The stocks of Skye Bank Plc, one of Nigeria’s leading retail and commercial banks were on demand last week.The bargain sentiment around Skye Bank Plc shares at the Nigerian bourse is a reflection of investors positioning ahead of expected future returns after its management declaration through a notice of strides recorded in the last one-year and future plans following Central Bank of Nigeria (CBN) change of the Board.
In the trading week to Friday July 21, increased wager in Skye Bank shares on the Bourse placed it topmost on basket of thirty-six (36) gainers. In the review trading week, the bank’s share price grew by 19.67percent or 0.12kobo from week-open level of 61kobo to 73kobo.
Skye Bank Plc commitment to debt recovery and profitability is paying off as it has recovered about N60billion from its debtors.
In addition to this recovery, the bank new management has also reached settlement and restructuring agreements with many of the chronic bad debtors resulting in substantially improved payments and prospects of future recoveries.
Among other positives, the bank has fully divested from four local subsidiaries releasing total cash value of N6.2billion, and is in the process of divesting from others. The bank has also won new mandates from States, Ministries Departments and Agencies (MDAs) to help drive Internally Generated Revenue (IGR).
Skye Bank has appointed a very reputable investment bank as financial advisers for its proposed recapitalization programme paving the way for a defined future for the leading financial institution classified as a Systematically Important Bank (SIB). Already, its 2016 financial scorecard has been submitted to Central Bank of Nigeria (CBN) for approval.
The advisers have identified the various options open to the bank for recapitalization and proposals are being considered by CBN accordingly.
The bank is not relenting in ramping and retooling of its Information and Communication Technology (ICT) platforms as it refocuses the retail vision leveraging digital platforms; while also stabilising operations and rewarding customers.
Currently, the bank has over 373 branches and cash centres across Nigeria offering premium financial services, with subsidiaries in Sierra Leone, The Gambia and Guinea.
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 (CIR), 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, and composed of other experienced and reputable professionals as executive and non-executive directors, found the institution in a poor state with many of its largest loans non-performing; its capital significantly eroded and liquidity impaired.
The board and management of Skye Bank Plc has been committed and sacrificial, in the public interest, since July 2016 in its efforts to reposition the institution and put it back on the path of sustainable growth. Those efforts have stabilized the bank and restored customer confidence and uninterrupted banking services; resulted in significant loan recoveries and clean-up of the bank’s loan book and security documentation; given the bank a more efficient cost profile; and produced accurate financial accounts for the institution.
“We have also identified clear and viable options for recapitalizing the bank and repositioning it for future growth. We assure all our stakeholders-customers, employees, shareholders, institutional partners and regulators of our continuing commitment to the success and sustainability of the institution”, the banks noted.
At the core of the bank’s problems was a failure of corporate governance typified by a very high level of nonperforming insider-related loans. The funding mix and structure as well as risk asset portfolio mix also signified improper risk management exposing the institution to policy and currency risks.
The new management has subsequently discovered significant infractions by previous managers of the institution through careful investigations by management and forensic audits conducted by reputable accounting firms. These infractions have been reported to the appropriate authorities.
In addition to the legacy problems met by the new management, the bank suffered significant deposit attrition as customers, depositors, shareholders and institutional partners panicked at the news of the CBN take-over, compounded by a series of negative campaigns deliberately orchestrated against the institution on social media and other informal channels.
The new management successfully arrested and managed the situation and have to a large extent stemmed the tide and reduced deposit loss, restoring customer confidence and stabilizing the institution. The management has also successfully settled many matured trade and bilateral obligations and restructured outstanding balances with the relevant institutions and counterparties.
One of the most important challenges the management addressed relates to the inadequacy of loan security and improper collateral documentation in the legacy portfolio of the bank. The management over the last year has worked assiduously 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.
The management has pursued other initiatives to restructure and reposition the bank based on its mandate including cost management and optimization, and divestments to improve the institution’s financial position. Cost management initiatives already implemented include: branch rationalization, review of service contracts and cash management operations all of which have resulted in hundreds of millions of financial savings. Given the financial position of the bank, the management with the authorization of CBN accepted the resignation of the four inherited executive directors.
Iheanyi Nwachukwu
