Nigerian Regulator Ousts Skye Bank Board Over Capital Concerns

LAGOS, Nigeria, Capital Markets in Africa: Nigeria’s central bank replaced almost all the members of Skye Bank Plc’s board for repeatedly failing to meet minimum thresholds on liquidity and capital adequacy ratios.

Chief Executive Officer Timothy Oguntayo and three of the bank’s eight other executives quit, along with Chairman Olatunde Ayeni and seven other non-executives, Governor Godwin Emefiele told reporters in Lagos on Monday. Alhaji Ahmad was named as new chairman and Adetokunbo Mukhail Abiru, a former Harvard Business School graduate who headed investment banking at First Bank of Nigeria Ltd., was appointed CEO.

“Skye Bank is not in distress and remains a healthy bank in the system,” Emefiele said. Regulators didn’t want prudential and capital adequacy levels to worsen to the point where depositors funds are at risk, spurring them to act, he said, adding that banking system remains healthy, he said.

The steps taken by the central bank may be a sign of other stresses building in the system, according to Exotix Partners LLP. Lenders are struggling to make money and extend credit with unpaid loans on the increase as Africa’s largest economy heads for a recession. Skye Bank has failed to report earnings since combining its operations with a bank that had to be rescued by regulators in 2009.

‘Potential Stress’
“It’s a surprise because up until now, the central bank had always said the banking system was OK,” said Esili Eigbe, head of West African research at Exotix in Lagos. “Uncertainty around asset quality is a big issue. And this could be a signal of potential stress in the system. I wouldn’t be surprised if other banks’ stock prices take a hit on the back of this.”

Earlier, Skye Bank plunged the most in more than six months to lead losses inNigerian stocks. The share price slid 9.5 percent, the most since Dec. 15, to 95 kobo by the close in Lagos for a market value of 13.1 billion naira ($46 million). That extended losses this year to 40 percent, the worst performer among the nation’s banks.

For a past story on the outlook for Nigerian banks, click here.

“The former leadership of the bank voluntarily resigned their positions in order to pave the way for a new team to further the new strategic direction of the bank in the retail and commercial business space,” the Lagos-based lender said in a separate statement distributed by the Nigerian Stock Exchange. “The challenge of accelerating growth in the new strategic direction becomes more urgent and compelling, given the poor performance that we recorded in the 2015 financial year end.”

Skye Bank, the nation’s eighth-largest lender by assets, was fined 4 billion naira by the Central Bank of Nigeria last year for delaying transfers on government deposits. By March the lender was forced to delay its annual financial statements as it struggled to complete the audit necessary after it combined its operations with Nigeria’s Mainstreet Bank in June last year.

Source: Bloomberg Business News