Real reasons why Skye Bank is troubled

• Mainstreet Bank acquisition
• Divided board, overbearing chairman
• TSA trouble
• Insider relate loans

By Wole Tokede

Against the widely held beliefs, Business247 Online News can reveal authoritatively that there is a combination of factors that are responsible for the present situation that Skye Bank finds itself. Some of the factors are self inflicted while others are externally brought upon it.

Of all the factors, the acquisition of Mainstreet Bank has been the Achilles’ heels of Skye Bank. The content of the package is actually different from what it was said to be contained by the Asset Management Company of Nigeria (AMCON), its packager.

Skye Bank emerged the preferred bidder after a rigorous bidding exercise that spanned five months, with over 20 bidders contending. It had on October 9, 2014, paid the mandatory deposit of 20 per cent for the acquisition of the target bank, with a pledge to complete the 80 per cent balance within the agreed time frame. On Friday, October 31, ahead of the November 3 deadline, the balance was paid.

Analysts described the deal as one of the biggest acquisitions ever in the country and that made Skye Bank one of the biggest and largest banks in the country in terms of branch network.

The fact that Skye Bank itself emerged from a very successful merger and integration of five banks in 2006, following the first phase of the banking industry consolidation made many analysts and its stakeholders to believe that the acquisition was part of Skye Bank’s strategic plan for growth.

The Bank intends to leverage its wealth of experience on the successful integration of five banks to drive efficiency, increase market share and ultimately ramp up stakeholder value from the acquisition of Mainstreet Bank. The new Skye Bank now has a combined branch network of over 450, which many believe would be a great asset.

Mainstreet Bank had nine subsidiaries and a large distribution network comprising 201 branches across 35 states and the Federal Capital Territory, Abuja. It had nine cash centres and 200 Automated Teller Machines (ATMs).

A competent source close to the board of the bank disclosed to Business247 that the liabilities of Mainstreet Bank were much more than what was disclosed to Skye Bank by AMCON which packaged the sales. The source revealed that despite the due diligence, the extent of its liabilities was not totally known by the new owner.

The consummation of the acquisition of the bank cost Skye Bank N130 billion. The source confirmed this figure to Business247. Despite the huge sum expended on the acquisition, a whole of N10 billion was said to have been spent on upgrading its branches and acquiring new work tools for the acquired entity.

The acquisition and the upgrade greatly impacted negatively on the reserves of the bank from over N200 billion before the deal, it now came down to about N50 billion after the exercise. The issue is now made to be more problematic as the expected instant impacts and benefits expected from the acquisition were not coming as expected by the board and management.

In addition, the bank actually lost about N120 billion to the CBN on the implementation of the Treasury Single Account (TSA). This directive coming after so much had been spent on the acquisition and refurbishing of the new entity was a big problem to the bank.

Mainstreet Bank, according to our sources, had enjoyed tremendous good will at the seat of power in Abuja as it had hugely benefited from being a banker to many parastatals and agencies of government. This became nothing to its new owners at the introduction of TSA not too long after its acquisition.

Despite what the former GMD, Mr Timothy Oguntayo wanted staff members to believe, the board of directors of the bank, led by Dr Olatunde Ayeni was highly divided. There was a report that the chairman was a staunch member of People Democratic Party (PDP) and he was alleged to have used his position in favour of his party while most of the other members were in All Progressive Party (APC). Decisions were said to be have been supported or opposed on party lines.

There was a veil reference to the fact that there was a problem in the board of the bank going by the email of the ex-GMD to members of staff announcing his resignation from the bank. It reads: “The last two years, of my stewardship as the GMD/CEO, have been eventful and challenging. I have put all that I have into turning the fortunes of this 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 MD/CEO with immediate effect. I enjoin you all to cooperate with the new management that would be announced soon”.

The efforts of the bank raising new capital to match its bigger size of business were not successful. The existing local shareholders of the bank confirmed interest in increasing their stake in the bank but two foreign banks which were equally competing to partner with the bank and make it to become a universal bank at the last minutes were developing cold feet towards its consummation.  According to the source, they backed out without telling the board and management of the bank having done their due diligence on the bank and its chairman.

This was said to have made it impossible for the bank to raise a minimum of N50 billion by December 31, 2016. It tried to raise the money locally and failed; the bank’s management tried abroad and was unable to convince a Moroccan bank and a South African bank to invest in it.

Insider credit was equally a problem for the board and management of the bank. According to a list of 100 chronic debtors released by AMCON, Skye Bank individually owed a total of N16.46 billion and jointly owed N104.80 billion with Zenith Bank, Intercontinental Bank, First Bank of Nigeria and Union Bank.

Despite all this, not many people knew there was problem in the bank as it was meeting customers’ obligations to its customers. But that has changed now, many high networth customers of the bank are apprehensive. There has been a running on the bank since on Monday and according to the findings of this medium, the saving grace for the bank is the public holiday declared by the Federal Government since Tuesday to Thursday.

The management of the bank in a bid to forestall the problem of customers withdrawing their funds from the bank sent this message to customers on Tuesday: “Skye Bank’s new management has taken charge of the bank, with the backing of the CBN. The CBN has assured safety of your deposit. There is no cause for alarm.”

Unless some serous steps were taken, the bank may have entered a new problem. The way the CBN handled the matter, many analysts believe it’s not proper as many people are put in suspect on whether the real problems are with the bank. A shareholder group is so vocal in condemning the approach of the CBN to the issue. The Corporate Communications Department of the bank is equally not on top of the situation as the issue is handled in its usual lethargical manner.

To stem the inpending problem that may be the lot of the bank, the CBN came out strongly on Wednesday to condemn the speculations going round that some deposit money banks in the country are distressed.

The apex bank in a press release signed by its Acting Director, Corporate Communications, Mr. Isaac Okorafor, said its attention had been drawn to malicious rumours and unfounded speculations that some banks in the country may have gone or may be going into distress.

The release says: “The CBN wishes to reiterate in the strongest terms that these rumours and speculations are untrue and do not reflect the actual health of the individual banks and, indeed, the entire banking industry.

“For the avoidance of doubt, the infusion of a new Board and Management for Skye Bank PLC is a proactive regulatory action meant to ensure that the bank does not continue to fail in its relevant prudential ratios. Neither Skye Bank nor any other bank in the industry is in distress.

“Therefore, the CBN would like to request the general public to ignore speculations or rumours to the contrary as they could only be the handiwork of mischief makers who do not mean well for the Nigerian banking system and its economy.

The CBN further stressed that as the regulator of the industry, the CBN said it reassures the banking and general public that their deposits remain safe in any Nigerian bank. “There is, therefore, no need for panic withdrawals from any bank”.

According to CBN: “Going by both the CBN’s Examination Reports as well as analysis from market watchers, International Credit Rating Agencies, and Development Finance Institutions, the Nigerian banking industry remains strong in spite of the global economic challenges emanating from the collapse of global commodity prices”.

The apex bank, therefore, urges the banking public to remain calm and go about their normal businesses without panic. “It is important that we do not create problems when none exists”. The CBN concluded.