Polaris Bank has released its 2019 financial results after securing the approval of the Central Bank of Nigeria (CBN) to its Annual Financial Statements for its first full financial year of operation. By all objective standards, the results are impressive especially given the legacy constraints under which the institution was birthed. folio repositioning.
With the exception of its NPL ratio (which as we have noted is understandable given its context and legacy challenges), Polaris Bank’s ratios compare favourably with the leading Tier 1 and Tier 2 banks and are in virtually all cases better than industry averages. ROA at 2% is at par with Zenith Bank; ROE at 33% is competitive against all Tier 1 banks with the exception of Gtbank; ROS at 18% ranks third behind only Zenith and Gtbank benchmarked against Tier 1 banks; and the bank’s Cost to Income ratio is as mentioned earlier well within industry averages. state that our Bank has indeed stabilized 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; our Cost-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 Year 2020…”
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, “The preferred partner providing superior financial solutions for customers” and mission statement, “We will leverage our knowledge of an ever- changing 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.
A December 2019 review and our recent assessment confirms progress on all aspects of the Corporate Transformation Plan.
Into the Future
Polaris Bank’s leadership is intensely focused on building the foundations of a bank for the future. They believe the future of banking globally and in Nigeria would be shaped by technology. Banks would be significantly dependent on technology for mobilising savings, extending and administering loans, payments analytics and management decision making. Polaris Bank had made a clear choice to be a retail bank and that choice meant its core would have 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.
Management had also reflected on other trends-the imperative of financial inclusion; increasing pervasiveness of the internet and social media; the revolution in payment systems; rapid development of various streams of technology innovation including artificial intelligence, voice and facial recognition, robotics, blockchain etc.; rise of so-called “fintechs”financial technology firms who were entering financial services based on technology capabilities and business models all meant that increasingly financial services would become a technology play; the combined effect of all these trends meant in their minds that Polaris Bank would need to scale up very quickly!
We believe bank management understands that while Polaris Bank is now well capitalised based on regulatory standards, the institution may benefit from enhanced capital levels if benchmarked against the major banks and telecommunications companies in the context of a competitive, technology- led, globalising financial services industry. These considerations coupled with Polaris Bank’s status essentially as a “bridge bank” owned by the Central Bank and AMCON mean that a divestment by these regulatory/ government entities and investment by a well-capitalised financial services group would have to be a strong consideration.
Our Conclusions
Our key conclusions suggest four main themes emerge from Polaris Bank’s first year performance. In our view these themes are overwhelmingly positive:
1. The financial performance of Polaris Bank in its first full financial year is impressive and the bank is stable, strong and competitive relative to leading Tier 1 and Tier 2 banks.
2. The Board and Management of Polaris Bank has successfully repositioned a previously troubled bank and created a new, thriving, forward-thinking bank
3. The bank has largely overcome its legacy challenges and constraints and is now very well positioned to compete in the Nigerian Financial Services Industry
4. The Management of Polaris Bank in concert with regulators seeks to assure a sustainable future for the bank and its customers leveraging technology, digital transformation and innovation in the context of a retail banking strategy.
Tokunbo Abiru, GMD/CEO, Polaris Bank
