‘Allures of Mainsteet Bank’s acquisition’

Skye Bank to complete merger process by Q3

WITH the successful acquisition of Mainstreet Bank and the unanimous approval received from shareholders for the takeover of the bank on Monday, investors’ who stake their fund in Skye Bank Nigeria Plc are set for better returns on investment in the current financial year.

Already, the bank had announced that it is targeting an increase in return on equity (ROE) by 13.17 per cent at the end of 2015 financial year.

The bank is also projecting to grow its Capital Adequacy Ratio (CAR) by 17 per cent within the same period.   
 
The Group Managing Director/Chief Executive Officer, Skye Bank, Timothy Oguntayo disclosed that net interest income is expected to rise by seven per cent in the present financial year adding that deposit mobilisation is being pursued vigorously to ensure that it generates fund to meet the target.

Oguntayo, who spoke during the bank’s pre yearly general meeting held in Lagos at the weekend, described the bank’s acquisition of Mainstreet Bank Limited as a strategic intent to accelerate growth and leverage opportunities in retail banking across the country.

Specifically, he disclosed that the management of the banks, with full support from the board have taken far reaching measures towards attaining a seamless and efficient integration of two financial institutions, adding that the merger process is scheduled to be completed by mid-year 2015 financial years.   

He said the bank had completed the integration of its operation with Mainstreet Bank by 50 per cent.

The Skye Bank boss also spoke of plans to ensure that the bank’s customers imbibe the electronic banking culture to enjoy a pleasant banking experience at all times and across all channels.

On the acquisition of Mainstreet Bank Limited, Oguntayo said it would make Skye Bank Nigeria’s fourth largest bank by branch network, with the total number of branches standing at 469 and 887 automated teller machines (ATMs).

According to Oguntayo, the combination of the two banks was expected to deliver significant operational synergies resulting in resource optimization and enhancement of shareholder value; as well as create opportunities to deploy e-channels products and capabilities to clients of Mainstreet Bank.

He further explained that increased balance sheet size of the combined entity would provide an enhanced capacity to provide credit to larger corporate and retail clients, adding that full integration of Mainstreet Bank would be achieved in June this year. 

“Firstly, there are locations Mainstreet is present which we are not, especially the South-East and some other areas. Therefore, having presence in some of those areas will help us to tap from the opportunities there. And most of those areas are actually retail banking related areas; this will help us in to mobilise low-cost deposits.

“For the customer base, the addition of the two entities will give us a total of four million customers and most of these customers are coming with deposits that have been stable over a period of time and this will be adding value to Skye Bank,” he stated.

He explained that Mainstreet bank is also a big player in terms of lending to agricultural sector, adding that Skye Bank would harness and reap from the opportunities in the agricultural sector which would result to increased revenue for the bank.

On whether the integration will lead to the rationalisation of branches, the Skye Bank boss said, “We have just taken over Mainstreet Bank and we don’t want to be in a haste to rationalise branches.

“But there are some that are obvious. For instance, if we are located on this side of the road and Mainstreet Bank is also on same side of the road. Unless the two branches can justify their existence, it will be a waste of money running two branches and two operating expenses. You know in Nigeria every bank has two generators. So those are costs that we would try and avoid.”

He further explained that the bank has concluded arrangement to raise additional tier one capital of N30 billion during the third quarter of 2015 to bolster its capacity to explore business and maintain an efficient capital adequacy ratio . 

Oguntayo said Skye Bank would intensify its customer acquisition drive across retail segments as well as optimize deposit mix through mobilization of low cost funding to bring down its cost of doing business . 

He said the bank had gone into strategic partnership with the International Finance Corporation to strengthen its retail banking capacity and framework to underscore the importance attached to the new business focus .

He said the essence of raising the additional fund from the market is to enable the bank to borrow and finance both investors and bank’s business.                                           

He added, “being the final year for the implementation of the strategy and in view of our recent acquisition of MBL, we have commenced the process for developing a new three-year strategic plan, which would extend the strategic objectives to accommodate additional corporate growth initiatives, with a view to deriving optimum value and synergy from the MBL acquisition and identifying plans for the future”. 

Also speaking at the meeting, the Chief Executive Officer (CEO) of Proshare, Nigeria’s leading market intelligence portal, Olufemi Awoyemi, said, the acquisition will clearly improve the industry positioning of Skye Bank to between 7th and 8th, depending on the parameter(s) applied.

He added that the newly acquired competences will allow the bank achieve cost leadership, business optimisation, stronger profit and greater ability to offer business convenience to retail and commercial customers across all geographies .

Meanwhile, Shareholders of the bank, on Monday, ratified the acquisition of Mainstreet Bank Limited.

The ratification was the highpoint of the court ordered extra ordinary general meeting held immediately after the bank 9th yearly general meeting held in Lagos on Monday .

According to the bank, during the consideration of the proposed scheme of external restructuring which deals with the acquisition and how to consolidate the operations of both banks, the Chairman of the bank, Tunde Ayeni, disclosed that the Securities and Exchange Commission (SEC), had given its clearance to the scheme .

According to Ayeni, after the receipt of the scheme clearance from the SEC, an application was filed at the Federal High Court which directed the meeting of the shareholders of the banks to be convened and the scheme be presented for their consideration and approval.

Explaining the benefits and effects of the scheme which gives legal seal to the acquisition, the Group Managing Director/Chief Executive Officer of the bank, Timothy Oguntayo, said the proposed restructuring would create a platform where significant synergies could be obtained for the benefits of the shareholders, employees, customers and the economy as a whole.

He further identified other benefits of the restructuring to include the opportunity to reposition the enlarged Skye Bank as a tier 1 bank within the Nigerian financial services space based on the expected benefits arising from economies of scale and scope.

“A business combination of this nature will potentially lead to revenue enhancements and cost savings for the enlarged Skye Bank with a wider customer base”, he added.

The Skye Bank boss explained that the scheme would provide an additional buffer to the existing capital base of the bank in the event of subsequent recapitalization directives by the CBN, as well as presenting an opportunity to create a stronger risk asset portfolio for the enlarged bank.

The shareholders also approved the appointments of four new executive directors by the board of the bank.   

The new Executive Directors are Bayo Sanni, Executive Director, Lagos Commercial Banking; Idris Yakubu, Executive Director, Abuja and Northern Region; Mrs. Markie Idowu, Executive Director, Technology and Service Delivery Channels; and Mrs. Abimbola Izu, Executive Director, Corporate services.  

Announcing the new board appointments, Oguntayo, expressed confidence that the new directors would further strengthen and reposition the bank for improved performance. He congratulated them on their appointments which he said would take effect in June and July 2015.