Tokunbo Abiru, MD, Polaris Bank

BY EMEKA EJERE

The Nigeria banking industry will witness a landmark exit on Tuesday, August 31, when the retirement of the managing director/chief executive officer of Polaris Bank Limited, Mr. Tokunbo Abiru, will begin to take effect. The decision, according to a statement from the bridge bank was taken following Abiru’s completion of his second two-year tenure at the helm of the bank.

On July 4, 2016, the Central Bank of Nigeria (CBN), intervened in the management of the then Skye Bank Plc by reconstituting the board of directors, shoring up the bank with N100bn capital injection. The regulatory action on the bank led to the resignation of its chairman, Mr. TundeAyeni, all non-executive directors on the board, as well as the managing director, Mr. Timothy Oguntayo, deputy managing director, and the two longest-serving executive directors on the management team.

Abiru was then appointed the group managing director and chief executive officer of Skye Bank in July 2016.Before his appointment, he had served in several capacities in some of the leading banks in Nigeria, including as one-time Executive Director in First Bank of Nigeria Plc.He was at various times appointed as Non–Executive Director in some leading companies, including Econet (now Airtel) Mobile Networks Limited, and FBN Capital Limited (now FBN Merchant Bank Limited).

Skye Bank was one of the banks that emerged after the bank consolidation exercise which ended on December 31, 2005, led to the reduction of Nigerian banks from 89 to 26. The banks that united to form Skye Bank were Prudent Bank, EIB International Bank Plc, Bond Bank, Cooperative Bank, and Reliance Bank.

The new bank later acquired Mainstreet Bank, a bridge bank for Afribank in 2014. Stakeholders in the banking sector said the problem of Skye Bank started due to the challenges it inherited from Mainstreet Bank as well as the refusal of bank executives to abide by CBN rules and regulations.

On September 22, 2018, the CBN again intervened in the ailing Skye Bank and the operating licence of the bank was revoked to give way to Polaris Bank Limited, a bridge bank created in consultation with the Nigerian Deposit Insurance Corporation (NDIC) to assume the ownership of the assets, all deposit liabilities and some other liabilities of distressed and defunct Skye Bank.  The bank’s share capital had run into negative territory due to bad loan deals. It was also in urgent need of recapitalization, a need its shareholders lacked the capacity to meet.

CBN governor, Mr. Godwin Emefiele, who announced the revocation, said: “Skye Bank requires urgent recapitalization as it can no longer continue to live on borrowed times with indefinite liquidity support from CBN. We have decided to establish a bridge bank, Polaris Bank, to assume the assets and liabilities of Skye Bank.”

Emefiele further said, “The strategy is for AMCON to capitalise the bridge bank and begin the process of sourcing investors to buy out AMCON. By this decision, the license of Skye Bank is hereby revoked.”Accordingly, the apex bank gave the board a clear mandate to turn the institution around positively within the shortest possible time.

Changing the game

Abiru, as the managing director of the bridge bank, took up the challenge, spearheading several growth initiatives which have placed the bank on upward trajectory. The Abiru-led Polaris team has continued to implement the July 2016 regulatory intervention to include entrenching sound corporate governance and risk management practices and transforming Polaris into fully fledged retail and commercial bank with strong digital backing.

The bank has invested significantly in technology with copiously integrated service models enabling customers enjoy banking services through a wide range of channels. As a result of several transformative business initiatives, Polaris Bank can now boast of a strong market share.

Mr. Abirusuccessfully implemented cost management initiatives which have enhanced liquidity and efficient service delivery to the bank’s customers. Through his aggressive recovery initiatives, the bank has been able to recover over N200 billion of outstanding bad loans within a short period.

Also, under his watch, the bank has been able to reach settlement and restructuring agreements with many of the chronic bad debtors resulting in substantially improved payments and prospects of future recoveries.

In line with the bank’s broad mandate which includes cost management and optimisation, as well as divestments to improve the institution’s financial position, the Abiru-led leadership of the bank embarked on several initiatives aimed at restructuring and repositioning the bank.

Some of the initiatives include: branch rationalisation, review of service contracts and cash management operations which have resulted in hundreds of millions of financial savings. Also, through some of the initiatives, the bank has successfully settled many matured trade and bilateral obligations while restructuring outstanding balances with the relevant institutions and counterparties.

Under Mr. Abiru’s watch, the bank has divested from four local subsidiaries, releasing total cash value of N6.2 billion.Polaris Bank under Abiru has also continued to promote the CBN’s National Financial Inclusion Strategy aimed at reducing the number of eligible adult Nigerians that are excluded from the formal financial system from 46.3 per cent to 20 per cent by the year 2020.

The lender has also made available different credit and funding options to small scale entrepreneurs and business owners, operating in the informal sector, in order to bring them into mainstream financial system.

The bank has also launched its revamped mobile banking application upgraded with new and exciting user-friendly features for a more convenient banking experience. With the application, customers can enjoy many benefits and access self-service options, such as, easy account opening, convenient self- booking and liquidation of fixed deposits, an expanded list of bill-payment options and easy activation of standing instructions and recurrent future payments.

These and many other moves leveraging technology and building a culture of innovation are fast repositioning the bank. Little wonder today, Polaris Bank’s branches are witnessing heavy traffic of customers trooping in to carry out transactions, open bank accounts and experience the innovative trends that the bank has introduced to its business.

Financial status

By the end of 2019 and as Polaris Bank settled into a new financial year early in 2020, it was evident that the bank had achieved Abiru’s objectives for that critical financial year and was primed to consolidate on that good start in 2020.The 2019 financial accounts of the bank reflected positive outcomes.

The first audited IFRS 2019 compliant financial result showed a gross earnings figure of ₦150.8bilion and a Profit Before Tax (PBT) of N27.8billion within the first full year of operation. This is consistent with the industry average of financial institutions of its size.

However, the bank has also enjoyed the huge transaction support of Lagos state, which is an institutional shareholder as well as the loyalty of its core customers. With legacy national bank in its fold, most south westerners still have a certain nostalgic association with it.

The bridge bank closed the 2019 financial year with Total Assets of N1.1trillion and Shareholders Fund of N83billion. A review of the results showed positive performance across most major key prudential ratios, including capital adequacy, liquidity, Non-Performing Loans which is now significantly in compliance with stipulated regulatory requirements.

The result showed that Polaris Bank recorded 14 per cent Capital Adequacy ratio and 81percent liquidity ratio both of which are well above regulatory requirements, demonstrating strong prudential compliance and assuring a strong capital buffer, careful liquidity management and resilience to regulatory headwinds.

The bank’s customer deposits stood at N857.9billion even as the lender continues to focus on stable, low-cost deposits and well-diversified portfolio devoid of high concentration. Similarly, the loan book stood at N261billion in December 2019, providing the bank with the desired leg-room to accommodate the required growth in risk assets to support the nation’s economic growth.

Commenting on the bank’s performance Mr. Abiru said: “The emergence of Polaris Bank on September 21, 2018, has heralded a new dawn as it laid the foundation for institutional competitiveness and service innovation in Nigeria’s challenging banking space.”

He further noted: “Our strategy which anchors on rebuilding the franchise and strengthening the balance sheet position provides enablers for ongoing initiatives towards lean operations and efficient balance sheet management devoid of capital erosion risks.

The chief executive officer expressed satisfaction with the bank’s new corporate governance regime. “We shall continue to run an ethically governed bank upholding sound risk management practices and proactively taking measures to mitigate the impact of the adverse business environment while the board and management continue to guide the bank towards a path of sustainable growth.

Going forward

On January 2, 2020 Abiru sent out a “welcome to 2020” email to all staff in which he said, “I am confident to 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”.

 Laying out his basis for optimism he said,“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…”

He also laid out strategic initiatives for future growth including the commencement of the Digital Transformation journey with recruitment of professionals and set up of structures and systems; launch of Polaris Bank’s agency banking platform “Sure Padi”, which is designed to provide banking services to the unbanked and under-banked as well as in locations in which the bank is not present; introduction of the PAYDAY loan product which booked over N1billion in loans in just four months; efforts to increase business volumes and activity, as well as lower costs; approval of a comprehensive performance incentive scheme in the form of PAY-FOR-PERFORMANCE and execution of the bank’s Corporate Transformation Plan.

Leaving the stage

Sharing his scorecard as the CEO of the bank, Abiru said: “It gives me great pleasure to say that, with the support of the board, executive management and all of you (staff), we have delivered on the mandate given to us by the Central Bank of Nigeria upon assumption of office in 2016.”

Recalling the poor state of the bank before he assumed office in 2016 as the group managing director of the erstwhile Skye Bank, Abirunoted that all prudential ratios were out of compliance with regulatory requirements, capital was negative, and the loan book was mostly delinquent, while liquidity faced deposit attrition. He also recalled that the IT infrastructure then was dilapidated and employee morale was low, resulting in erosion of public confidence.

“We have reversed almost all regulatory ratios for good and currently rank amongst the very best in the industry. There can be no better testament to the much-improved state of the bank than the full year 2019 results in which the bank posted profit after tax (PAT) of N27 billion.

“To buttress the fact that this is sustainable, the bank’s first half 2020 result showed a PAT of over N18 billion, despite the tremendous headwinds brought on by the COVID-19 pandemic.”

He added: “We also commenced the refreshment of the bank’s IT infrastructure, which had largely become outdated and dilapidated due to years of under-investment.

“As a result of the successful completion of the first phase of the IT Refresh Programme, which consisted mainly of upgrade of the infrastructure and digital platforms, and relocation of the bank’s Data Centres to Tier III data locations as mandated by CBN regulations and in line with global best practices, the bank’s customers are now experiencing significantly improved service delivery.

“In addition, by introducing and committing resources to the agency banking model, we have contributed in no small measure to deepening financial inclusion for the unbanked and under-banked throughout the length and breadth of Nigeria.”

He restated that today’s Polaris Bank has been successfully positioned as a bank of choice in Nigeria due to the work that has been put in by the various stakeholders including the loyal customers of the bank.

On the issue of leadership succession, Abiru said, “During this period leading to my final disengagement, I will work closely with the CBN, the board of directors and executive management of our bank to ensure a seamless transition and smooth handover to my successor.”

Analysts’ views

Commenting on the Abiru’s legacies,the executive vice-chairman, High Cap Securities, Mr. David Adonri, commended the outgoing CEO for his ability to transform a bank which he said was badly mismanaged by Ayeni and his team in the days of Skye Bank, to the extent rebuilding public confidence.

In a telephone interview with Business Hallmark, Adonri, who is also a customer of Polaris Bank,  said, “TokunboAbiru, for me, has done well. He has been able to transform a bank that was badly mismanaged as Skye Bank by Ayeni and his team before the intervention of CBN, to the extent of rebuilding public confidence.

“I am a customer of Polaris Bank and I also have accounts in other bigger banks. I can tell you that I’m more satisfied with the services of the bank than with what I’m getting from others.

“Even their IT infrastructure is much more robust than those of the other banks. And I’m even getting to know his name for the first time. In fact, that guy (Abiru) is a silent achiever. Please use your medium to help me congratulate him and wish him well in his future endeavours.”

On his part, former president of Chattered Institute of Bankers of Nigeria (CIBN), Mr. OkechukwuUnegbu, commended Mr. Abiru for successfully managing Polaris bank, which he described as a contentious institution, having emanated from a crisis-laden Skye Bank.

“However, I think a lot of things about the bank are still opaque”, Unegbu told Business Hallmark.

“I think the right thing he should do as he’s leaving is to drop a note, stating clearly the state of affairs of the institution before his exit.