Skye Bank rides 873% profit on improved risk management

The continuous focus on improved risk management practices is impacting positively on Skye Bank’s performance as its audited report, prepared in line with the International Financial Reporting Standards (IFRS), shows highest profit growth of 873 percent and dividend increase of 100 percent, triggering a huge scramble for the shares of the bank.

The bank’s market consideration at the Nigerian Stock Exchange (NSE) rose by the highest allowable daily percentage change of 10 percent with a gain of N2 to close at N8 per share, as investors reacted positively to the earnings report. Audited report and accounts of the bank for the year ended December 31, 2012, showed improvement in profitability as the bank harnessed its business base and efficient cost management to deliver returns to shareholders. Key extracts of the audited report showed that profit after tax leapt to N12.64 billion in 2012, representing an increase of 872.6 percent on N1.30 billion recorded in 2011. Profit before tax had jumped by 480.9 percent from N2.84 billion in 2011 to N16.51 billion in 2012. The bank maintained a steady top-line in 2012 with net interest income and net non-interest income of N44.50 billion and N22.60 billion, respectively.

On the basis of the bottom-line, the board of the bank has recommended an increase in cash dividend per share from 25 kobo paid for 2011 business year to 50 kobo for 2012.

This performance underlined the bank as a return-driven bank. Earnings per share increased to N1.01 in 2012 as against 20 kobo in 2011. At current market value, earnings yield stands at about 16.6 percent while dividend yield stands at 8.2 percent, within the top bracket of earnings and yields of quoted equities. A dividend cover of 2.02 times for 2012 as against 0.80 times for 2011 underlines the ability of the bank to sustain its impressive dividend payouts.

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The bank’s balance sheet also showed similarly performance as it focus on quality growth, brought down the relative level of non-performing loans to its lowest level. Its assets quality improved considerably as non-performing loan/gross loans ratio surpassed industry’s target of 5 percent at 4.95 percent in 2012, as against 6.39 percent. Deposit base expanded by 22.4 percent at N790.09 billion in 2012 compared with N645.45 billion in 2011, reflecting the strong profile of the bank in the intensely competitive banking industry. Total assets crossed the N1 trillion mark to N1.07 trillion in 2012, as against N914.27 billion in 2011. Equity funds firmed up to N106.89 billion, as against N100.11 billion in the previous year.

Commenting on the report, Kehinde Durosinmi-Etti, group managing director, Skye Bank, said the report reflected the commitment of the bank to its goal of quality and sustained growth and returns to shareholders.

Durosinmi-Etti noted that the improvement in the intrinsic profitability of the bank underscored management’s grasp of competitive edges that the bank should build on as it progresses to its target of a leading top-tier bank.

According to him, “in a year of impactful regulatory interventions including tight monetary policies, we recorded growth in the most of our performance indicators. For instance, we grew our interest income by 35 percent from N74.9 billion to N101.0 billion, signalling an accretion in our volume of business transactions, while customer deposits grew by 22 percent, from N645.5 billion to N790.1 billion.

“The continuous focus on improved risk management practices yielded dividends as our impairment and provisions charge fell significantly, which positively impacted on our profit before tax of N16.5 billion, a significant growth of 481 percent from N2.8 billion reported in 2011. We also recorded a reduction in our operating expenses, from N42.3 billion last year to N40.2 billion, following the deliberate cost management and efficiency initiatives we commenced in the past few years, in spite of the high operating cost environment.

“The critical performance ratios, in terms of returns, efficiency, non-performing loans and liquidity, are well within acceptable regulatory levels. Therefore, we are confident that our focus on defined growth segments and efficient use of our branches and various electronics platforms will put us in vantage position to meet our future plans.

“We will further leverage on our expertise and comparative advantage in key growth areas including commercial banking, corporate banking, project finance, trade finance, public private partnership and public sector to unlock significant growth in incomes, while we further reduce costs by building on our increasingly popular retail banking franchise. We see a whole lot of opportunities in the large commercial and corporate sectors, retail market and small and medium enterprises and we will fully explore these in the periods ahead.”

On benefits of IFRS-compliant reporting by banks, he said “it allows for more disclosures that could allow investors to make informed decisions,” saying the bank was on a good stead to sustaining the impressive performance in 2013, given the early indicators in the year.