Skye Bank Shares Nosedive as CBN Sacks Board, Mgt

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  •  Ahmad, Abiru take over as chairman and MD, Emefiele insists Nigerian banks remain strong
  • Why pleas to Tinubu fell on deaf ears

Goddy Egene, Obinna Chima and Nume Ekeghe

In what could be deemed a poorly guarded secret, the Central Bank of Nigeria (CBN), yesterday, finally announced the removal of the chairman of the board of Skye Bank Plc, Mr. Tunde Ayeni; other non-executive directors of the board; its managing director, Mr. Timothy Oguntayo; deputy managing director, Mrs. Amaka Onwughalu; and two other executive directors of the bank.
Expectedly, the shares of Skye Bank Plc fell by 9.5 per cent to lead the Nigerian Stock Exchange’s (NSE) price losers’ chart, as investors reacted to the removal of bank’s board and some members of its executive management team.

Skye Bank shares fell from N1.00 to close at N0.95 per share. The bank’s shares had suffered a 36 per cent value erosion year-to-date, falling by N1.50 to N0.95 per share and underperforming the NSE All-Share Index which has appreciated 1.26 per cent YTD.

As its shares plunged yesterday, they had an overall impact on the banking segment of the NSE as the Banking Index fell by 1.1 per cent.

The sector came under pressure following reports of the impending board changes.
In all, nine banking stocks ended the day on a bearish note: Other than Skye Bank, FBN Holdings Plc also shed 5.1 per cent, while Fidelity Bank Plc and Stanbic IBTC Bank Plc went down by 4.6 per cent and 4.4 per cent, respectively.

Other losers included Diamond Bank Plc (3.4 per cent), Zenith Bank Plc (3.1 per cent), Access Bank Plc (1.3 per cent), FCMB Group Plc (0.6 per cent) and Guaranty Trust Bank Plc (0.2 per cent).

For several months, the market had been concerned about the soundness of Skye Bank in the face of insider lender and a growing non-performing loan (NPL) book, which had eroded its capital and liquidity ratios.

Alarm bells also went off when the bank issued a profit warning in the first quarter of 2016 and still failed to release its full year 2015 results before the end of second quarter of 2016.
By last week, market analysts had confirmed to THISDAY that the bank’s board and executive management were going to be shown the exit after Skye Bank made repeated forays to the central bank’s discount window (lending window) opened penultimate week when the central bank sucked out N1.3 trillion from the banking system through the Secondary Market Intervention Sales (SMIS) inthe interbank forex market.

Confirming their removal of most members of the board of Skye Bank yesterday,the central bank said 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 had been sacked.

In anticipation of their removal Ayeni and Oguntayo tendered their resignation monday morning.
In the place of the chairman, Alhaji M. K. Ahmad was appointed the new chairman of the board while Mr. Adetokunbo Abiru was appointed the new managing director of Skye Bank by the CBN.

Addressing journalists in Lagos monday, CBN Governor, Mr. Godwin Emefiele, said the central bank took what he described as a proactive step in order to save the health of the bank from further deteriorating.

To correct the anomalies in the bank, he said the CBN had several meetings with the management and board of Skye Bank as part of its strategy of close engagement whenever a bank’s financial or governance situation poses potential threats to the overall stability of the financial system.

Emefiele said despite the expectation of the relevant regulators, market watchers, financial analysts and interested stakeholders, Skye Bank should have been doing much better, but what was evident was the opposite.

Given the aforementioned issues and the fact that Skye Bank is a domestic Systematically Important Bank (SIB) with significant interconnectedness, he said the CBN would be failing in its duty if it did not take immediate action to nip the steadily declining health of the bank in the bud and correct the situation.

Emefiele said in view of the long grace period allowed the bank to correct the situation, the central bank came to the conclusion that, 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.

“Fortunately, and in the overall interest of the bank, the chairman and some board members have decided to resign their appointments from the bank.

“Consequently, by virtue of the powers vested in the Governor of the CBN, we have decided to reconstitute the board and management of the bank, and appoint new members with the sole responsibility of ensuring the speedy restoration of the health of the bank.

“To this effect, the chairman of the board, all other non-executive directors, the independent director, the managing director, the deputy managing director, and two longest serving executive directors have voluntarily resigned their appointments with immediate effect.

“In their place, we have selected industry experts and people of high integrity whom we believe can turn the bank around.

“In this regard, we have selected Alhaji M.K. Ahmad to be the new chairman while Mr. Adetokunbo Abiru would be the new managing director. The more recent executive directors will be allowed to remain to ensure continuity and a smooth transition,” he explained.

Ahmad is a seasoned public sector executive with over 35 years experience spanning the public sector and the financial services industry.

He served as the pioneer Director General and Chief Executive Officer of the National Pension Commission (PenCom). He was also a pioneer staff of the Nigeria Deposit Insurance Company (NDIC) where he rose to become a director. He has also served on the board of various companies and committees including banks and not-for-profit organisations.

Abiru is a seasoned accountant and banker and was until recently an executive director in First Bank of Nigeria Limited. He was also the Lagos State Commissioner of Finance from 2011 to 2013. Abiru is a fellow of the Institute of Chartered Accountants of Nigeria.

Continuing, the CBN governor pointed out that the medium-term vision of the CBN, which was unveiled in June 2014, indicated that the central bank would proactively manage potential threats to financial system stability, maintain zero tolerance to practices that undermine the health of financial institutions, and create a strong governance regime that is conducive for financial intermediation, innovative finance and inclusiveness.

He said it was in furtherance of these commitments that the CBN made the changes, just as he assured the incoming board and management of the CBN’s unflinching support during this transition period.

“It is important to reiterate the fact that Skye Bank is not in distress and remains a healthy bank in the system. The CBN hereby assures depositors, shareholders and all relevant stakeholders that there is no reason for concern or panic as we seek their continued cooperation at this time.

“It is our expectation that the shareholders and remaining executive directors will work seamlessly with the new team to ensure that the fortunes of the bank are restored in the shortest possible time,” he said.

Responding to questions from journalists, Emefiele emphasised that “the three most important issues in every bank are its NPLs, its capital adequacy and liquidity ratios”.
“What we have seen since late 2013 to 2014 is that the capital adequacy ratio at this bank (Skye), has been weakening and we thought it is not right for us to allow this to continue to weaken to the point where it gets to an irrecoverable situation.

“It has nothing to do with being distressed and it is important that we take it that we do not want the ratios of this bank to get worse to a point were depositors funds are at risk.
“The board has come to the realisation that it has tried its best and that it is about time for them to bow out, so that a new team can come in and run the bank to improve the position of the bank,” he said.

He further stated that strategic health of the banking industry remains strong, adding that when there is need to inform the general public about the strategic health of any bank, the central bank would not fail in its responsibility as a regulator.

“No doubt, as a result of global shocks, there is a weakening of certain ratios, but those ratios have not weakened to a point where we would say the banking industry is distressed.
“We would like to appeal to all depositors to be calm. There is no need to leave the impression that any bank is distressed. No deposit is at risk.

“The CBN conducts its stress-testing of banks. We do not wait to be called to begin to talk about stress-testing a bank. Stress-testing is a process that is on-going in CBN,” he added.
Also reacting to news report (not THISDAY), that the central bank had been interfering with the floating exchange rate regime, Emefiele said: “It is not true that central bank has been involved in interfering in the exchange rate regime.

“It is a flexible exchange rate regime. Prices are determined based on the market forces of demand and supply but it is important to emphasise that CBN remains a player in that market.
“Indeed, till now, CBN is a major player and we began to see that other players were beginning to return and some of the returns and reports we are reading in newspapers on the bids and sale of the banks, you have seen that there are other autonomous sources that are coming in.

“However, we want a situation where overtime, the CBN would step back and more autonomous sources for generating foreign exchange would come into the market so that we can conserve our reserves.

“At this time, it is not true that CBN is interfering in price determination mechanism, but we are a stakeholder and we are still a major player and we would like to see a situation where we can gradually withdraw from the market and more and more new people can come into the market and take over the determination of our pricing of foreign exchange in Nigeria,” he said.

Despite Emefiele’s attempts to explain away the problems of Skye Bank, THISDAY can authoritatively report that the early warning signs that all was not well with the bank were evident last year.

However, its board led by Ayeni tried in the last few months to no avail to use political means to plug the hole in its book instead of recapitalising the bank.

Sources informed THISDAY that Ayeni and Oguntayo, in a bid to stop their ouster, turned to the former Lagos State governor and a leader of the All Progressives Congress (APC), Mr. Bola Tinubu, to come to the bank’s rescue by prevailing on the CBN governor to give the board more time to turn around the bank.

However, Tinubu was reportedly to have turned down their request on the grounds that the Lagos State Government was not happy with the way the shares of Ibile Holdings Limited, the investment arm of the Lagos State Government in the defunct Eko International Bank (EIB) Limited, which was to consolidate with the defunct Prudent Bank Plc, Bond Bank Limited, Reliance Bank Limited and Co-operative Bank Plc between 2005 and 2006 to form Skye Bank, were whittled down.

EIB, THISDAY gathered, had the largest balance sheet of the five banks that merged between 2005 and 2006 to become Skye Bank, but owing to the absence of diligence on the part of Ibile Holdings, the former managing director of Prudent Bank and later Skye Bank, Mr. Akinsola Akinfemiwa, was able to relegate the significance of the bank established by the Lagos State Government to the background.

Even after Akinfemiwa was forced to resign in 2010 when the CBN enforced the 10-year tenure limit for bank CEOs, his predecessor, Mr. Kehinde Durosimi-Etti who had emerged from the legacy EIB was only allowed to remain in the saddle for four years before stepping down for Oguntayo.
THISDAY gathered that Ayeni who had by 2014 bought up considerable shares in Skye Bank and fought his way to emerge as its chairman, preferred a more malleable CEO to run the bank.

As members of the board, Ayeni and other directors borrowed heavily from the bank with most of the loans going bad.

A source from the bank confirmed that Ayeni’s indebtedness to the bank stands at over N30 billion while another non-executive director, Mr. Festus Fadeyi, owes Skye Bank about N98 billion.

Fadeyi is the chairman and managing director of Pan Ocean Oil Corporation, a joint venture partner of the Nigerian National Petroleum Corporation (NNPC).

In addition to the insider lending, Skye Bank is also believed to be heavily exposed to the oil and gas sector, having lent heavily to Atlantic Energy Drilling Concepts.

Despite the CBN’s intervention at Skye Bank, it was not all bad news for Nigerian banks yesterday, as ten Nigerian lenders comprising Zenith Bank Plc, Guaranty Trust Bank Plc, Access Bank Plc, First Bank Nigeria Limited, United Bank for Africa (UBA) Plc, Diamond Bank Plc, Fidelity Bank Plc and Ecobank Transnational Incorporated (ETI) made the list of the top 1,000 leading banks in the world.

According to the 2016 ranking by the Banker, a publication of Financial Times of London, based on the banks’ shareholders’ fund, Zenith Bank topped list of banks from Nigeria, was the seventh in Africa and 325th in the world with $2.837 billion shareholders’ funds.

The bank was closely followed by FirstBank, which was ranked the second top bank in Nigeria with a shareholders’ fund of $2.036 billion, FirstBank came in 11th in Africa and 417th in the global ranking.

In third place was GTBank with a shareholders’ fund of $1.673 billion, but was ranked the 13th top bank in Africa and 490th in the world.

Also, Access Bank ranked 4th in Nigeria with a shareholders’ fund of $1.536 billion, 14th in Africa and 522nd in the global ranking.

UBA was placed fifth position in Nigeria with a shareholders’ fund of $1.004 billion, 18th in Africa and 670th in the global 1,000 top banks.

Diamond Bank was sixth with a shareholders’ fund of $912 million, 20th in Africa and 711th in the world, while Fidelity Bank was ranked the 25th banks in Africa and 802nd bank the world.
According to report by the Banker, Chinese banks continued to dominate the global ranking of Top 1,000 banks, but also showed signs of slowing down.

The Industrial and Commercial Bank of China (ICBC) remained number one and China Construction Bank number two.

US banks did well in the ranking with JP Morgan holding onto the third position, Bank of America, sixth, Citigroup, seventh, and Wells Fargo eight.

“For Africa’s other major banking market, Nigeria, it was a similar story. In 2015, 13 lenders from the country were featured in the global ranking. In 2016 this has fallen to 10, with only two banks, Access Bank and Ecobank Nigeria, registering gains to their Tier-1 capital positions.
“This reflects the difficulties faced by the continent’s second biggest oil producer over the review period, as low oil prices began to take their toll. Togo’s Ecobank Transnational has retained its global ranking of 306th and has moved up the regional table one place to sixth.

“Beyond these larger markets, some of African lenders have performed relatively well in the 2016 rankings. Building on their success in previous years, all three entries from Kenya recorded positive Tier-1 capital growth,” the report added.