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Skye Bank: Growth Anchored on Sound Business Model, Efficiency

26 May 2013

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Durosinmi-Etti


The impressive performance of Skye Bank Plc in its 2012 financial year is a proof of the bank’s readiness for a new growth phase, reports Festus Akanbi


Skye Bank Plc continued its impressive trajectory in corporate performance in 2012 financial year by delivering strong market showing and impressive financial fundamentals in line with the targeted goals and growth forecasts set at the beginning of the year. Financial analysts and market commentators have applauded the bank’s profit returns and other performance growth indicators as heralding a new growth phase for the bank.

The bullish and impressive performance of the bank during the year under review was anchored on sound business models, effective cost management measures and other factors, which have proven to be game changers. Business prospects for the 2013 financial year are also bright as could be gleaned from the first quarter’s result of the bank, which was released recently.
The highlights of the bank’s result for the year 2012 include significant growth in profitability, marked increase in total balance sheet size, reduction in cost structure, growth in deposit level, solid liquidity and strong capital base.

N70 Billion Fresh Capital
Meanwhile, Skye Bank has concluded arrangements to raise N70 billion in fresh capital to strengthen its balance sheet and support its business expansion. Its Group Managing Director/Chief Executive Officer, Mr. Kehinde Durosinmi-Etti, said the bank would raise tier 2 capital before the end of the third quarter and seek additional funds through tier 1 issue in the nearest future.

Durosinmi-Etti said the bank had been growing and so needs to shore up its capital. According to him, given the way the bank had optimized its capital, additional funds would lead to better value creation for all stakeholders.

In addition, the Skye Bank boss hinted that the bank might also consider acquiring another bank if such a move will add significant competitive advantage to it. It is expected that the bank may go for one of the three nationalized banks-Enterprise Bank, Keystone Bank and Mainstreet Bank –which AMCON is planning to sell.

Result
Audited report and accounts of the bank for the year ended December 31, 2012 showed remarkable improvement in profitability as the bank harnessed its vast business base and increasingly efficient cost management to deliver impressive returns to shareholders.     
The audited report of the bank was prepared in line with the International Financial Reporting Standards (IFRS) and approved by all financial services regulatory agencies, was presented to the investing public recently.

Key extracts of the audited report showed that profit after tax leapt to N12.64 billion in 2012, representing a whooping increase of 872.6 per cent on N1.30 billion recorded in 2011. Profit before tax had jumped by 480.9 per cent from N2.84 billion in 2011 to N16.51 billion in 2012. The bank maintained a steady top-line in 2012 with net interest income and net non-interest income of N44.50 billion and N22.60 billion respectively.

On the basis of the impressive bottom-line, the board of the bank has recommended an increase in dividend per share from 25 kobo paid for 2011 business year to 50 kobo for 2012.
This performance underlined Skye Bank as a return-driven bank. Earnings per share increased to N1.01 in 2012 as against 20 kobo in 2011. At current market value, earnings yield stands at about 16.6 per cent while dividend yield stands at 8.2 per cent, within the top bracket of earnings and yields of quoted equities. A dividend cover of 2.02 times for 2012 as against 0.80 times for 2011 underlines the ability of the bank to sustain its impressive dividend payouts.

The bank’s balance sheet also showed similarly impressive performance as the bank’s focus on quality growth brought down the relative level of non-performing loans to its lowest level. The bank’s assets quality improved considerably as non-performing loan/gross loans ratio surpassed industry’s target of 5.0 per cent at 4.95 per cent in 2012 as against 6.39 per cent. Deposit base expanded by 22.4 per cent at N790.09 billion in 2012 compared with N645.45 billion in 2011, reflecting the strong profile of the bank in the intensely competitive banking industry. Total assets crossed the N1 trillion mark to N1.07 trillion in 2012 as against N914.27 billion in 2011. Equity funds firmed up to N106.89 billion as against N100.11 billion in the previous year.

Commenting on the report, the Group Managing Director Durosinmi-Etti, said the report reflected the commitment of the bank to its goal of quality and sustained growth and returns to shareholders.

He noted that the improvement in the intrinsic profitability of the bank underscored management’s grasp of competitive edges that the bank should build on as it progresses to its target of a leading top-tier bank.

According to him, “in a year of impactful regulatory interventions, including tight monetary policies, we recorded growth in the most of our performance indicators. For instance, we grew our interest income by 35% from N74.9 billion to N101.0 billion, signaling an accretion in our volume of business transactions, while customer deposits grew by 22%, from N645.5 billion to N790.1 billion.

“The continuous focus on improved risk management practices yielded dividends as our impairment and provisions charge fell significantly, which positively impacted on our profit before tax of N16.5 billion, a significant growth of 481% from N2.8 billion reported in 2011. We also recorded a reduction in our operating expenses, from N42.3 billion last year to N40.2billion, following the deliberate cost management and efficiency initiatives we commenced in the past few years, in spite of the high operating cost environment.
“The critical performance ratios, in terms of returns, efficiency, non-performing loans and liquidity, are well within acceptable regulatory levels.

Stable Board
The Board of the bank is composed of very competent professionals, distinguished and versatile Nigerians in various fields, namely law, accounting, engineering, banking, among others. Their diverse professional backgrounds and rich wealth of experience have helped in making policies that advance the cause of the bank. The Board, under the leadership of Mr. Olatunde Ayeni who is the chairman, is responsible for policy formulation and providing general guidelines and direction for the smooth running of the bank.
The Board is cohesive, vibrant, resourceful and operates as a unified body. It ensures strict adherence to good governance and has independent directors who provide depth and quality to the deliberations so as to break new frontiers for the bank.

International Subsidiaries
Skye Bank Plc has three subsidiaries in Sierra Leone, The Gambia and Guinea where quality banking services are provided. The three subsidiaries have since become successful business models in their host countries. Collectively, they contributed N537 million to the bank’s gross earnings and N287 million to operating profit of the Group. The subsidiaries are committed to delivering good returns to the shareholders.

Customer Service
The Bank strengthened its complaints management structure through the provision of of resources for both internal and external customers with a view to resolving all complaints in the most efficient manner, with emphasis on timely remediation and utmost professionalism.
The bank uses its Customer Care (YES) Centre as a major touch point for its existing and potential customers. It has expanded the mandate of the Centre to include card administration, internet banking request, mobile banking, transaction notification, among others. The bank has also established a Business Re-Engineering function to ensure the elimination of process bottlenecks and automate as many processes as possible.

Risk Management
The Bank employs enterprise risk management to mitigate against risks that are inherent in business. Well trained staff man the risk management function, including credit risk, market risk, operational risk, legal risk, liquidity risk, among others. The governance processes for managing these risk types, including Management and Board structures, are well articulated and implemented.

Tags: Business, Nigeria, Featured, Skye Bank

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