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Published On: Sun, Sep 23rd, 2018

Customers fret over Skye Bank’s demise

By Okey Onyenweaku

There was subdued anxiety within the finance circles throughout the weekend over the collapse of Skye Bank plc.

The sudden demise of the stricken lender, caught many industry stakeholders napping. However, usually reliable sources confirmed to Business Hallmark that the move had long been anticipated and was carefully managed to protect depositors and ensure the stability of financial system.

NDIC and CBN’s joint announcement equally told the public that a whopping N786 billion would be injected into the successor bridge institution to be called, Polaris Bank.

The Central Bank of Nigeria (CBN) on Friday September 21, 2018 withdrew the operating license of Skye Bank. The CBN Governor, Godwin Emefiele, who announced the decision, said depositors’ funds remained safe. However, shareholders are still in a quandary.

 A shareholder of the bank, Mr. Boniface Okezie told Business Hallmark that his warnings to the bank and the authorities have vindicated him. According to him, he had frowned at Skye bank’s acquisition of Mainstreet Bank ( Afribank).

Nevertheless, the CBN and NDIC have noted that, “Consequently, Polaris Bank Limited has been issued operating licence by the CBN and shall commence banking business from today, Friday, 21st September”.

According to the announcement, “The operating license of Skye Bank has been revoked by the governor of the Central Bank and the NDIC has commenced its liquidation. The capitalisation of Polaris Bank Limited is being done by the Assets Management Corporation of Nigeria through the injection of about N786 billion to return the bank to soundness and profitability so as to enable its subsequent sale to credible and financially sound third-party acquirers.”

Emefiele revealed  that although the bank’s performance improved after July 2016 when the Assets Management Corporation of Nigeria (AMCON) and the CBN stepped in’’.

However, both institutions said that, “the result of our examinations and forensic audit of the bank revealed that the Skye Bank requires urgent recapitalisation as it can no longer continue to live on borrowed time with indefinite liquidity support from the CBN’’.

It further noted that ,“we wish to assure all depositors that under this arrangement, their deposits shall remain safe and that normal banking services shall continue in the new bank on Monday, 24th September 2018, to ensure customers to transact their businesses seamlessly.”

Shares of Skye Bank will be temporarily be suspended on the Nigerian Stock Exchange (NSE) and Polaris Bank will begin operations today Monday in all Skye Bank’s former offices.

 Skye Bank Plc failed most financial regulatory benchmarks over the last three years, forcing the CBN to retire its board and management.

In 2014, Skye Bank was the fourth largest commercial lender in the country with 469 branches across the country after acquiring defunct Afribank, christen Mainstreet bank when it was nationalised by government.

Before recent developments and the bank’s management crisis the stage had been set for an epic battle to save it from its own past.

Weak asset quality, rising funding costs and increased customer wariness about the safety of their deposits have conspired to squeeze out the bank’s balance sheet and tear current profit figures to shreds as its management tries to restore confidence and recover bad loans. The not-so-subtle easing out of four immediate past executive directors of the bank, has thrown an additional pall over its fortunes as stakeholders continue to fret over the reasons why four senior executives would collectively resign on the same day.

The affected directors Idris Yakubu, Markie Idowu (Mrs), Abimbola Izu (Mrs) and BayoSanni were said that have occupied their senior positions for less than two years.

They were believed to have been part of a new board that came into being following the intervention of the Central Bank of Nigeria on July 4, 2016.

A letter from the bank notifying the Nigerian Stock Exchange (NSE) of the departure of the directors and signed by the banks Group Managing Director, Tokunbo Abiru, said in a terse and frigid statement that the executive directors had contributed immensely to the successful leadership transition which commenced the previous year.

The statement noted that “…the new development does not in any way affect the smooth running of the bank as it continues to deliver services to its customers across the country. 

It added that the portfolios of the directors had, unprecedentedly, been reassigned to general managers to ensure a seamless transition. Market observers insist that the resignation of four Executive directors at the same time was abnormal and reflective of a festering problem with the banks broad operations, particularly its loan book.

In the view of some outside observers, Skye Bank was yet to resolve its internal kinks that started manifesting last year when the Central Bank of Nigeria (CBN) announced the removal of its erstwhile chairman, Mr. Tunde Ayeni, who, it was claimed, had an overbearing influence over the banks credit process which in turn led to a hefty exposure to a faltering Oil & Gas sector in which Ayeni was known to be a major player ; other directors that got the boot at the time were non-executive directors and its managing director, Mr. Timothy Oguntayo; deputy managing director, Mrs. AmakaOnwughalu; and two other executive directors. The clean sweep of the top echelon of the bank was designed to allow for a fresh start and a rejigging of the banks business model and the reconstruction of its credit portfolio. Apparently, the gambit did not pan out, and in a swift move to get a firmer handle on the increasingly eerie state of the banks operating expenses and recalcitrant risk asset portfolio, the CBN has had to ease into the banks parlous affairs again with a new team of managers, preferably at lower personnel cost.

Apart from obvious problems with its loans and advances the bank has been known in the past to have challenges with its board and management. The first problem was the delicate balance between staff of the former EIB Bank Plc and Prudent Bank Plc, after some bitter internecine squabbles it was agreed that the Chairmanship of the board and the Managing Directorship would swing alternately between candidates of both legacy banks who were the major equity holders of the new enlarged institution, explaining why the pioneer Chairman Musiliu Smith, came from the old EIB while the Managing Director, Sola Akinfemiwa, was a product of the old Prudent Bank and close ally of the former governor of Lagos State, Asiwaju Bola Ahmed Tinubu. During Akinfemiwa’s tenor the bank enjoyed huge patronage from states controlled by the now defunct Action Congress of Nigeria (ACN) whose principal promoter was Asiwaju Tinubu. These were the halcyon days of the bank, a period when it saw its liquidity wax stronger and its profitability grow sturdily. With the exit of Akinfemiwa, things began to grow steadily awry as the new helmsman, Kehinde Durosimi-Etti took office as the Managing Director. Durosimi-Etti equally had a strong relationship with the preeminent leader of politics in the South west, Tinubu, but he lacked the personal drive and rugged marketing charisma that stood Akinfemiwa out. This meant that the bank gradually lost market share and clout to other institutions that had since warmed their way to the hearts of the regions political gladiators.

 By the time the mantle of leadership of the bank was handed to Timothy Oguntayo, new internal powerhouses of influence had taken control of the bank and its Chairman Ayeni, who had deep pockets and strong fraternal links with the federal government, had started calling the shots. This saw some of the previous strong influencers within the bank such as Tinubu and the new governors of the south west states quietly withdraw their patronage. The consequence was that business with states like Lagos fizzled, thereby elbowing the bank into a tight liquidity corner. The worsening liquidity eventually snowballed into dodgy credits and a panic drive towards the now declining Oil & Gas sector. Poor credit quality and declining liquidity has been the bane of the bank in the last two years and the CBN has doggedly tried to stem the leak as the bank struggles to keep from sinking.

Regardless of the expected curated statement of the banks new management of, confidence of customers has continued to dissipate. Those of them who have accounts in other bank are gradually transferring their funds.

The CBN governor, Godwin Emefiele, had said that the regulators last intervention was necessary in view of the persistent failure of Skye Bank to meet minimum thresholds for critical prudential and capital adequacy ratios, that brought it repeatedly to the CBN’s lending window. Emefiele told journalists that Skye Bank’s liquidity and non-performing loan ratios had been below and above the required thresholds respectively for quite a while.

“Fortunately, and in the overall interest of the bank, the chairman and some board members have decided to resign their appointments from the bank.

“Consequently, by virtue of the powers vested in the Governor of the CBN, we have decided to reconstitute the board and management of the bank, and appoint new members with the sole responsibility of ensuring the speedy restoration of the health of the bank.

“To this effect, the chairman of the board, all other non-executive directors, the independent director, the managing director, the deputy managing director, and two longest serving executive directors have voluntarily resigned their appointments with immediate effect.

“In their place, we have selected industry experts and people of high integrity whom we believe can turn the bank around.

“In this regard, we have selected Alhaji M.K. Ahmad to be the new chairman while Mr. AdetokunboAbiru would be the new managing director. The more recent executive directors will be allowed to remain to ensure continuity and a smooth transition,” Emefiele had said to finance reporters in Lagos during CBN’s intervention in the bank

Shareholders of Skye Bank were further agitated by the development which they suspect would throw their bank into deeper challenges. Its customers were utterly jittery.

Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Okezie Boniface told Business Hallmark that the crisis in Skye Bank was not going to abate until drastic measures were taken to fish out those who used their influence and positions to take loans without paying back.

They have sacked four of our executive directors and I do not know of any bank the authorities took over that we (Shareholders got back again).

Commenting on the issue, Managing Director, Crane Securities Limited, Mike Ezeh told BH that the bank was having serious liquidity challenges resulting in the intervention of the CBN.

‘’In fact, customers are gradually transferring their monies to stronger banks. The banking halls are becoming empty by the day’’, he said.

Ezeh also disclosed that the CBN may not allow the bank to die since it acquired one of the nationalized bank.’’ The CBN appears determined to save the bank’’, Ezeh added.

‘’It took the bank eight hours to pay a customer who needed money to pay for goods supplied to him because the bank lacks liquidity’’, he said.

The bank appears not to want any encumbrances of any kind. Not now. But achieving its target and return to good health in the short term hangs in a balance. Not even the seemingly, strong and healthy banks which have made it clear that the times are hard, are surviving well.

How will Skye Bank be able to reposition in this prevailing tough times. This is the million naira question?

The economic dynamics do mean the quick revival of a bank that has been mismanaged and is leaving in a life support.

What dealt the bigger blow to the bank was its acquisition of Mainstreet Bank at an outrageous price. Reportedly, Skye Bank had paid N126billion to acquire a bank that experts and Even AMCON, had revealed was supposed to cost at most N80billion to N100billion. This, experts said was caused by lack of proper due diligence. The development which showed that Skye Bank did not have the capacity to accommodate this huge financial institution had done the bank in.

Skye Bank had also fallen into trouble with the apex bank and was penalized for failing to remit the federal governments fund to the treasury Single Account (TSA) at a time it was struggling. N4billion penalty was huge for a bank which did not have strong shock absorbers like UBA, First Bank among other banks that suffered similar fate and survived.

Skye banks challenge had been traced to the merger of weak financial institutions including (Prudent Bank, Eko Bank, Bond Bank, Co-operative Bank Plc and Reliance Bank which merged in 2006. The bank’s in ability to harmonize, the diverse culture of the different banks did not help issues as each small unit bunched together and tried to propagate its culture and dominate in the bigger institution. The lack of trust and a behavior that seemed to cause a superiority context made it impossible to put the best hands at the more strategic positions.

A former staff of the bank who would not want his name mentioned in print told Hallmark that workers were relieved of their duties based on which unit you came from even when you are very good.‘’Some of were sacked because our bosses did not occupy top management positions. In fact, they targeted me when my boss was on leave’’, she said.

Share Performance:

Investors in Skye Bank stock have been unsettled since its management team was sacked and replaced in July 2016. The banks stock has plunged from N0.55 kobo a share on July 4, 2016 and rose to N0.91 kobo on July 8, 2016 before declining to its nominal price of 0.50 kobo. Even though shareholders have already incurred huge loses on the investment, many of them are desperately looking for ways to exit the investment. Unfortunately, they are stuck because nobody is prepared to buy the banks shares, especially in recent times. Interestingly, its market capitalization has also become the smallest in the industry at N6,940.15billion as at feb.9, 2017.

Prospects; The prospect of Skye Bank repositioning and returning to full strength is slim. This is because the economic dynamics in the country now does not give hope, let alone favouring a surprise turnaround. The country has been struggling to dig itself out of a recessionary hole since the first quarter of 2016.

A critical observation of the third quarter results of Deposit Money Bank’s (DMB’s) shows mixed performance. In an economy, which has recorded a downward slide in GDP for three successive quarters, expectations are modest on performance. This harsh condition has been compounded by the devaluation of the Naira, restriction of access to foreign exchange for importers of 41 items and the policy on Treasury single account (TSA) which have prompted tighter regulation.

More hazardous is the decline in the price of crude from $114 per barrel in June 2014 to hover between $50 and $59 per barrel. These have dealt a heavy blow on business operations as many of them seem to be struggling to survive.

Skye Bank is no exception not when its crisis continues to worsen by the day. Sadly, the bank is highly exposed to the oil and gas sector and the energy sector hugely that there is hope in sight on how to recover those loans.

The bank had unsuccessfully muted the idea of raising additional capital. The unfavourable operating environment and the woeful performance of the capital was not encouraging for any company to do public offering let alone Skye bank which has been wobbling in the last two years.

Smaller shareholders are furious at the information that the bank erstwhile chairman, Mr. Tunde Ayeni and another director Dr. Festus Fadeyi had borrowed huge loans from the bank to run other business concerns. Details show that while Ayeni owes the bank as much as N36 billion and repaying only N6billion Fadeyi owed N98billion.

How will Skye Bank be able to reposition in this prevailing tough times? This is the one million Naira question that many market observers are asking. But achieving its target and return to good health in the short term hangs in a balance. Not even the seemingly, strong and healthy banks which have made it clear that the times are hard, are surviving well.

Skye Bank’s challenges had been clearly revealed in its Q4 2015 report which was delayed for months before it became public.

The result had showed that the bank made a pre-tax loss of –N53bn and an after tax loss of –N50bn.

Despite the loan losses which stood at N21billion in Q4, Proshare Intelligence noted that the banks performance was ‘’an extremely poor set of results that was broad based. Both funding income and non-interest income were negative’’.

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