The new Polaris bank

Most readers who are familiar with this column will be aware that I have sustained an intermittent commentary on developments at the now defunct Skye Bank since the Central Bank of Nigeria (CBN) intervened in its affairs on July 4, 2016.

I wrote in my first intervention on the subject titled “The Skye Bank Challenge” published on August 3, 2016 that “Skye Bank had some inherent potential…it had some relative post-consolidation success and had grown its industry relevance, brand positioning, branch network, ICT channels competences and franchise…” but this potential had been undone as “corporate governance and risk management standards were somewhat eroded” due to the “unrestrained ambitions” of “powerful shareholders”. However I categorically endorsed the appointment by the regulators of Messrs. M.K Ahmad and Tokunbo Abiru as Chairman and GMD/CEO respectively of the bank. As I wrote at the time, “…if there was any team that could be sent in the circumstances to stabilize, reposition and grow Skye Bank, it is without doubt, M. K Ahmad and Tokunbo Abiru.”

Happily Ahmad and Abiru did not betray my confidence and those of the regulators. As I noted in my last article on the topic, “The Skye Challenge: A Renewed Mandate”, on June 13, 2018 “…two years into their mandate, the CBN-appointed board of Skye Bank has normalized the institution, restored its prudential stability, embraced proper risk management and corporate governance and most importantly restored customers’ and depositors’ confidence, earning a well-deserved renewal of their mandate” Ahead of the second year anniversary of their appointment, the CBN extended the tenure of Ahmad, Abiru and their colleagues on the board, in effect passing a vote of confidence on their efforts to stabilize the institution, and has now appointed them to steward the new Polaris Bank, the bridge bank established by CBN and AMCON to take over the assets and liabilities of Skye Bank.

In my last two articles on Skye Bank, I focused on final resolution of the bank’s capital deficiency to ensure sustainability-in “The Skye Bank Challenge: An Update” published a year after the CBN intervention (July 19, 2017), I wrote that “…beyond stabilization, the bank would still require support from government and the regulator in putting the bank in a recapitalization-ready mode. While management may have succeeded in restoring stability, structural solutions beyond the current internal capacity of the bank will be required to cure the bank’s significantly eroded capital base in order to make it possible for investors to acquire the bank and provide capital for future viability”. I repeated the point in my conclusion in “The Skye Challenge: A Renewed Mandate” earlier referred to above, “…all stakeholders, especially the management, regulator and government must now focus on a final resolution of the recapitalization imperative within the management’s extended tenure”

That is exactly what has now happened! The establishment of Polaris Bank by CBN and AMCON after revoking the operating license of Skye Bank Plc offers a “final resolution” of the significant capital shortfall in Skye and provides an opportunity for long term sustainability of the new entity. It should be noted that given that Skye Bank was a large, “systemically important” bank, it was in the public interest to protect its depositors and indeed the stability of the financial system, especially in the context of a difficult political transition and an economy that continues to struggle with growth below 2% after an unprecedented economic recession!

The injection of N786billion into Polaris Bank by the regulators takes care of the “hole” in the capital of Skye Bank and allows rational investors to invest in the bridge bank. It is of course the responsibility of agencies of government (EFCC, Police, CBN, AMCON, NDIC etc.) to hold any persons responsible for the initial capital deficiency to account for their actions. The work done by the CBN-appointed management of Skye Bank by way of accounting and forensic audits would facilitate such reckoning if anyone is truly committed to seeing that happen! I have seen comments in the media by some clearly mis-informed persons questioning the retention of the outgoing management of Skye Bank in the new Polaris Bank-as I have mentioned earlier, it was the actions of the ownership board of Skye Bank which was removed by CBN in 2016 that led to the problems in the bank and the CBN-appointed management of Ahmad and Abiru have actually rescued the bank and put it on a footing that now enables final resolution. They deserve our commendation!Unfortunately the victims of this affair are the retail investors in the bank whose investment has been wiped off due to no fault of theirs, while the larger investors may have extracted “rents” far beyond the value of their equity by other means!

The new Polaris Bank starts on a good footing-with 370 branches, over 1,000 ATMs and other digital channels, a large retail customer base across the country and a strong management…and it is now fully-capitalised to the CBN minimum regulatory capital threshold of N25billion! I am quite confident given the retention of the leadership of M. K Ahmad and Tokunbo Abiru that the sky may be the limit for Polaris Bank.

Opeyemi Agbaje