Skye Bank to sell units outside Nigeria to bolster cash

Skye Bank Plc, which had its management replaced by the Central Bank of Nigeria in July after breaching liquidity thresholds, plans to sell units outside of Africa’s biggest oil producer to ease pressure on capital buffers.

According to a Bloomberg report monitored by Business247 News Online, the bank is seeking to dispose of majority stakes in its businesses in Gambia, Guinea and Sierra Leone, according to two people familiar with the matter, who asked not to be identified because the deals are private. Greenwich Trust Limited was hired as financial adviser on the deals in which bidders must submit expressions of interest by November 18, the people told Bloomberg.

The lender is seeking to drop its international banking licenses so it no longer needs to have a capital adequacy ratio of 15 percent and become a national bank that only needs a CAR ratio of 10 percent, one of the people said. Skye Bank had a CAR of 12 percent at the end of 2015.

“Right now, they are short of required capital, so if they strip off all those assets they will raise some money and it will mean that their capital adequacy requirement will be lowered by the central bank,” Omotola Abimbola, an analyst at Afrinvest West Africa Ltd. in Lagos, said by phone. Having a lower capital requirement will make it easier for the lender to “remain in business,” he said.

Skye Bank has plunged 64 percent this year, the biggest decline in the 171-member Nigerian Stock Exchange All Share Index after Forte Oil Plc. The Central Bank of Nigeria provided Skye with a loan shortly after removing its management to ensure its operations didn’t suffer from a run on deposits, the regulator said at the time. Skye, along with Unity Bank Plc, is close to being insolvent, analysts at Dubai-based Arqaam Capital Ltd. said in a note in October.

“While we realize that the bank still has liquidity and asset quality issues, we view this approach on capital as a practical option to begin with,” CSL Stockbrokers Ltd. said in an e-mailed note on Tuesday. The depreciation of the naira may have added further pressure to the lender’s risk-weighted assets, causing capital ratios to deteriorate further, the brokerage said.

Concern about the health of Nigerian banks, particularly among small-and-medium-sized-lenders, is being fanned by non-performing loans at a six-year high as the economy struggles to cope with lower oil prices and crude output. The naira has weakened almost 38 percent since June, when regulators dropped a peg against the dollar that had been blamed for a dearth of foreign investment.

The CBN moved to calm investors and on October 12 said the country’s lenders have strong capital buffers and capacity to generate income and absorb losses.