Skye Bank grew 81% in pre-tax profit in the first quarter of this year. Could you unpack those results?
Skye Bank had always taken the route of organic growth strategy until 2013 when we decided to acquire one of the nationalized banks offered for sale by the Asset Management Corporation of Nigeria (AMCON). Consequently, in line with regulatory requirements, the Bank submitted an Expression of Interest (EoI) for the acquisition of Enterprise Bank Limited, for which Heritage Bank Limited was announced the preferred bidder on September 11, 2014. Skye Bank later emerged as the preferred bidder for Mainstreet Bank Limited (MBL) on October 3, 2014 after a rigorous bidding process. The Bank effectively took over the management of MBL on December 18, 2014. The acquisition of MBL has repositioned and transformed Skye Bank to a more commercially inclined institution. Following the takeover of MBL, both institutions were fully integrated in June 2015 and are now running on one of best and most efficient banking applications in Nigeria; Flexcube 12.0. The speedy and smooth integration was a result of past investments in best-of-class IT infrastructure made by the Bank in the last two years. With the acquisition, the Bank's branch network grew from 259 to 469 branches in Nigeria, and about 70 branches have been slated for closure as part of the Bank's ongoing branch rationalization exercise. This network made Skye Bank the 4th largest bank by branch network. The Bank is already reaping the benefits of this acquisition. For instance, owing to the boost in business activities, we recorded 81% growth in pre-tax profit in 1Q2015. In absolute terms, we posted a pre-tax profit of NGN6.2 billion and NGN10.7 billion period 1Q2015 and 2Q2015, respectively.
What were some of the benefits of the Mainstreet Bank takeover, and how did this provide you with opportunities like agricultural lending?
In terms of service quality and turnaround time, MBL had not been a great brand prior to our acquisition. However, MBL has a pool of loyal institutional and corporate customers who remained with the bank despite its status as an AMCON-owned bank. This loyalty is also reflected in its customer base, which did not reduce significantly prior to AMCON take-over. MBL also has a competitive advantage in agriculture lending, which accounted for 12.6% and 16.9% of its total loans in 2012 and 2013 respectively. NPL ratio on agriculture loans was very negligible, at 0.01%. We expect to leverage MBL's success story and footprint in agriculture business and ensure our complete coverage and presence in all the 36 states of Nigeria.
Do you have plans to reach beyond Gambia and Sierra Leone? And will future growth come from brick-and-mortar expansion or other means?
As one of the market leaders in e-business in Nigeria, we provide top-notch and tailored e-solutions for our corporate and public sector clients. For instance, the Bank's internet banking platform has robust functionalities that meet the needs of our corporate and growing middle-income class customer. Similarly, in our quest to provide secured e-channel platforms for our esteemed customers locally and internationally, we recently received three International Certifications from the UK Trade and Investment. The three awards include ISO 20000 IT Service Management, ISO 27001 Information Security Management, and ISO 22301 Business Continuity Management. We have invested in the creation of ATM galleries and e-centers as opposed to brick-and-mortar branches. We also have a business office in Dublin that acts as an investment company. We plan to use it as an access point for clients looking for projects in Nigeria.
How has Skye Bank responded to the Forex restrictions that were recently put in place?
Skye Bank ensures strict compliance with regulatory directives. However, we expect certain developments to occur as a consequence of the foreign exchange restriction. There are major issues for correspondent banks, but the full impact on the banking industry is still not clear. In Skye Bank, some of our transactions will be affected, as we need to clear the backlog in a bid to maintain the Bank's credibility and reputation. On the other hand, institutions with huge investments in certain lines of trade like rice importation may have issues with meeting their banking obligations. This may lead to higher credit impairment and lower earnings from such transactions. Although the policy has its own advantages, we will continue to evaluate the impact of the policy on our overall business. This puts us in a position to consider alternative forms of generating income.