain its origins.
READ ALSO:
Stable NPL ratio does not tell the whole story
Sterling Financial’s reported non-performing loan ratio remained at 4.7 per cent, unchanged from the comparable figure disclosed in its results.
At face value, this offers reassurance. The ratio does not suggest a deterioration in reported non-performing loans relative to the bank’s loan portfolio. But the stability of one ratio cannot settle the broader question of asset quality.
The balance sheet shows gross loans to corporate entities and other organisations at approximately N1.54 trillion, compared with N146.30 billion in loans to individuals. Gross customer loans stood at about N1.68 trillion before expected credit loss deductions, while the reported net loan balance was approximately N1.61 trillion.
The concentration in corporate lending makes sectoral and borrower-level disclosure particularly important. Corporate exposures can be large, and difficulties affecting a small number of substantial borrowers may have disproportionate consequences for credit costs.
The published figures also show expected credit loss allowances of approximately N6.98 billion for Stage 1 exposures, N29.28 billion for Stage 2 exposures and N38.58 billion for Stage 3 exposures.
These stages are particularly important. Stage 1 generally covers financial assets without a significant increase in credit risk since initial recognition; Stage 2 covers exposures with a significant increase in credit risk; and Stage 3 covers credit-impaired exposures.
Industry experts emphasise that the sizable Stage 2 allowance deserves particular attention because it relates to exposures whose credit risk has increased significantly even though they are not necessarily classified as non-performing loans.
“It would be wrong to equate Stage 2 balances automatically with bad debts, but they are an important indicator of the risks building within the portfolio,” said Akannor in a note to THEWILL, He suggested that Management should explain the movement in each stage, the sectors driving the exposures and the extent to which provisions are adequately matched to the risks.
For shareholders, the question is whether the reported 4.7 percent NPL ratio captures the full direction of credit risk or whether other indicators are signalling a more complicated picture.
NGX performance trend
The Group’s flagship subsidiary, Sterling Bank, closed its last trading day (Friday, October 16, 2026) at N76.50 per share on the Nigerian Exchange (NGX), recording a 0.6 percent drop from its previous closing price of N76.95 Sterling began the year with a share price of N7.05 and has since gained 985 percent on that price valuation, ranking it first on the NGX in terms of year-to-date performance.
“Shareholders can be optimistic about STERLINGNG knowing the stock has accrued an outstanding 875 percent over the past four-week period alone—best on NGX.
Stockexchange listings,” the NGX noted on its website.The report added that Sterling Bank is the fifth most traded stock on the NGX over the past three months (Jul 2 – Oct 16, 2026) and has traded a total volume of 2.18 billion shares—in 18,750 deals—valued at NGN 18.3 billion over the period, averaging a volume of 34.6 million shares (valued at NGN 290 million) per session.
Sterling Financial Holdings CEO, Yemi Odubiyi, commented on the group’s 2026 H1 results, stating that the performance reflects continued growth across the Group’s core businesses, supported by disciplined execution and improved operating efficiency.
He emphasised that the successful completion of the Group’s recapitlisation programme positions the institution for the next phase of growth across its commercial banking, non-interest banking, and wealth-management business.
Odubiyi noted that the group is focused on sustaining growth, strengthening its balance sheet, and delivering long-term value across its diversified platform.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
