CBN extends support to Skye Bank for another year

The Central Bank of Nigeria (CBN) has extended its guarantees to Skye Bank for another year just as it considers the bank’s recapitalisation proposal, the commercial lender has revealed.

The bank, which is recognized as one of the nation’s systemically important banks because of the size of total deposits it holds after it acquired Mainstreet Bank, indicating an increase of its capital ratio to 16 per cent, which represented the industry average.

The apex bank shored up the commercial bank last year with a 100 billion naira ($328 million) capital injection, after sacking its top management for failing to meet minimum capital requirements. It then appointed a new management team.

The bank said it had recovered N60 billion in bad loans, closed some branches and sold four subsidiaries to boost capital in the past year.

Skye’s problems started after it used short-term funds to buy local lender Mainstreet Bank in 2014 but failed to raise fresh cash. It was in talks with shareholders and investors last year to raise 30 billion naira, but suspended the plans when weak oil prices hit capital markets and drove foreign investors away.

“The bank continues to require assistance from central bank and government as it repairs the damage inflicted on the institution in the past and charts a sustainable path forward for the bank,” Skye bank said in a statement.

It said it had reached restructuring agreements with many of the chronic bad debtors resulting in improved payments and prospects of future recoveries, it said in a statement.

Skye shares rose more than 3 per cent on Tuesday; and were up 16 percent this year, after last year’s 68 percent plunge.

The bank, which posted a pre-tax loss in 2015, said it had submitted its 2016 accounts for approval.

The bank said it has appointed advisers to guide it on a recapitalisation process and that it has identified various options with proposals being considered by the central bank.