In life, the dream of everyone is to have a sweet ending in all endeavours. It is not the beginning that matters, but the end thereof. Those who have had smooth trajectory on their career path have every reason to give glory to their Maker, for as the scripture says, “It is not of him that willeth, nor of him that runneth, but of God that sheweth mercy.”
This can be said to be the lot of Tokunbo Abiru, group managing director/chief executive officer, Polaris Bank Limited.
Abiru, who has put in over three decades in the banking sector, and successfully carried out a transformation plan that changed the fortunes of the bank, will officially be bowing out tomorrow, August 31,2020, from Polaris.
Polaris, it would be recalled, inherited a lot of liabilities of the defunct Skye Bank, but through the doggedness of the out-going GMD, the bank was brought from insolvency to profitability. And looking at where the bank is today, the future is bright.
News about Abiru’s retirement as the Group Managing Director/Chief Executive Officer, Polaris Bank Limited, made the headlines last Monday.
Those who have followed his activities as a banker, attest to the fact that the last four years were perhaps, the most defining part of his career. The reason is very simple.
His joining Polaris at the point he did was tantamount to a “crown of thorns.”
He was head-hunted in July 2016 by the Central Bank of Nigeria (CBN) to go and perform a magic, as it were.
He was pointedly saddled with the responsibility of ensuring that the defunct Skye Bank Plc was led out of insolvency. Realising the need to work as a team with other professionals on the board, and as team player he has always been, Abiru delivered on the mandate, by successfully leading the transformation of the defunct bank to become a thriving Polaris Bank in four years.
In his testimonial that was in the form of a synopsis he sent out in a short note that announced his plan to bow out of the bank, he gave some hints on how he performed the magic of transformation at Polaris Bank. “With the support of the Board and Executive Management of Polaris Bank and by God’s grace, I have delivered on the Central Bank of Nigeria’s mandate to stabilise and establish the Bank on the path of sustainable profitability,” Abiru said.
“Polaris Bank is today a digitally enabled, customer-friendly and forward-looking enterprise, which has secured its rightful place in the vanguard of Nigeria’s banking industry. What remains outstanding is the divestment of government ownership from the bank to suitable investors in order to further solidify the journey on the path of continuous growth,” he had announced cheerfully.
According to his personal account and the bank’s financial statements, Abiru has no doubt put Polaris on a good standing, placing it amongst the core of strong, leading Tier 2 banks in Nigeria. Evident from verified financial statements and other bank documents, the bank is now not just profitable and stable, but also poised to compete effectively with the established competitors in the Nigerian banking industry.
Transformation: It took some sweat!
Without result-oriented management, Polaris would not have been able to transit from liability to profitability, only in four years of its transformation. This perhaps justified the decision of the apex bank to appoint Ahmed as the Chairman of Polaris Board; Abiru as its GMD/CEO and other reputable professionals as executive and non-executive directors to pull the bank from the brink of outright collapse.
At its takeover, a failure of corporate governance was one of the bank’s major problems. This was evident in what the new management described the bank’s high level of non-performing insider-related loans. By implication, its funding structure and risk asset portfolio mix signified improper risk management exposing it to policy and currency risks.
Also, reports of forensic audits, which reputable accounting were engaged to conduct, revealed significant infractions under the bank’s previous managers. As a result, Polaris suffered significant deposit attrition. Customers, depositors, shareholders and institutional partners alike doubted its future until the apex bank announced its take-over on July 4, 2016.
Under Abiru, however, the new management managed the bank’s grievous challenges, which culminated in reduction of deposit loss, restoration of customer confidence and stabilisation of the bank. Also, it settled many matured trade and bilateral obligations and restructured outstanding balances with the relevant institutions and counterparties.
Abiru’s team, substantially, addressed the challenges of loan security inadequacy and improper collateral documentation in the legacy portfolio of the bank. It equally cleaned up loan and collateral documentation on most of the high value facilities, thereby putting the bank in a stronger position to enforce its rights as a lender.
With its aggressive loan recovery drive, the bank recovered over N60 billion of outstanding bad loans within Abiru’s first year in office. Under Abiru’s leadership, records showed, loan recovery rose to N100 billion at the end of the second year. Also, it reached settlement and restructuring agreements with many of the chronic bad debtors resulting in substantially improved payments and prospects of future recoveries.
Abiru, likewise, pursued other initiatives to restructure and reposition the bank based on its mandate including cost management and optimisation and divestments to improve the institution’s financial position. Among others, cost management initiatives include branch rationalisation, review of service contracts and cash management operations all of which have resulted in hundreds of millions of financial savings.
Brighter future: Nothing to worry about
With its profit before tax standing at N27.83 billion at the end of the 2019 financial year, Abiru and his team have returned Polaris to profitability in line with the mandate the apex bank set for the new management. Now on a strong foothold, the bank has been repositioned as a major player in Africa’s biggest economy with over 370 branches nationwide.
Already, the bank has been restructured for sustainability. At the beginning of the 2020 financial year, Abiru reeled out future plan for the bank in a note to its staff members nationwide. He wrote in part: “2018 was pivotal in the life of the bank with the transition from Skye to Polaris. 2019, however, is even more important as we commence the journey of truly building a bank and brand we will all be proud of in years to come.”
“I am confident our bank has indeed stabilised and is now headed towards our purpose which is to become a top retail bank” in Nigeria. This was demonstrated by our collective and sustained performance trajectory in 2019. Our prudential ratios-capital adequacy and liquidity ratios are now in full compliance with stipulated regulatory requirements.
“We returned to profitability on a month-on-month basis throughout 2019.Ourcost-to-income ratio is also in line with industry average. We aggressively pursued our IT infrastructure refresh with a view to replacing and upgrading the aged, obsolete and sub-optimal performance IT equipment. The impact on efficiency, effectiveness, transactions and customers’ experience will become noticeable from the end of the first quarter of 2020…”
With this impressive performance, therefore, Abiru laid out strategic initiatives for the bank’s future growth. He cited the bank’s digital transformation, which had begun with recruitment of professionals and set up of structures and systems. He cited the bank’s agency banking platform, an initiative designed to provide banking services to the unbanked and under-banked, especially in locations where the bank is not present.
Confident of taking the bank to an enviable status in the nearest future, Abiru reaffirmed his resolve to execute its corporate transformation plan, which according to him, was designed to provide direction for the bank into the future and define its corporate and strategic aspirations.
A peep into Polaris
Indeed, the last two years have been noteworthy in the transformational history of Polaris Bank, a bridge bank the Central Bank of Nigeria (CBN) established September 21, 2018 to manage the assets and liabilities of Skye Bank. The apex bank resorted to this option on three related grounds.
First, as revealed in its records, Skye Bank, the defunct precursor of the bridge bank, had about 80percent non-performing loans far above the regulatory standard. Second, other prudential and adequacy ratios of the defunct bank abysmally performed much below the thresholds of the apex banks. Third, the owners of Skye Bank failed to recapitalise the bank.
Altogether, these grim realities shaped CBN’s decisions first on July 4, 2016 and afterwards on September 21, 2018. On the former date, the apex bank announced the takeover of Skye Bank. With Abiru as GMD/CEO, consequently, the CBN appointed a 16-member Board of Directors under the chairmanship of Mr. Muhammad Ahmad for the defunct bank.
Also, on the latter date, the apex bank established Polaris to assume the assets and liabilities of Skye bank in consultation with the Nigerian Deposit Insurance Corporation (NDIC), a statutory body set up to protect depositors and guarantee the settlement of insured funds. That decision marked the second phase in the history of the troubled bank in which both customers and investors practically lost confidence.
Obviously, the rationale behind the strategy of the apex bank was pure and simple. As designed then, the CBN Governor, Godwin Emefiele explained, the strategy is for the Asset Management Company of Nigeria (AMCON) to capitalise the bridge bank and begin the process of sourcing investors that will eventually buy out AMCON.
Return to profitability
From the abysmal records of its precursor, Polaris has come out stronger under its new management, now performing impressively and lucratively as much as other banks that are not in crisis. The bank’s first audited report bears witness to the positive change a management structured around sound corporate governance can bring about.
Under his leadership, undoubtedly, Abiru has changed the narrative of Polari Bank from pessimism to optimism, more aptly from liability to profitability. In its audited report, Polaris posted N27.35 billion profit after tax in the 2019 financial year. In terms of profits after tax, relatively, Polaris performed much better N660 million posted by EcoBank; N7.13 billion by Sterling Bank; N10.66 billion by FCMB; N16.35 billion by Union Bank; N5.03 billion by Wema Bank and N2.95 billion by Unity Bank.
Besides its comfortable return to profit, Polaris reported N857.86 billion total deposits in the 2019 financial year, a major feat most banks of its status could not record. In the same financial year, for instance, Sterling Bank could only report the total deposit of about N827 billion, Stanbic IBTC 660.93 billion, Wema Bank N578.88 billion and Unity Bank 251.91 billion.
Likewise, its return on assets was quite impressive in the year under review. With its 2% return on assets, Polaris ranked ahead of EcoBank, which reported 0.03%; Sterling Bank 0.60%; FCMB 0.66%; Wema Bank 0.70%; First Bank 0.72%; Unity Bank 0.91%; Union Bank 0.94%; Fidelity Bank 1.21%; Access Bank 1.35% as well as UBA 1.54%.
In terms of return on equity, Polaris reported 33%, almost at par with GTBank at 33.67%. From available records, most Tier I banks did not post better returns on equity than the bridge bank. In the 2019 financial year, Zenith could only post 15.85%; Access Bank 17.44%, UBA 15.35%, First Bank 6.66% and Ecobank as low as 0.24%.
With the exception of Stanbic IBTC that returned 34.79% on equity, virtually all Tier II banks were ranked below Polaris in their performance. In 2019, as shown in their audited reports, Sterling Bank only returned 6.29% equity; FCMB 6.58%; Fidelity Bank 11.90%; Union Bank 7.55%; Wema Bank 9.20% and Unity Bank’s equity regressed by 1.22%, all of which were ranked below the bridge bank.
At the end of the financial year, Polaris’ capital adequacy ratio comfortably stood at 14% while its liquidity at 81%. These ratios are well above regulatory requirements, thereby demonstrating a strong return to prudential compliance and providing assurance of a strong capital buffer and careful liquidity management to customers and regulators.
With respect to its cost-to-income ratio, Polaris recorded 59% relatively better than Ecobank (83.33%), Access Bank (70.08%), UBA (68.26%) and First Bank (75.83%). Only GTBank and Zenith, both Tier I banks, posted better cost-to-income ratio than Polaris. When compared with banks of its status, Polaris did better than Fidelity Bank, which reported 73.79%; FCMB 86.71%; Sterling 84.24% and Union Bank 84.27%.
From about 80% record of its precursor, Polaris’ non- performing loans at 46% is relatively high given its inherited portfolio. Obviously, with its management’s aggressive efforts to improve loan quality, strengthen collateralisation and collect outstanding loans, the non-performing loans of the bank would come down significantly in the foreseeable future.
