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Skye Bank Shareholders Approve N50billion Capital Raising

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Skye Bank

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I mentioned some days ago that Skye Banks is looking to raise equity to increase its Capital Adequacy Ratio. Reuters has confirmed as follows;

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Skye Bank Plc has won shareholders’ approval to raise N50 billion ($316 million) in capital to expand its operations and boost its balance sheet, the mid-tier lender said in a statement on Tuesday.“The bank would raise Tier 11 capital before the end of the third quarter and seek additional funds through Tier 1 issue in the nearest future,” CEO, Kehinde Durosinmi-Etti, said in the statement.Tier 11 capital refers to debt while Tier 1 is equity.The lender said it won shareholders’ vote last Wednesday to raise the funds by way of debt or equity at home or abroad.

Skye bank gets approval to raise N50bn

Ugo Obi-chukwu "Ugodre" is a chartered accountant with over 16 years experience in financial management, corporate finance and financial analysis. He is also a retail investor and a personal finance advocate with over a decade experience investing in the Nigerian stock market. Ugo is the founder/Publisher of Nairametrics and blogs regularly on the website.

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Business News

IMF advises banks to suspend dividend payment

However, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income.

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IMF discloses immediate priority , Reduce funding oil subsidy - IMF to Nigeria , IMF: 40% of African countries can't pay back their debts , Nigeria among countries that pushed Global debt to $188 trillion - IMF , Coronavirus: World Bank, IMF to support Nigeria and other member countries affected, IMF, World Bank to hold meetings via conference call over Coronavirus epidemic, IMF advises banks to suspend dividend payment

In an article published on its website, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, advised banks to halt dividend payment for now. According to her, with the expectation of a deep recession in 2020 and partial recovery in 2021, banks’ resilience will be tested. Therefore, having in place strong capital and liquidity positions to support fresh credit will be essential.

According to the article, one of the steps needed to reinforce bank buffers is retaining earnings from ongoing operations which are not insignificant.

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IMF staff calculate that the 30 global systemically important banks distributed about US$250bn in dividends and share buybacks last year.

READ MORE: State Governments: Another cycle of non-payment of salaries to begin soon

In a circular dated January 31, 2018, the Central Bank of Nigeria (CBN) stipulated new conditions for eligibility of Nigerian banks to pay dividend and the quantum of dividend to be paid out by banks who are eligible. Prior to the release of the circular, dividend payout policy for Nigerian banks had been spelt out in Section 16(1) of BOFIA 2004 (as amended) and Prudential Guidelines for DMBs of 2010. The circular provided guidelines and restrictions around divdidend payout for banks based on NPL ratio, CRR levels, and Capital Adequacy Ratio (CAR).

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However, there were no regulatory restriction on dividend payout for banks that meet the minimum capital adequacy ratio, have a CRR of “low” or “moderate” and an NPL ratio of not more than 5%. However, it is expected that the Board of such institutions will recommend payouts based on effective risk assessment and economic realities. Indeed, current economic realities demand caution.

Current economic realities mean that banks face asset quality threats, further devaluation threat which may impact capital in some cases, and lower profits which in turn affects the quantum of capital retained. Ideally, these should reflect in NPL ratio and CAR ratio and should immediately restrict banks’ ability to pay dividend. However, there is usually a time lag before these ratios begin to reflect the new economic realities. Therefore, IMF’s advise may come in handy for many banks.

(READ MORE: Software security limitations cited as major reason for Covid-19 bank rush)

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That said, halting dividend payments may not go down well for many retail and institutional investors, who rely on bank dividends for regular income. Banks like Zenith and Guaranty Trust have a good history of consistent dividend payment with attractive yields which is a major attraction for many shareholders.

IMF advises banks to suspend dividend payment

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CFOs of FUGAZ and their 3-year performance record

CFO is to ensure that the company is highly profitable so that no matter how high it’s share price might be, if listed on the floor of the Nigerian Stock Exchange, it would still be termed undervalued.

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Among many executive positions in an organisation, the Chief Financial Officer (CFO) is sometimes considered to be one of the most strategic, and rightly so. When the firm in question is an operator in the financial services sector, then the office becomes even more critical to be thrown to just anyone.

Besides being responsible for fiscal operating results, the CFO is the senior executive directly responsible for managing the financial strategy, decision and actions of a company. He tracks cash flow, analyses the company’s financial strengths and weaknesses, and fill in for the lapses, reducing operations costs and increasing income.

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In other words, we can say that the job of the CFO is to ensure that the company is highly profitable so that no matter how high it’s share price might be, if listed on the floor of the Nigerian Stock Exchange, it would still be termed undervalued.

This article looks at the CFOs in Nigeria’s tier one banks, their profiles, their last 3 years records and projections for 2020.

READ ALSO: Billionaire investors in the Nigerian Insurance space (2)

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Ugo Nwaghodoh, Group CFO, United Bank for Africa Plc (UBA)

Ugo is a seasoned financial analyst and accountant with experience spanning assurance, advisory, financial control, financial modelling & programming, strategy and business transformation, investor relations, corporate restructuring, risk management, mergers & acquisition, business integration and project management.

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He has been the Group CFO at United Bank for Africa Plc since 2011, managing the performance, financial control, portfolio investment and investor relations among others.  Before then he was the Divisional Head, Financial Control and Investor Relations between 2008 and 2011.

He also had a brief stint as Group Chief Compliance Officer, and as Head of Special Project (Corporate Mergers). He was Head, Performance Management, Strategy and Business Transformation for about 3 years, where he drove the cost optimization initiatives of the bank, and engaged in policy formulation.

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Before UBA, he had worked as Manager, Assurance and Business Advisory Services with PriceWaterhouseCoopers Nigeria for 8 years, and 2 years in Kenya on secondment.

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He has a degree in Accounting and Finance, and MSc in Finance & Management from the Cranfield School of Management, Cranfield University.

He is a fellow, Institute of Chartered Accountants of Nigeria (FCA).

His last 3 years performance

UBA, under Nwaghodoh’s watch, had a fairly unfavourable 2018 as cost to income ratio increased from 57.8% in 2017 to 64% in 2018, and profit after tax almost remained the same increasing only slightly from N78.59 billion in 2017 to N78.60 billion in 2018.

The bank, however, staged a comeback in 2019 with cost to income ratio reduced to 62.7% while profit after tax increased by over N10 billion to N89.08 billion.

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Share price however declined from N10.3 in 2017 to N7.7 in 2018 and N7.15 in 2019, probably not Nwaghodoh’s fault though, since this happened across most financial services institutions. In addition, the bank also paid N30 million as fine to the CBN in 2018, a situation which led shareholders to cry out to Apex bank for what was termed ‘unfair penalties’.

Nwaghodoh, however, has a beautifully designed investor relations page to his credit, with answers to Investors FAQs, analysts reports and credit ratings for the bank, shareholders information and news among others.

Oluseyi Kumapayi, CFO Access Bank Plc

Kumapayi joined Access Bank in 2002. Before then, he was with the First City Monument Bank (FCMB) where he served as Financial officer.

Kumapayi got his MBA from the Kellogg school of management, Northwestern University, and  has been severally endorsed in Corporate finance, risk management and business strategy, financial analysis, mergers and acquisitions, financial modelling and investment banking.

He also attended the INSEAD course on Risk Management, London Business School (LBS) High Performance People Skills program, Euromoney, Assets and Liability Management, Strategy Master Class and Mergers and Acquisition. He is a Certified Chartered Accountant.

Now let’s look at the bank’s three years performance under Kumapayi. 

For the cost to income ratio, Access bank has remained profitable over the last three years, but now the question would be how profitable?

Cost to income ratio reduced from 72.40% in 2017 to 65.30% in 2018 showing that the bank’s strategies succeeded in reducing the ratio of cost to income and making more profits. However, 2019 recorded a negative progression to 68.7%.

This is in spite of the fact that profit after tax grew significantly to N97.5 billion in 2019, from N94.98 billion in 2018 and N53.6billion in 2017.

Overall, we can say the indices point to greater progress made in 2018, compared to 2019.

Note also that the merger between Access Bank and Diamond bank started in 2018, running through 2019 before it was eventually sealed with the launching of the new Access logo, and the slogan ‘access more’. The role of a CFO in a merger of this magnitude is ourightly priceless, given that not all merger talks result in a successful merger of assets, shareholders, and even management team.

There is also the acquistion of controlling equity interest in Transnational Bank Kenya Plc, which Access Bank undertook in October 2019.

Share price at last day of the year progressed from N10.45 to N6.8 to N10, showing that share price dropped most in 2018, which interestingly happened to be the most profitable year so far. In the same 2018, Access bank paid N20 million in fines to the Central Bank of Nigeria.

Kumapayi has kept the investor relations page of the bank’s website duly updated with annual financial reports, investor news, credit ratings, upcoming events, shareholders information and news.

 

Oyewale Ariyibi, CFO, First bank of Nigeria Plc

Oyewale Ariyibi, CFO, FBN Holdings

Before becoming Chief Financial Officer at FBN Holdings Plc, Oyewale Ariyibi had worked with Transnational Corporation of Nigeria Plc (Transcorp) as Chief Finance Officer, and at Standard Chartered Bank, Nigeria as Country Financial Controller.

He has a cumulative 23 years experience in banking and financial services, business assurance, tax management, business process review and consulting across several institutions.

He has been certified in areas such as capital raising, tax planning and cost management, operational risk management, strategic and corporate planning, compliance and business assurance amongst others, and is a Fellow of the Institute of Chartered Accountants of Nigeria (FCA), Associate of the Chartered Institute of Taxation (ACIT) and Certified Pension Institute of Nigeria (ACIP).

So what has he done with First Bank in the last three years?

Profit after tax has been on an increase, from N47.78 billion in 2017 to N59.74 billion in 2018 and N62.09 billion in 2019. This is laudable given that 2016/17 was not the best times for the Nigerian economy.

Share price has however dropped from N8.8 in 2017 to N7.95 in 2018 and N6.15 in 2019.

This may be no fault of his given that he has managed to keep the cost to income ratio stable at 80.17% in 2017, 80.15% in 2018, but it increased slightly in 2019 to 81.31%.

Note that the FBN Holdings also paid a fine of N32.65 million to the CBN in 2018.

This trend can be considered worrisome not only because FBN holdings has the highest cost to income ratio among the tier one banks, but because it is the only of the five banks where cost to income ratio did not reduce over the last 3 years.

This probably explains why shareholders earned 0.25 dividends per share in 2017, 0.26 in 2018 and 0.38 in 2019, the least dividends declared by any of the top banks.

The investors’ relations page of the bank’s site is a bit unclear and it is not easy to access needed information, but once a site visitor gets past the initial confusion, one can see shareholders information, corporate governance reports, financial highlights, unclaimed dividends, press releases and news.

Ariyibi might need to ask some pointers from his colleagues in other tier one banks.

Recently, Ariyibi led engagements with regulators towards FBN’s intention to divest its 65% holdings in FBN insurance Limited.

 

Mukhtar Adam, CFO Zenith Bank Plc.

Mukhtar Adam was appointed Chief Financial Officer (CFO) of Zenith Bank in 2018, and is currently the Group Head, Financial Control and Strategic Planning Group of the bank.

Before this, he was the bank’s Deputy CFO, and sometime before 2014, he headed the Financial Reporting, Tax Management and Strategic Planning Groups, overseeing the entire Zenith Group’s financial reporting.

Adams worked in Financial Services Group of the Nigerian and Ghanaian practices of PricewaterhouseCoopers (now PwC), as a Senior Consultant, before joining Zenith Bank in 2007.

Adam holds a PhD in Finance from the Leeds Beckett University (UK); M.Sc. (Finance – Financial Sector Management) from University of London’s School of Oriental and African Studies, (UK); MBA (Finance) from the University of Leicester (UK) and B.Ed. Social Sciences (Economics and Management) from the University of Cape Coast (Ghana).

Many feathers for one man’s cap, we must agree!

He also holds a Diploma in International Financial Reporting Standards (IFRS) from the Institute of Chartered Accountants in England and Wales (ICAEW).

He is a member of the Institute of Chartered Accountants of Nigeria (ICAN), Chartered Institute of Taxation of Nigeria (CITN), and Institute of Chartered Accountants of Ghana (ICAG).

So, what has Mukhtar Adam achieved for Zenith bank since he took over from Stanley Amuchie in 2018?

It’s been three progressive years for this tier one bank as cost to income ratio has continued to decline from 52.70 in 2017, to 49.30 in 2018 and further down to 48.8% in 2019. Commendably, this progression is not just a result of cutting down operation costs, but increasing income.

Profit after tax for 2017 stood at N173.79 billion and increased to N193.42 billion in 2018 and spiked further to N208.84 billion in 2019.

Whatever magic wand Adams holds over the bank, it must be working well because among the five tier one banks, Zenith bank has consistently had the highest profit after tax for the past three years.

Share price of the bank also moved from N25.6 in 2017 to N23.05 in 2018 and further down to N18.6 as at last day of 2019.

However, this cannot be counted against him as share price is subject to a whole range of extraneous factors. In the 2018, the bank paid N10 million fine to the CBN.

With his input, the bank also maintains a detailed investors relations page with press releases, credit ratings, corporate governance reports and financial updates. In addition to the BOT which pops up to help guide a visitor through the page and answer inquiries, Adams also appears to be one CFO who spells out his key financial strategies on all aspects of the banks operations, on the investors relations page.

Adebanji Adeniyi, CFO, GT Bank

Adeniyi became CFO of GT bank in 2013.

Adeniyi has been certified competent in risk management, portfolio management, risks and investments, Operational dynamics and Associated Risks among others, and has over two decades of professional experience.

He gained his early experience from notable companies including PricewaterhouseCoopers, and Arthur Andersen (now KPMG).

Adebanji Adeniyi, Chief Financial Officer, GT Bank

His banking experience comes from his stint with Lead Bank Plc, and his years at GT Bank. He is a Fellow of Institute of Chartered Accountants (FCA), and also holds a MBA.

So, what has he been up to in the last 3 years.

For Guaranty Trust Bank Plc, cost to income ratio reduced from 38.2% in 2017, to 37.2% in 2018, and to 36.1% in 2019

In addition to its gradual improvement, GT bank has maintained the best cost to income ratio among the top banks.

The bank has also maintained a high profit after tax after Zenith bank. GT Bank recorded N170.47 billion profits after tax in 2017 and this increased to N184.64 billion in 2018 and N196.86 billion in 2019.

Like other banks, however, share price has dropped over the years – from N40.75 in 2017 to N34.45 in 2018 and N29.7 in 2019. In addition to this, GT Bank also received a heavy penalty of N24 million in 2018 from the CBN.

In terms of profitability, both for the bank and for investors, Adeniyi is getting it right.

The bank also has a well laid out investors relations page detailing corporate and financial information, outlooks and insights, upcoming events and investors news, shareholders information and annual reports.

Kudos!

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Endeavor honours founders of Kobo360

Fixing Africa’s supply chain is clearly important for commerce on the continent.

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Kobo360

Endeavor, a leading global movement for high-impact entrepreneurship, has honoured the founders of Kobo360, Obi Ozor and Ife Oyedele as Endeavor Entrepreneurs.

Kobo360 is a digital logistics platform that uses big data and agile technology to reduce friction and improve efficiency in the African logistics ecosystem.

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Managing Director, Endeavor in Nigeria, Gihan-Mbelu, explained that the company is excited to welcome Kobo360 into Endeavor’s network which includes some of the world’s most exciting scale-up entrepreneurs and most experienced mentors and investors.

She said, “Fixing Africa’s supply chain is clearly important for commerce on the continent, and Kobo360’s rapid growth over the past 3 years is evidence that the company’s valuable services are in critical demand. Obi and Ife are inspiring founders and their relentless focus on scaling Kobo360 serves as an inspiration to high-impact entrepreneurs everywhere.”

Meanwhile, since launching in 2017, Kobo360 has surpassed several milestones, including a $30 million Series A in August 2019.

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“It’s an honour to be joining this global network of high-impact entrepreneurs and to have Endeavor recognise our efforts to transform Africa’s logistics sector using technology. As entrepreneurs, we wanted to turn African problems into African opportunities.

“Focusing on logistics, Ife and I started Kobo360 to not only fix the inefficiencies that exist, but to build opportunities for the businesses we serve and most importantly, the hundreds of thousands of truck drivers across Africa. This is a fundamental milestone in Kobo360’s journey; our Global Logistics Operating System [GLOS] will revolutionize supply chain across emerging markets, Ozor, Co-founder & CEO of Kobo360.

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