Skye Bank Set to Dispose Foreign Subsidiaries

• Skye Bank Set to Dispose Foreign Subsidiaries

Skye Bank has said it is seeking to dispose of majority stakes in its businesses in Gambia, Guinea, and Sierra Leone in a bid to ease pressure on capital.

With this move, the bank seeks to relinquish its international licence and become a National Bank.

National banks require a capital adequacy ratio (CAR) of 10 per cent as against 15 for international banks.

The Central Bank of Nigeria (CBN) replaced the bank’s management on July 4th, citing liquidity, capital adequacy, and asset quality issues. The bank’s ratios were well below regulatory requirements as at full year 2015. Its non-performing loan (NPL) ratio was at about 13 per cent (regulatory maximum: 5%), capital adequacy at about12 per cent (regulatory minimum: 15%), loan-to-deposit ratio at about 98 per cent, and liquidity ratio at about 22 per cent (regulatory minimum: 30%).

Therefore, in order to improve liquidity the CBN had injected about N100 billion (one-year tenor) into Skye since the change in management

We expect that an expansion of risk weighted assets on the back of the depreciation of the naira may have put further pressure on CAR which may have declined significantly below the 12 per cent reported for full year 2015, analysts at CSL Stockbrokers Limited stated.

From our discussion with a top management official, we understand that management had communicated the intention to divest off its foreign subsidiaries since May and the process is nearing completion. The bank is currently auditing half year numbers which will give a more current assessment of the bank’s capital ratio.

Furthermore, CSL Stockbrokers Limited stated that while they realise that the bank still has liquidity and asset quality issues, they viewed the move by the bank to divest from its foreign subsidiary “as a practical option to begin with.”