News Column

Cutting Cost - Skye Bank Eyes Alternative Power Source

May 23, 2014

Kingsley Ighomwenghian And Bamidele Ogunwusi



In the face of shrinking margins and more challenging operating environment, the management of Skye Bank Plc, on Thursday in Lagos, spoke of plans to implement cost cutting measures as part of efforts to continuously guarantee adequate returns on investment to shareholders.

Fielding questions during a pre-Annual General Meeting of the bank, the Group Managing Director/Chief Executive designate, Timothy Oguntayo, told newsmen that Skye Bank working at driving its operating expenses from 67 per cent in the 2013 financial year, to 60 per cent by current year-end.

One way the bank hopes to achieve this, he said, is by cutting off middlemen in their value-chain and going directly to the service providers.

As a way of tackling the biggest challenge of cost reduction, he continued, is looking at alternative source of power supply, thereby significantly bringing down cost-to-income.

The bulk of the cost, he continued, came from regulatory fees and charges, such as the 0.3 per cent contribution to the Asset Management Corporation of Nigeria (AMCON) by banks and the deposit insurance premium paid to the Nigeria Deposit Insurance Corporation (NDIC) by banks.

The fees hit banks hard, he said, because the Central Bank of Nigeria (CBN) deducted 0.5 per cent of total assets of each bank from source at the end of the 2013 financial year, instead of the pre-agreed 0.3 per cent. He noted that this affected the projections of various banks, because the 0.5 per cent deduction ought to have started at the end of current year, just as the CBN also debited the banks for the 2010 contribution to the sinking fund.

Oguntayo, who takes over from Kehinde Durosinmi-Etti on August 1, 2014, assured that Skye Bank submitted a bid for one of the three banks nationalised in 2011 by the CBN, and is still very interested, having been shortlisted as one of the five to undertake due diligence. He said the shortlisted investors are expected also to submit a final bid within the next two weeks.

Oguntayo said Skye Bank's strength is in oil and gas and the real estate sectors of the economy, but noted that it has not abandoned lending to the agricultural sector. He said agric lending is fraught with a lot of risks, hence the decision by most banks to play cautiously in the sector.

The bank, he said, has so far facilitated N15 billion loans to customers under the Commercial Agriculture Credit Scheme (CACS).

In the maritime sector, the MD-designate lamented delays in the implementation of the Cabotage Vessel Financing Fund (CVFF) has been hampered by official delays, adding that CVFF applications have been lying with the Nigerian Maritime Administration and Safety Agency (NIMASA) for over two years, awaiting approvals.

The Skye Bank boss also said plans to rise $150 million in Tier II capital from development finance institutions in Europe are at advanced stage, having concluded the deal for $50 million before end of June, while the balance is expected before end of July.

"The Tier I and II capital raising project is progressing as planned in 2012 annual general meeting we had approval to raise $50 billion Tier 1 capital and $100 million Tier II capital, we have gone far in Tier II aspect and Tier I too we are progressing".


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: AllAfrica