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Skye Bank Acquires Mainstreet Bank

Skye Bank Acquires Mainstreet Bank

Banking has got another giant, with the  Asset Management Corporation of Nigeria (AMCON) at the weekend transfer ownership of Mainstreet Bank to Skye Bank Plc.

The transfer took place after a completion meeting where AMCON divested its interest and transferred  ownership of the bridge bank to  Skye Bank, which paid 100 per cent of the acquisition value.

It was reported last week by The Nation, a local newspaper, that the clearance of the acquisition by the Securities and Exchange Commission (SEC), the apex capital market regulator that has statutory control over mergers and acquisitions.

At a short handover held at AMCON headquarters in Lagos, at which the directors of Mainstreet Bank and Skye Bank were present, AMCON handed over ownership and praised Skye Bank for emerging the preferred of the over 29 bidders “in the highly competitive and transparent process that took over a year to complete”.

Skye Bank was lauded “for its tenacity and doggedness in pursuing the acquisition with all sense of seriousness and professionalism”.

AMCON also praised the out-going Board and Executive Committee members of Mainstreet Bank for “their dedication and service to Nigeria in steering and piloting the affairs from what it used to be, to profitability”.

Between October 3 and October 31, Skye Bank paid both the initial 20 per cent mandatory deposit and completed the 80 per cent balance well ahead of the November 3 deadline for the 100 per cent acquisition of Mainstreet Bank, which has been described by several analysts and financial commentators as a ground-breaking acquisition.

While addressing the executive members and management team of Mainstreet Bank at the bank’s headquarters after the handover by AMCON in Marina, Skye Bank Group Managing Director Mr. Timothy Oguntayo, assured the staff and customers of good times ahead. He solicited the co-operation of all in ensuring a seamless transition.

Analysts have been unanimous in that the acquisition, operationally, is a game-changer for Skye Bank, given possible synergies and the impact on the balance sheet and profitability of the bank. It will also increase the bank’s market position in the industry and at the stock market.

Analysts predict that the potential impact will be big on Skye Bank’s reach and asset size. Mainstreet Bank has nine subsidiaries and a large distribution network comprising 201 branches across 35 of the 36 states and the Federal Capital Territory, Abuja. It has nine cash centres and 205 Automated Teller Machines (ATMs).

Skye Bank, with dominant operations in the Southwest, is also banking on Mainstreet Bank to deepen its penetration of the South-East and South-South regions where it is less represented. Some 26 per cent or 54 branches of Mainstreet Bank’s network are located in the two regions. These two regions also account for 28 percent of Mainstreet Bank’s over 1.9 million customers, second only to Lagos with 37 percent.

With smooth and seamless integration, Skye Bank will make valuable in-roads into these two regions without the need to incur huge expenditure. The acquisition will bring valuable concurrence and synergy from the mutual focus areas of commercial and retail banking of the two entities. Skye Bank focuses on retail and commercial banking, which is also the main focus areas of Mainstreet Bank.

The audited report and accounts of Mainstreet Bank for the year ended December 31, 2013, showed that retail and commercial banking contributed 78 per cent, 36 per cent and 18 per cent of total deposits, total loans and profit before tax. Mainstreet Bank’s savings and demand deposits accounted for 21 per cent and 43 per cent of the deposit mix, which also demonstrated its focus on these two segments. A second generation leader, Mainstreet Bank has a large pool of loyal institutional and corporate customers, which, in spite of its status as an AMCON-owned bank, ensures that the bank retained almost its two million customers after the takeover.

Also, Mainstreet Bank Limited has a history of successfully managing agricultural loans, which accounted for 12.6 per cent and 16.9 per cent of its loan portfolio in 2012 and 2013, second only to “general” sector. Analysts have said Mainstreet Bank’s expertise in managing agric loans made its non-performing loan ratio very negligible at 0.01 per cent, where Skye Bank saw a significant opportunity to improve its expertise in this area, and therefore raise its market share in the agriculture sector. This will position Skye Bank very strategically to partner with, and participate in the Federal Government’s short and medium term planned strategic investments and budgetary allocation to the agriculture sector.

Besides driving growth with its inorganic strategy, Skye Bank, organically, has been witnessing a notable upturn in its performance.  The bank recorded a pre-tax profit of N12.3 billion on a top-line of N97.13 billion in the third quarter. Key extracts of the interim report and accounts of the bank for the nine-month period ended September 30, 2014 showed modest growths in some performance indices. The pre-tax profit of N12.3 billion represented a quarter-on-quarter growth of 33 per cent. With gross earnings of N97.1 billion, the bank was able to reduce its interest expense by 15 percent year-on-year to close at N30.3 billion compared with N35.7 billion as at September 2013.

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