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Banks strategise on approach to new banking regulation

By Babajide Komolafe

Withthe commencement of the new banking model last week, banks have started  reviewing the business strategies with a view to determine the right approach to adopt  in complying with  the requirement of the  new model.


Meanwhile, Skye Bank commenced a new strategic direction which emphasises greater efficiency and resource optimisation.
The new banking model which became effective Monday 15th November replaces the Universal Banking model introduced December 2000. The new model recognises three types of banks namely  commercial banks, merchant banks, and specialised banks.

It also allow banks to operate either as  a regional bank, national bank or as an international bank depending on their capital base.  The new regulation released two weeks ago gave banks till February 15th to submit compliance plan and indicate which type and of bank they intend to operate.

Vanguard investigation revealed that most banks are still strategising on how to approach the new model vis-a-vis their commercial and merchant banking operations.

While some banks have indicated their strategic direction under the new model most of the banks are still studying the new regulation and the market with a view to come up with a position on their strategic focus under the new model.

For example two weeks ago Diamond Bank said it would  divest from its non-bank subsidiaries and focus on International Commercial Banking. ”The choice of International Commercial Banking is in line with the Bank’s vision to build: A strong financial services institution with effective presence in Nigeria and Africa and, indeed all the key financial centre’s of the world”, the bank said in a statement.
Similarly, Skye Bank said it would operate as an international bank under the new dispensation with a new strategic direction that emphasises resource optimisation.

Already the bank have began to retool and realign its business policy in a move geared towards not only up scaling or up tiering its business operations and clientele but also to achieve greater efficiency and resource optimization in line with its growth plans and industry  leadership     agenda.

The bank’s new business policy emphasizes up-scaling the bank’s activities in the strategic sectors of the economy as well as concentrating on and deploying its expertise and competences to specific business areas where it enjoys comparative business advantage.

While not compromising its established leadership in the retail banking segment, the new business model of the bank places greater emphasis on Corporate and Investment banking portfolios as well as providing support for indigenous oil and gas firms in both the upstream and downstream sectors in addition to extending lines of credit to the foreign ones. Other sectors being focused on by the bank include agriculture, manufacturing, the extractive industry, maritime, project finance and infrastructural development.

In order to enhance its ability to discharge its new mandate and business operations effectively, the bank recently raised N15 billion in the first leg of its planned capital raising exercises to shore up its capital base to N103 billion. The funds will be used to invest in technology, expand its operations and provide working capital.

The capital raising exercise which attracted huge patronage from the international investors, was seen as an eloquent testimony to the resilience of the Skye brand and the confidence of current and prospective investors in the capacity of the bank to efficiently pursue its growth agenda.

It would be recalled that the shareholders of the bank at the annual general meeting  held on May 20, 2010 had authorized the bank to raise about N100 billion in equity and debt over the next two years. This initial capital raise therefore constitutes the equity part of the proposed funding program while the balance will be sourced via long term debt which will be raised in the course of the two-year period.

One of the factors that  enhanced the attractiveness of the bank was  a  recent of the bank by a  leading international finance and research firm, Renaissance Capital. The firm  adjudged Skye Bank Plc as the fifth largest bank in Nigeria post the recently concluded CBN/NDIC special audit of all the money deposit banks.

The firm said Skye Bank was a strong player in some of the country’s most cash-rich states, including Lagos and Rivers States.
Similarly, the report said in addition to having physical presence in its core markets, the bank built a leading e-platform, which has allowed it to become an industry leader in internally generated revenue as well as building a Tier 1 network of automated teller machines (ATMs ) and point of sales terminals.

In addition, the report announced Skye Bank as the fastest growing Tier 2 bank in the country, and credited the bank as having one of the best business strategies, a factor that was said to be responsible for the success and growth of the bank.


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