Born in 2006 from a union of four banks, the entity, Skye Bank Plc, has been through several transfusions and finally transformed into Polaris Bank on Friday, September 21, 2018 after being on life support for more than two years. BUKOLA IDOWU and SHOLA BELLO (Lagos) write on the activities that led to its takeover.
The Central Bank of Nigeria (CBN), on Friday evening, had revoked the license of Skye Bank and the Nigeria Deposit Insurance Corporation (NDIC) said it has commenced the process of liquidating it. In its place, the CBN had issued an operating license to Polaris Bank Limited, which would, from September 21, 2018 take over the assets, liabilities, staff and management of the distressed bank. The story of Skye Bank can be traced back to 1989 when it was Prudent Bank Plc. In 1990, the bank was issued a license as merchant bank and it rebranded as Prudent Merchant Bank Limited. By 2006, in the recapitalisation era of the former CBN governor, Chukwuma Soludo, when the capital base of banks was increased to N25 billion, it merged with four other banks to form Skye Bank Plc. The union consisted of EIB International Bank Plc, Bond Bank Limited, Reliance Bank Limited, Co-operative Bank Plc and Prudent Bank. Having adjusted to the union, the bank thrived and even scored a first. In January 2011, the bank introduced a Naira-denominated MasterCard debit card, called “MasterCard Verve”, the first of its kind in Nigeria.
It swept the nation with its off-site Automated Teller Machines before the policy, which stopped off-site ATM operations by banks. Following the nationalisation of some banks in 2013, Skye bank bidded for one of the banks taken over by the Assets Management Corporation of Nigeria (AMCON). It succeeded in buying Mainstreet Bank for N126 billion, beating Fidelity Bank to it as part of its strategic growth move.
This move, industry watchers say, has been one of the mistakes of the bank as they said the bank at that time, did not have enough capacity to take over another bank. This may not be far from the truth as two years into the acquisition, the bank was already having liquidity issues such that it was a resident of the CBN facility window and had acquired substantive level of bad loans arising from insider credits. This prompted the apex bank to take drastic move as it was deemed a systematically important bank. On July 4, 2016, the CBN decided to change the board of the bank but in a preemptive move, the managing director, Timoty Oguntayo, along with the executive directors of the bank resigned from their position. To enable the bank run efficiently, the CBN had pumped in N350 billion into the bank until the shareholders were able to build up the share capital of the bank. However, two years down the line, the shareholders had not been able to raise the required capital and the bank remained a regular face at the CBN facility. Consequently, the CBN had, on Friday, taken the step to take over the bank and hand over its ownership to AMCON. This means that the over 450,000 diverse shareholders of the bank had lost out on their investment. Despite being one of the best performing stock on the Nigerian Stock Exchange (NSE) in terms of share price, its fate could not be changed.
Last week, the defunct Skye Bank shares gained 14.93 per cent from 67 kobo to close at 77 kobo. Year-to-date, the stock gained 54 per cent and was one of the best performing banking stocks on the NSE. Governor of the CBN, Godwin Emefiele, explaining the decision to revoke Skye’s license said, “on 4th July 2016, we took a regulatory action on Skye bank Nigeria PLC. Specifically, this action led to the resignation of the chairman, all non-executive directors on the Board as well as the managing director, deputy managing director, and the two longest serving executive directors on the management team. “At that time, the proactive action was informed by unacceptable corporate governance lapses as well as the persistent failure of Skye Bank PLC to meet minimum thresholds in critical prudential and adequacy ratios, which culminated in the bank’s permanent presence at the CBN Lending Window. “The focus of the action then was to save depositors’ funds and to ensure that the bank continued as a going concern, being a systemically important bank. Part of our intention was also to stem the imminent job losses to staff if a liquidation option had been adopted.
“These objectives have been fully achieved and the bank has been able to meet customer obligations, having curtailed the liquidity hemorrhage and restored depositors’ confidence.”
He noted that although the bank’s performance has improved considerably compared to the pre-July 2016 era, “the result of our examinations and forensic audit of the bank has, however, revealed that Skye bank requires urgent recapitalisation as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN. The shareholders of the bank have been unable to recapitalise it.” Reacting to the news, the founder of Noble Shareholders Association, Gbadebo Olatokunbo said, “these are the things that are discouraging local investors. CBN should hold the directors of the bank responsible; they should not allow shareholders to suffer the way they did when the three banks were nationalised.
“I wonder what would be the fate of shareholders. It is a big disappointment; I am just going through my holdings to know how much I have there. The directors of the bank must be made to pay for this.” The publicity secretary of the Independence Shareholders Association, Moses Igbrude said, “The impact on local investors will be so severe, it has happened before and we lost our investment. “I blame the former management, when they bought Afribank, we told them that it would generate problems. Shareholders have lost the investment unless CBN may reconsider to appoint new board for the bank.”On his part, stockbroker and chief executive officer, Sofunix Investment and Communications, Mr Sola Oni, said that the revocation of license of Skye Bank Plc by the CBN was sudden though the bank has been technically insolvent over the years.
According to Oni, the new development has imposed additional responsibilities on those saddled with the task of ascertaining a company’s going concern status to act in the nick of time before burble bursts.
“Skye Bank’s share price has been discounted significantly on the NSE over a long period through investors’ reaction to the company’s challenges.” He stated that the apex bank’s rescue technique through Polaris Bank tilts more in favour of depositors. “What is the fate of the real owners, the equity holders? Although shareholders take the highest risk and in good time, highest return, action must be expedited to attract strategic investors in order to bring the bank on the track. This is the only way the shareholders can heave a sigh of relief”, he said
He, however, added that the development is a sad commentary and capable of further putting investors’ confidence in a quandary, saying that the NSE’s corporate action of trading suspension on the defunct Skye Bank’s shares is consistent with its investor protection obligation as a Self Regulatory Organisation (SRO).
Meanwhile, despite the initial panic that follows the take over of a bank, assurances have come from regulators, CBN and NDIC as well as the new bank to depositors.
Managing director and chief executive of NDIC, Alhaji Umaru Ibrahim, explained that the injection of N786 billion to Polaris would return the bank to soundness and profitability to enable its subsequent sale to credible and financially sound third party acquirers.
He further said that the NDIC carried out the Bridge Bank option to resolve the Skye Bank Plc in order make certain that its depositors are fully protected as their deposits with Polaris Bank limited remain insured under the NDIC Act and the customers of Skye Bank Plc can also continue to transact their businesses with Polaris Bank Limited thereby ensuring the non-disruption of their banking transactions.
“Furthermore, the adoption of the Bridge Bank model for the resolution, Skye Bank Plc, guarantees that most of the employees of that bank will not lose their jobs and they will continue their employment with Polaris Bank Limited under fresh contracts of employment. The NDIC, as Deposit Insurer, acted to ensure the continued safety of depositors’ funds in furtherance of the regulatory authorities’ resolve to proactively manage potential threats to financial system stability. “The NDIC hereby assures depositors and customers of the defunct Skye Bank PLC that their deposits are safe and hereby encourages them to continue to transact their normal banking businesses with Polaris Bank Limited.” The CBN governor, who noted that the N350 billion pumped into the bank in 2016 would be taken out of the N786 billion being put on the table by AMCON said, “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 enable customers to transact their businesses seamlessly. “Thus, all customers of Skye Bank shall be automatic customers of the new bank and their accounts and records duly purchased by Polaris Bank. “Given the good performance of the board and management, the CBN shall retain them. In addition, Polaris Bank shall absorb all employees of Skye Bank under a new contract unless any employee decides to opt out.
“We wish to assure the general public that the Nigerian banking industry remains safe and resilient and that the CBN will continue to live up to its responsibilities of promoting stability in the banking and financial system.” The new bank yesterday, also issued a statement saying, “all depositors of Skye Bank Plc are hereby notified that they are now depositors of Polaris Bank Limited, which is fully capitalised and has the support of both the Central Bank of Nigeria and the Nigeria Deposit Insurance Corporation. All depositors shall be able to conduct their normal banking transactions in respect of such deposits at all branches previously operated by Skye Bank Plc which branches are now being operated by Polaris Bank Limited. All depositors are further given notice that they are entitled to make withdrawals from their deposits either in full or in part, subject only to any security agreement existing on such deposits, as their accounts are now maintained by Polaris Bank Limited. Depositors are strongly encouraged to continue to maintain their deposits and normal banking relationship with Polaris Bank Limited.
“Polaris Bank Limited shall continue to pay interest on all deposits in accordance with any deposit agreement formerly existing between each depositor and Skye Bank Plc as at the date of assumption of such deposit by Polaris Bank Limited. In the event that Polaris Bank Limited seeks to make any changes to interest payable on any deposits, any such changes shall be notified in writing to each depositor and shall only take effect after a reasonable time following the giving of such notice.
“The CBN has retained the Board and management of the defunct bank to manage the affairs of Polaris Bank Limited as a result of their good performance following the intervention in the defunct bank in July 2016. All customers and depositors of the bank can reach their relationship managers for any further clarifications if required. “The Board and Management of Polaris Bank Limited wish to use this opportunity to appreciate and thank all customers for their support to the defunct bank and hope that this support will be extended to Polaris Bank Limited. We will also like to use this opportunity to assure all customers of our continuous excellent services at all times.”
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