Banking sector big brands league expands

Sometimes if a company name is carefully and diligently chosen it could reflect on the business. The character, combining with other factors also propels the business. Fast growing Skye Bank is a product of former Prudent Merchant Bank.  The name has been working for the founders of the bank as they set their eyes on sky as their limit.

Symptomatic of the managers’ historical practice and with focus to remain a force in the banking sector, Skye Bank recently acquired Mainstreet Bank. It will be recalled that Prudent Bank which was licensed in 1989 had in 2006 acquired four other banks – EIB International Bank, Bond Bank, Reliance Bank and Co-operative Bank. The acquisition which strengthened the bank and its spread led to its change of name to Skye Bank Plc.

The second tier bank is further fortifying itself, inching gradually to the top with the acquisition of Mainstreet Bank, former Afribank. Analysts say the managers of Skye are daily rehearsing their lesson on competition and dominance. To make impact and compete among big boys, businesses need to get their approaches right. To compete you must have  flexibility and enthusiasm. “There are challenges involved, but with good preparation and determination you can be successful in big-brand dominated markets” an expert said.

The  acquisition of former Afribank which used to be the  fourth largest bank after Union Bank, First Bank and UBA will obviously elevate the status of Skye Bank and give it more spread, if maintained will give more visibility to Skye Bank. It is no doubt that this is a strategic growth plan by Skye Bank.

Reacting to the development, Skye Bank is reported to have said the acquisition of Mainstreet Bank was part of its strategic plan for growth. The Bank intends to leverage its wealth of experience from the successful integration of five banks to drive efficiency, increase market share and ultimately ramp up stakeholder value from the acquisition of Mainstreet Bank.

According to Skye Bank, the acquisition will avail it of many benefits, including cost leadership, business optimisation, and greater ability to offer business convenience to its teeming retail and commercial customers, with a combined branch network of over 450, across all the states of the Federation.

Skye Bank Plc has given details of how its acquisition of Mainstreet Bank Limited will positively impact its business operations and enhance the achievement of its strategic objectives and goals.

The bank further said the acquisition would help deepen its penetration of the South East and South South regions where it is currently less represented, explaining that out of Mainstreet Bank’s 201 branches and nine subsidiaries, 26 per cent or 54 branches are located in the two regions.

“These two regions also accounted for 28 per cent of Mainstreet Bank’s over 1.9 million customers, second only to Lagos with 37 per cent. This clearly shows that the integration of Mainstreet Bank will enable us make valuable in-roads into these two regions without the need to incur huge expenditure had we remained a single entity as Skye Bank”, the top lender explained.

Besides, Skye Bank explained that the acquisition would bring valuable synergies from the mutual focus areas of commercial and retail banking of the two entities in a larger Skye Bank. The bank noted that its focus is on retail and commercial banking, which is also the main focus area of Mainstreet Bank Limited.

It is said that to show its readiness,  within four days of the announcement of Skye Bank as the preferred bidder by AMCON, the bank effected payment of the mandatory 20 per cent before the expiry of the one week given.

The emergence of Skye Bank, Cedar and Fidelity Bank as preferred, first and second  reserve bidders, respectively, resulted from a rigorous and competitive bidding process, coordinated for AMCON by Barclays Africa Group Limited and Afrinvest West Africa Limited (Financial Advisers) and Banwo & Ighodalo (Legal Advisers).

In Third Quarter of this year, Skye Bank result showed moderate growth in some performance indices. It recorded a Profit before tax of N12.3billion during the period which represents a quarter on quarter growth of 33 per cent%.

With gross earnings of N97.1billion, the bank was able to reduce its interest expense by 15 per cent Year on year to close at N30.3billion compared to N35.7billion as at September 2013. This is in line with its operational strategy of increasing the volume of low cost funds in its deposit portfolio.

With the acquisition which will create a few big brands in the banking sector and as Skye Bank races to the front, the competition among the  big ones will become interesting.