Polaris Bank: Positioned for growth

Polaris Bank recently released Full Year 2019 results showing that the bank has successfully transitioned from the hitherto troubled institution known as Skye to a Bank set to consolidate its growth levers.

The annual financial statements of the bank ending for the December 31, 2019 period, show gross earnings of over N150 billion, Profit before Tax of N27.83billion and Profit after Tax of N27.35billion showing very strong profitability and profit potential going forward.

The bank’s deposits from customers was N857.8billion with Total Assets in excess of N1.14Trillion confirming that Polaris Bank remains a systemically important bank within the Nigerian financial system.

Net interest income surged over 800 percent to N87.7 billion, while net fee and commission income came in at N8.5 billion up 300 percent from N2.15 billion in 2018.

Apart from strong capital adequacy, the bank’s other ratios are equally impressive with Return on Assets (ROA) at 2 percent, Return on Equity (ROE) 33 percent, and Liquidity Ratio at 81 percent.

These ratios demonstrate operating efficiency, strong inherent capacity for profitability and returns to stakeholders, very comfortable liquidity and asset efficiency.

The bank’s Cost to Income ratio of 59 percent came in line with industry averages.

Polaris has been able to position itself as the bank for digitally savvy Nigerians and customers.

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In 2019, Polaris Bank pursued strategic initiatives for future growth which have continued this year including digital transformation and launch of the bank’s agency banking platform, Sure Padi. Commencing in September 2018 immediately after the transition to Polaris Bank, the management worked with KPMG, EY, Deloitte and other first class advisory and consultancy firms to develop a strategy and corporate transformation plan and defined aspirational and inspirational new vision statement, namely being “The preferred partner providing superior financial solutions for customers” and mission statement, “We will leverage our knowledge of an everchanging world to constantly design innovative solutions that facilitate our customers’ enterprise” as well as values-Boldness, Sustainability, Innovative, Continuous Learning and Trustworthy. The bank also adopted a predominantly retail market focus in line with its core strengths and competences and defined new customer value propositions:-Ease, Friendliness and Accessibility: focused on convenience, customer excellence and customer delight; Creating opportunities and providing empowerment for selected sectors: Youths, SMEs, Women and the Underserved; Digital First: providing easy and simple banking through digital and being future focused.

The objectives of the Corporate Transformation Plan included sustainability; profitability and capital preservation; regulatory compliance and buy-in; realizing value from investments; aligning business and operating models to strategic aspirations; and execution-achieving quick-wins, and phased implementation.

The critical pillars of transformation as designed are Digital Transformation, Enhancement of IT Infrastructure and Technology Platforms, Cost Optimisation and Operational Efficiency, Workforce and Culture Alignment, Brand Equity Enhancement and Business/Strategic Initiatives.

One of the problems that plagued the now defunct Skye Bank is the issue of non-performing loans or NPLs.

On July 4 2016 the Central Bank of Nigeria (CBN) constituted a new board and management for Skye Bank Plc to address its declining prudential ratios and return the bank to sustainable profitability with a mandate to reduce cost to income ratio, improve asset quality, improve liquidity and capital adequacy and restore profitability.

The new team, led by Muhammad K. Ahmed and Adetokunbo M. Abiru as Chairman and Managing Director/CEO respectively worked on cleaning up loan and collateral documentation on most of the high value facilities, thus putting the bank in a stronger position to enforce its rights as a lender.

As a result of these and other measures, as well as aggressive loan recovery drive, the bank recovered over N60billion of outstanding bad loans in its first year in office and these recoveries were ramped up to over N100 billion by the end of the second year.

The management also reached settlement and restructuring agreements with many of the chronic bad debtors resulting in substantially improved payments and prospects of future recoveries.

The bank fully divested from several local and international subsidiaries releasing total cash value of over N19 billion.

Polaris Bank results clearly show an institution positioned for growth amid trying times in the Nigerian macro-economic space and financial services industry.

By making a clear choice to be a retail bank Polaris has chosen its core to be around capabilities around technology.

These convictions underpinned management’s focus on digital transformation and on refreshing and upgrading Polaris Bank’s IT infrastructure.

In 2019, management had overseen significant investment in the bank’s critical IT infrastructure including data centres, digital labs and human capital.

By these moves the bank management has successfully arrested issue of customer attrition and managed the situation and significantly stemmed the tide and reduced deposit loss, restoring customer confidence and stabilizing the institution.

The management has thus entrenched sound corporate governance and risk management practices, ensuring enduring profitable operations while positioning the bank optimally for investors.