More than five days after Skye Bank’s license was withdrawn by the Central Bank of Nigeria, CBN, business men, traders and investors alike in the Ilorin metropolis, particularly the capital city’s business district have been on the lookout for the presence of Polaris, the bridge bank that bought over the distressed bank, National Pilot investigation reveals.
After the shock announcement by CBN of the liquidation of the bank on account of its distress and its quick takeover, former banking offices of the new bank have started wearing the predominantly yellow logo of the bridge bank across the country. Monitoring the situation by this medium at the Challenge Ilorin branch of the bank showed the old logo of Skye Bank still at the place. “We are expecting the changes and we hope that this would make the bank bigger and better than what we used to know,” explained by Richard Ekundayo, a manager of a logistics and courier firm in Ilorin.
The CBN revoked Skye Bank’s operating license last week. As stop gap measure, the Nigeria Deposit Insurance Corporation, (NDIC) created a bridge bank named Polaris Bank to assume assets and liabilities of Skye Bank. The bridge bank will inject N786bn to recapitalise the bank and return it to stability and profitability before selling to interested investors, says the money industry regulator.
Like in many other parts of the country, customers of the bank have continued to show worries over the news of the liquidation of the bank. Critically examined, Skye Bank distress since 2016 was never in isolation. Even more, recent analysis show that the effect of the recession of that year has not worn off the banks listed in 2016 as showing stress signs by the CBN audit. But the apex bank has been covering for the bank as it seems.
Why the CBN pampered the bank up till last week has continued to baffle players in the money industry. This seeming over pampering started as early as February 2014 when Asset Management Corporation of Nigeria (AMCON) announced that it was going to sell 100% if it’s stake in Mainstreet bank by October of that year. After the bidding rounds, Skyebank emerged the preferred bidder with a bid of N126 Billion. It immediately paid the initial deposit of 20% (N26 Billion) and on October 31, paid the balance of N100 Billion ahead of the November 3 deadline to acquire MainStreet Bank.
The question that has often been asked is. Why did Skye Bank acquire MainStreet bank? According to the bank at the time, it did so to “achieve an inorganic growth and address structural concerns affecting the bank in its preferred area of commercial banking business”. It particularly noted that it was attracted by the low NPL ratio of 4.3% (lower than the regulatory ratio of 5%) and the brand loyalty and branch network of the bank in the SS and SE parts of Nigeria.
However, even in 2014, there were warning signs. One obvious one was the rapidly reducing capital adequacy ratio of the bank. An issue that was even acknowledged by the Apex Bank body itself. However, strong these concerns were, it didn’t stop the CBN from giving its “no objection” to the acquisition.
In 2016, CBN fired Timothy Oguntayo, chief executive of Skye Bank as the apex announced takeover of the financial institution on Monday. Oguntoye led a team to acquire the Mainstreet Bank in 2014. But at the time, it was heavily speculated that the takeover of Skye Bank by CBN, may just be a dress rehearsal of impending crash of three or more banks in the country. With public funding pulled from banks on account of Federal Government’s Treasury Single Account, (TSA), drop in oil revenue accruing to the country and investors’ disinterest in the economy, analysts at the time said that it pointed to distress in the money industry.
CBN’s action in 2016 was also interpreted as the sequel to the deadline given by CBN a year before to three commercial banks to recapitalize by June 2016. In 2015, CBN gave three commercial banks the deadline in which to recapitalize after they failed to hit a minimum capital adequacy rate, (CAR), of 10 per cent. By the apex bank’s rules, banks are supposed to maintain a maximum 40 percent of its total liquidity. But going by its analysis that year, the three banks did not meet up with the benchmark.
