By Babajide Komolafe
These are challenging and stormy times for the Nigerian economy. For the first time in a decade, an economy that used to record growth rate of 7.0 per cent is now in recession. It recorded negative growth rates in the first and second quarters of this year, courtesy decline in crude oil price as well as fiscal and monetary policy that aggravated the severe impact of the decline from oil revenue on businesses and individuals.
In the banking sector, the severe economic climate has resulted in huge non performing loans of over N700 billion leading to erosion of profits due to provisioning for bad loans, cost cutting measures including staff retrenchments as well as reduction in staff remuneration.
The Skye Bank scenario
Skye Bank however needed more. According to the Central Bank of Nigeria, CBN: “Although the existing board had done its best to steer the ship, it was clear that it would be unable to bring the bank out of its present precarious situation”. Consequently, the chairman, all non-executive directors, as well as the managing director, deputy managing director, and the two longest-serving executive directors on the executive management team resigned from the bank.
To replace them and pilot the affairs of the bank out of the precarious state, the CBN appointed two banking technocrats, Mr. Muhammed Kabir Ahmad as Chairman, and Mr. Tokunbo Abiru as Managing Director Chief Executive. The apex bank also appointed Mr. Bayo Sanni and Mr. Idris Yakubu as executive directors, while Markie Idowu and Mrs. Abimbola Izu were retained as executive directors.
The need for this regulatory action is reflected by the audited financial statements of Skye Bank for 2015. The result show that the bank recorded loss of N40 billion, despite net income of N50.4 billion powered by net interest income of N50.9 billion and net income from fees and commission of N15 billion. The results however showed that these performances were eroded by N27.5 billion provision for bad loans and N40.8 billion general and administrative expenses.
Prospects and Potentials
Reversing this trend is the challenge before the new management of Skye Bank. In order to do so, the M.K Ahmad LED board will have to battle against the odds of an economy in depression, negative perception and decline in public confidence occasioned by the regulatory action. Yet there are prospects. First, the chairman, M.K Ahmad and the Managing Director, Mr. Tokunbo Abiru are masters of the game.
Their experiences and reputation inspire the much needed confidence in the bank. Ahmad is a seasoned technocrat with over 35 years experience. He was the pioneer Director General of the National Pension Commission, a pioneer staff, and subsequently Director of the Nigeria Deposit Insurance Corporation. He was until now, a Director on the Board of FBN Holdings PLC. Also,
On his part, Abiru has worked in leading commercial banks including GT Bank and First Bank, from where he recently retired as Executive Director. He is an alumnus of Harvard Business School and one time Commissioner for Finance in Lagos State.
Secondly and most importantly is the strength of the Skye Bank brand and franchise in the banking public. This is reflected in the 2015 audited financial statements of the bank which revealed total deposit of N753 billion from customers while the bank gave out N704 billion as loans during the year. This resulted into net interest income of N50.9 billion.
Also the bank recorded total asset base of N1.19 trillion, including cash asset of N205 billion. Though the results show a decline in performance, it however affirms the strength and viability of Skye Bank franchise. This is further affirmed by its vast branch network buoyed by recent acquisition of former Mainstreet Bank, its competitive edge in the electronic payment segment as well as its unique offerings for Small and Medium Enterprises (SMEs).
Furthermore, the new management has crafted and unveiled a five point strategy for achieving the daunting task of returning Skye Bank to the path of profitability. These are: New Business strategy that focuses on commercial and retail business segment; Improved services delivery and business strategy leveraging on expansive branch network, and strategic investment in relevant cutting edge technology to deliver better products and services; Aggressive loan recovery; and N50 billion capital raising exercise.
In a letter to customers and stakeholders of the bank, Ahmad and Abiru expressed confidence that these measures, combined with commitment to sound corporate governance and risk management practices, high quality staff, and regulatory support, will prove effective in returning Skye Bank to profitability.
“We are very optimistic of the bank given its vast potentials and its strategic position in the economy. We wish to assure you, our esteemed customers and stakeholders of our commitment to preserve your investments and deposits and we further assure you that the support and backing of the CBN and other relevant stakeholders have been obtained in this respect”, they said.