In spite of all the challenges of 2008, the bank recorded impressive growth in all its performance indices, Lucky Fiakpa writes

The 2008 financial report of Skye Bank Plc is one result the Board of Directors would be proud to present to shareholders at the bank's forthcoming Annual General Meeting. The bank recorded impressive growth in all its performance indices.

As a result, it is proposing for dividend payment the sum of N6.95 billion, translating to 60 kobo per share, which is 165 per cent increase from the N2.6 billion or 35 kobo per share paid the previous year. This is one aspect of the result that will gladden shareholders' minds.

Having watched their share values plummet to an all time low during the year, no thanks to the global financial meltdown, an impressive dividend pay out is one piece of news the shareholders would love as compensation for their losses in the capital market.

Operating Performance

In spite of all the challenges posed in 2008, the bank's recorded 88 per cent growth in gross earnings moving from N41.72 billion posted the previous year to N78.28 billion during the year in review. Profit before tax stood at N21.69 billion, a whopping increase of 172 per cent on the N7.97 billion recorded in 2007.

The bank posted an after tax profit of N16.02 billion during the year as against N5.88 billion recorded the previous year, an increase of 172 per cent. Total assets and contingents closed at N1.02 trillion, representing an increase of 98 per cent over N516.50 billion posted the previous year.

Total deposit rose by N233.12 billion, up 87 per cent from N267.09 billion in the year ended September 2007 to N500.21 billion in the review period. The improvement seen in the topline equally reflected in the overall performance of the bank.

Financial Ratios

From the financial ratios and from the table given below, 2008 performance was indeed a good outing for Skye Bank. The profit margin, which measures how much of the gross earnings was retained as net profit moved up impressively from 14 per cent the previous year to 21 per cent. This means that as against 14 kobo retained as net profit from every N1.00 earned as gross earnings the previous year, the margin moved up to 21 kobo for every N1.00 earned this year, an increase of seven kobo.

This is quite encouraging. The reason may have to do with cost management during the year. This shows that costs were well managed during year.

Return on shareholders' funds was however not very impressive. The ratio dropped from 27 per cent the previous year to 23 per cent during the year under review. This was probably due to the quantum leap in the size of the bank's shareholders' funds during the year. The huge funds raised during the year may not have been fully deployed before the close of the financial year. That probably explains the drop in the ratio.

However, return on assets employed was good. As against two percent returned in 2007, the ratio inched up marginally to three percent during the year. From the look of things, the bank made good use of all assets at its disposal. Return on assets measures how efficient assets were deployed in a given year.

Total asset/gross earning ratio which measures how many times assets were turned over in the cause of the year also inched up from nine percent to 10 percent during the year.

The good outing of the bank this year notwithstanding, there is still room for improvement.

Strategies

One strategy adopted by Skye Bank during the year was to try and carve a niche for itself as a bank that can be counted upon in big ticket financing. Shortly after the banking consolidation, it embarked on real estate development, a programme that eventually saw it listing Skye Shelter Fund on the Nigerian Stock Exchange.

Having successfully entrenched itself in that area, the bank quietly moved on as ship acquisition fund provider to those willing to invest in the shipping business.

Only last month, the bank managing director and chief executive officer, Mr. Akinsola Akinfemiwa, stated that about 60 per cent of all new ships acquired in Nigeria in the last two years were bankrolled by Skye Bank. This, indeed, is a feat considering the fact that government has not been able to fund its ship acquisition fund programme successfully.

Akinfemiwa who disclosed this in a chat with maritime reporters shortly after the formal opening ceremony of a bonded terminal owned by the National Clearing and Forwarding Agency (NAFCA) but sold to Jorotom International Agency Limited by the Bureau for Public Enterprises (BPE) three years ago, under the national privatization programme, described the maritime industry as vital to sustainable development of the Nigerian economy.

The Skye Bank boss said his bank's full understanding of the sector informed the reason why it has supported it tremendously over the years. Although, he did not state the exact amount the bank has put into the industry so far in financing acquisition of new vessels, some reports have it that not less than N10 billion may have been made available to some investors in the sector.

"I can not give you the figures off hand. But those in the department charged with that responsibility can give you the details. The resources we have made available to those in this sector are enormous. I am very sure no other bank in Nigeria has done as much as we have done in this sector and we are not relenting.

"That is why we are here for NAFCA formal opening ceremony. From the beginning, we supported Jorotom International Agency Limited to bid for NAFCA. We are happy that today the company has succeeded in taking over the company. That is one of the reasons we are here in full force. You can see my chairman, Deputy Managing Director, Directors and other top officials of the bank are here", he said.

As part of its contribution to developing the economy, the Managing Director stated that his organisation is involved in project financing of several sectors of the economy, including oil and gas, telecommunications, aviation, and shipping.

He explained that the bank had financed the acquisition of ships by Nigerian businessmen to enhance their level of participation in Cabotage, presently dominated by foreign players.

Ever courageous and innovative, the floating of the Skye Shelter Fund, SSF, by Skye Bank is the first of its kind by any bank in Nigeria since the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) began sensitization for the listing of REIT in the market. The NSE had earlier made moves to deepen the capital market through derivatives when it began the sensitization of operators on REIT.

The Fund a close-ended Real Estate Investment Trust (REIT) scheme is intended as a platform for pooling resources together from various classes of investors interested in exploring investment opportunities in real estate business but either lack sufficient capital to stand alone or lack the time and or expertise to act on its own for a profitable management.

A REIT is a company that buys, develops, manages and sells real assets. It is a business that raises money by selling shares to the public, much in the way as an Investment Trust; and owns property or provides mortgage lending to developers. Its main business activities are restricted to the generation of income cash flows to be passed on to investors who enjoy exceptions from paying Federal Government income tax, subject to meeting certain legislative requirements.