An admixture of benign hand of fate and willful political vendetta constitute the greater part of the “inside and outside forces” that consumed the immediate past board and management of Skye Bank Plc.
The key personnel of the bank in board and management positions resigned on Monday, July 4, ahead of the move by Central Bank of Nigeria (CBN) to effect a leadership change in Skye Bank same day.
The CBN governor, Godwin Emefiele, said that Skye Bank had been on life-support for longer than CBN could tolerate, hence the intervention.
“The Central Bank of Nigeria (CBN) would like to inform the general public of its decision to effect changes in key personnel on the Board and Management of Skye Bank PLC with effect from today Monday, 4th July 2016.
“Specifically, these changes relate to 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.
“These proactive moves have become unavoidable in view of the persistent failure of Skye Bank PLC to meet minimum thresholds in critical prudential and adequacy ratios, which has culminated in the bank’s permanent presence at the CBN Lending Window.
“In particular, Skye Bank’s Liquidity and Non-performing loan Ratios have been below and above the required thresholds, respectively, for quite a while,” Emefiele said.
While CBN diagnosed Skye Bank of capital adequacy ratio deficiencyand accompanying liquidity challenge, Timothy Oguntayo, the immediate past Group Managing Director/Chief Executive Officer (CEO) blamed his forced exit on what he called “forces inside and outside the bank”.
In an e-mail to the bank’s staff that day, Oguntayo, who led Skye Bank into its expansionary phase from 2014, lamented about what he referred to as the internal and external forces that resisted his efforts to turn the bank around.
He said, “The last two years of my stewardship as the GMD/CEO, has been very eventful and challenging.
“I have put all that I have into turning the fortune of the bank around, working with each and every one of you. However, the results have not been commensurate with the efforts. There have been counter forces from within and outside the bank that made it impossible to achieve steady progress.”
“It is in this vein that I have offered to resign my appointment as the GMD/CEO with immediate effect. I enjoin you to all to cooperate with the new management that would be announced soon,” Oguntayo said.
Oguntayo’s “counter force” experience could be traced to circumstances surrounding his emergence as the bank’s GMD/CEO, as Tunde Ayeni became chairman – a development that emitted chocking oudour of suppressed opposition against them from various dimensions.
The manner of their coming was seen as creating some disequilibrium in the political calculations that dictate the affairs of the bank, given the side Ayeni was coming from in Nigeria’s political divide at the time.
Ayeni was said to be in the good books of the leadership of the Peoples Democratic Party (PDP) that controlled the federal government until May 29 2015. This provided him the window of opportunity to garner the financial muscle to invest in key sectors of the economy, including telecom, power and financial services.
Ayeni, it will be recalled, acquired the Nigeria Telecommunication Limited (NITEL) and owns Ibadan and Yola power Distribution Companies (DISCOs) – investments reportedly made possible with facilities obtained from Skye Bank.
According to sources, this strong financial backbone emboldened him to attempt the push that paved the way for his emergence as the bank’s chairman during which Oguntayo, already an executive director, was appointed GMD/CEO.
However, this “show of strength” did not please some “outside forces”. One of such “forces” is a prominent South-West politician and chieftain of the ruling All Progressives Congress (APC) who has significant interest in the bank.
Ayeni, coming from the “offensive, now opposition political camp” ought not have made such a radical push that dislodged the politician’s men in strategic positions in Skye Bank in 2014, this newspaper learnt.
Moreover, that leadership change resulted in the disengagement of former Group Managing Director/CEO, KehindeDurosinmi-Etti, at the end of his first 4-year tenure in July 2014.
Sources disclosed that Durosinmi-Etti was not given the option of seeking a re-appointment as GMD/CEO, a development that strengthened the “counter forces” against Ayeni and his team.
This newspaper learnt that several strategic moves were made for and by Ayeni, to appease the offended spirit and obtain the fatherly love of the politician; the intended result was not achieved. The “Baba”, it was learnt, refused to forgive, and remained the arrow-head of external “counter force” against the ambitious young guys.
Hand Of Fate
Unfortunately, Ayeni and his team incurred the regulatory wrath of CBN when they engagedin insider-related facilities that turned out to be sticky and resulted in huge non-performing loans for the bank.
Reports showed that Skye Bank Plc exposure to the power, oil and gas sector amounted to N449.08billion in two accounting years: N209.08 billion in 2013 and N240 billion in 2014.
Additionally, Skye Bank reportedly recorded off-balance sheet engagements in terms of loans granted to two creditors Newcross and PPP Fluids totalling N50 million and N233 million respectively.
In fairness to Ayeni and Oguntayo, the bank’s leadership made significant efforts to shore up the bank’s capital because Skye Bank, by its size, is categorized among Nigeria’s Systematically Important Banks (SIB) by CBN.
In March 2015, Skye Bank signed an agreement with StanbicIBTC Bank and Financial Market Dealers Quotation System (FMDQ) to issue N100 billion in commercial paper to increase its ability to do more transactions.
The first tranche of the transaction in the size of N20 billion opened March 23rd and closed on March 27th, 2015. Oguntayo, in a chat with newsmen, said Skye Bank was taking advantage of the Commercial Paper window to expand the number of instruments on its Balance Sheet.
He also said that CBN was restructuring N27 billion short-term loans Skye Bank made to Nigerian state governments to 20-year maturities, paying a 16 percent coupon.
Oguntayo had also disclosed in May 2014, that the bank was in the process of securing $104 million in Tier II capital from two European development financial institutions (by July that year) and that it planned to launch a share sale of N30 billion to institutional investors before the end of 2014.
Gains And Pains
These moves constituted part of the build-up for Skye Bank to acquire one of the nationalised banks – Mainstreet Bank, which it did in October 2014. This “success” yielded mixed fortune for the bank.
The bank’s 2014 pre-tax profit fell 46.6 percent to N10.47 billion, compared with N19.64 billion in the previous year. Gross earnings however rose marginally to N136.74 billion from N132.39 billion the previous year. The directors proposed a bonus issue of one share for every 20 held by existing shareholders.
Skye Bank disclosed that its earnings were hit by increased loan loss expense, which rose 58 percent to N18.99 billion from N12 billion previously, while operating expense also increased 9.8 percent during the period.
The narrative assumed a ‘pain-relieving’ change when the bank published its third quarter account for the period ended September 30, 2015. It announced gross earnings of N129.24 billion, representing an increase of 33.06 per cent over the N97.13 billion recorded during the corresponding period in 2014.
In its unaudited result submitted on the floor of the Nigeria Stock Exchange, the bank said there was “very strong fundamentals in all the key performance indicators and strong growth in fees and interest income, as well as investment and other incomes.”
Aside significant growth in fees, commission, investment and other income, the result further showed that the bank’s profit before tax increased to N14.98 billion during the year under review from N12.33 billion compared to the same period in 2014, reflecting a growth of 21.45 per cent. Also, profit before tax increased by the same 21.45 per cent to N11.98 billion as against N9.87 billion in 2014.
That is the end. As at July 4 2016, when the CBN effected a management change in Skye Bank, the bank’s audited 2015 result was yet to be published – four months behind the statutory deadline of March 31. And its Annual General Meeting had not held.
That is a sign that all is not well with Skye Bank, Boniface Okezie, President, Progressive Shareholders Association of Nigeria, told this newspaper. Okezie maintained that “what is happening at Skye Bank is nemesis of Mainstreet Bank they acquired in controversial circumstance.
“Why would a bank that had the billions to acquire Mainstreet Bank begin to have problem shortly after the celebrated acquisition? They have not explained the source of the N126 billion used to acquire MainstreetBamk; I have been telling them that they bit more than they could chew,” Okezie said in a telephone chat on the developments at Skye Bank.
Tokunbo Martins, Director, Banking Supervision, CBN, has a similar thought. Speaking on Channels Television live programme, “Sunrise Daily”, after the apex bank’s intervention, Martins said she believed that Skye Bank was too ambitious in its acquisition of Mainstreet Bank.
Skye Bank acquired MainstreetBank for N126 billion in October 2014 when it emerged the preferred bidder for the nationalised bank. It completed the take-over and integration process mid 2015 after a court ordered AGM where shareholders approved the acquisition of Mainstreet Bank.
The acquisition widened Skye Bank’s presence in Nigeria’s banking landscape as it absorbed Mainstreet Bank’s huge assets, including a large network of 201 branches, nine cash centres and 205 Automated Teller Machines (ATMs).
With Skye Bank’s dominant operations being in the South-West, its acquisition of Mainstreet Bank provided an opportunity to deepen its penetration of the South-East and South-South regions where Skye Bank was less represented.
Some 26 per cent or 54 branches of Mainstreet Bank’s network were located in the two regions. These two regions also accounted for 28 per cent of Mainstreet Bank’s over 1.9 million customers, second only to Lagos with 37 per cent.
These windows of opportunity later turned into a liability to Skye Bank, according to Okezie who adjudged the acquisition bid as somewhat questionable.
Regrettably, the new large status of Skye Bank brought it a sour taste. In June 2016, Standard &Poor’s lowered Skye Banks ratings following the bank’s significant asset deterioration.
The rating company in a press release said: “We anticipate deterioration in Skye Bank’s asset quality metrics and profitability, which we think will markedly diminish the bank’s capital adequacy relative to the regulatory minimum and heighten refinancing risks.
“Consequently, we are lowering our global scale ratings on Skye Bank to
‘CCC+’ from ‘B-‘ and our national scale rating to ‘ngB+’ from ‘ngBB’ and placing them on CreditWatch with negative implications.”
This negative standing of Skye Bank contributed to the CBN’s intervention of July 4, as Emefiele clearly stated: “Given the aforementioned issues and the fact that Skye bank is a Domestic Systematically Important Bank (SIB) with significant interconnectedness, the CBN would be failing in its duties if it does not take immediate action to nip the steadily declining health of the bank in the bud and correct the situation.
“In view of the long grace period allowed the bank to correct the situation, we came to the conclusion that, although the existing board had done its best to steer the ship it had come to a realization that it would be unable to bring the bank out of its present precarious situation.”
It could be recalled that CBN had imposed a fine of N4 billion on Skye Bank for concealing funds belonging to Ministries, Departments and Agencies (MDAs), thus violating the Treasury Single Account (TSA) policy.
One unfavourable turn of event against Skye Bank was CBN’s decision to intervene in the bank mid-year, while it had given the bank a directive to resolve its liquidity related issues before December 31.
The CBN had sent a letter to Skye Bank dated January 22, 2O16, in which the bank was granted an extension till December 31, 2O16 to resolve its insider credits and related liquidity issues.
“We refer to your letter dated December 10, 2015 and our exchange of correspondence on the above subject [Insider Credits] and write to inform you that the Central Bank of Nigeria has granted an extension of time till December 31, 2O16 to enable you bring your insider related credits within the stipulated regulatory maximum of 1O% of your paid-up capital per director, including his/her related parties and 6O% paid-up capital for total related credits in line with our circular BSD/9/2OO4 on Large Exposures and Connected Lending,” the CBN letter read in part.
This newspaper was informed by those familiar with the developments in Skye Bank that the immediate past leadership made significant efforts to ensure that the issues highlighted by CBN were effectively resolved before year end.
Ayeni’s team had reportedly agreed with some off-shore investorsto buy into the bank — close to N100 billion. Apparently aware of this move, the “counter-forces” moved to scuttle the plan. “Otherwise, why did CBN take the action when Skye Bank still had about 6 months window to do what CBN mandated it to do?” a stakeholder who would not want his name published, told The UNION last week.
This could be traced to the handiwork of the “counter-forces” Oguntayo alluded to. “I am aware there has been some forces fighting to take over the leadership of the bank,” ShehuMallamMikail, National President, Constance Shareholders’ Association of Nigeria, told The UNION by telephone when contacted on the matter.
The development at Skye Bank will have far-reaching effects that will generate a dimension of consuming forces. Already, investors have begun to dump the bank’s shares at the Nigerian Stock Exchange.
The immediate past President, Association of Stockbroking Houses of Nigeria (ASHON), Rasheed Yussuf, told Skye Bank’s new leadership Friday,thatthe shares of Skye Bank had been dumped by investors, following the developments at the bank.
“Let me tell you one thing: You need to work very hard, very fast. As we speak, I have over one hundred and fifty million shares of Skye Bank. Nobody is buying, Yussufsaid. The team was led by Alhaji M.K Ahmad, Chairman of the Board andTokunboAbiru, GMD/CEO.
Abiru said at The Exchange that the new leadership was on a (rescue) mission. This implies that those owing the bank should be prepared for a new, if necessary raw, deal.
Certainly, no stone will be left unturned as Abiru, a former Lagos State Commissioner for Finance; and Ahmed, former Director-General, Pension Commission (PENCOM) brings another dimension to the “counter-forces” that would visit some quarters soon.