Nine Months 2014 Results Presentation. to Investors and Analysts

Transcription

1 Nine Months 2014 Results Presentation to Investors and Analysts 1

2 DISCLAIMER This presentation is based on Skye Bank PLC s ( Skye Bank or the Group or the Bank ) unaudited IFRS results for the period under review. All results are prepared using IFRS. Skye Bank has obtained some information from sources it believes to be credible. Although the Bank has taken all reasonable care to ensure that all information herein is accurate and correct, it makes no representation or warranty, express or implied, as to the accuracy, correctness or completeness of the information. In addition, some of the information in this presentation may be condensed or incomplete, and this presentation may not contain all material information in respect of Skye Bank. This presentation contains forward-looking statements which reflect management's expectations regarding the Group s future growth, results of operations, performance, business prospects and opportunities. Wherever possible, words such as anticipate, believe, expects, intend, estimate, project, target, risks, goals and similar terms and phrases have been used to identify the forward-looking statements. These statements reflect management's current beliefs and are based on information currently available to the Bank's management. Certain material factors or assumptions have been applied in drawing the conclusions contained in the forward-looking statements. These factors or assumptions are subject to inherent risks and uncertainties surrounding future expectations generally. Skye Bank cautions readers that a number of factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully and undue reliance should not be placed on the forward-looking statements. For additional information with respect to certain of these risks or factors, reference should be made to the Bank's continuous disclosure materials filed from time to time with the Nigerian banking regulatory authorities. The Bank disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 2

3 OUTLINE Operating Environment Skye Bank Overview Financial Highlights Risk Management Key Initiatives Strategies 3

4 DOMESTIC ECONOMY GDP growth accelerated to 6.54% in 2Q14 from 6.21% in 1Q14. The growth in the GDP was largely due to a rebound in oil production. GDP Growth Rate 6.8% 6.2% 6.5% Nigeria s annual inflation rate dropped from 8.3 percent in September as against 8.5 percent in August % 3Q13 4Q13 1Q14 2Q14 The exchange rate as at the end of the quarter stood at N155.75/$, N163.90/$ and N170.00/$ at the RDAS, interbank and parallel market segments of the foreign exchange market against N155.73/$, N162.80/$ and N168.00/$, respectively, at the beginning of the period. Inflation Rate 8.5% The external reserves fell by 0.15% m/m and 13.6% y/y to US$39.56bn in September according to latest data from the CBN. The reserves had stood at US$39.52bn in August 2014 and US$45.66bn in September 2013 respectively. The Federal Government recently proposed $78 as the benchmark price for a barrel of crude oil, 0.50 cents higher than the $77.50 per barrel approved by the National Assembly in the 2014 budget and fixed the exchange rate at N160 per dollar for the 2015 national budget. This was however scaled down to $73 on November 15 on the backdrop of persistent fall in crude oil price. Oil production projection for 2015 was set at million barrel per day, lower than million bpd programmed for this year. 8.0% 8.0% 8.2% 7.8% 3Q13 4Q13 1Q14 2Q14 3Q14 FX Rate Interbank N/$ Q13 4Q13 1Q14 2Q14 3Q14 Sources: CBN, NBS, NNPC 4

5 CURRENT BANKING LANDSCAPE The Central Bank of Nigeria (CBN) reintroduced N65 charge after the 1 st three withdrawals on Remote-On-Us and this took effect September 1, CBN on released guidelines for the operation of International Money Transfer Services (IMTS) on September 26, The allowable limit for outbound transfers has been increased from $2,000 to $5,000 per transaction AMCON announced preferred bidders for two of the nationalized banks that had been put up for sale:-heritage Bank for Enterprise Bank and Skye Bank for Mainstreet Bank Industry/Regulatory Updates Bankers Committee established a virtual registry containing moveable assets of loan seekers in the micro, small and medium enterprises ( MSMES ) sector in the country. The Collateral registry is to enable money deposit banks customers register their assets which would become their collateral and serve as security for the loans under the Central Bank of Nigeria ( CBN) MSME financing for which a sum of N220 billion was recently launched by the apex bank. Redemption of AMCON Bonds on October 31 New Circulars Limit on Tier 2 Capital as a ratio of Tier 1 to 25% Limit on Foreign borrowings by banks to 75% of shareholders funds 5

6 CURRENT BANKING LANDSCAPE CONT D The implementation of Basel II Accord for Capital Adequacy computation is to commence in October 2014 Deposit Money Banks are gearing up to invest over $3.623bn (about N598billion) in the power sector.this investment is in addition to the $13bn total banking. loans to the sector in 2013 for the electricity distribution companies and $1.7bn for the power generation firms. Outlook In line with the World Economic outlook, Sub-Sahara Africa is expected to grow by 5.1% in 2014 and 5.8% in IMF noted that despite the poor security conditions and declining oil production earlier in the year, the Nigerian economy remains resilient. However the EVD(Ebola Virus Disease) outbreak will have negative impact in the economies of Guinea, Liberia and Sierra Leone. The banking industry is expected to grow significantly in 2015 as most banks seek to raise more capital to enhance business. MPC meetings scheduled for November may take a bullish view on private sector CRR and also review the band on exchange rate in view of continuous fall in oil prices 6

7 OUTLINE Operating Environment Skye Bank Overview Financial Highlights Risk Management Key Initiatives Strategies 7

8 OVERVIEW OF SKYE BANK Background Skye Bank was incorporated as Prudent Merchant Bank Limited in December 1989 and commenced operations in May 1990 as a merchant bank Its name was changed to Prudent Bank Limited in 2000 following an approval by the Central Bank of Nigeria ( CBN ) for the conversion of the bank to a commercial bank and commenced operations as a commercial bank in 2001 Further to the consolidation reforms in the banking sector, Prudent Bank Plc merged with Eko International Bank Plc, Bond Bank Plc, Reliance Bank Limited and Cooperative Bank Plc to form Skye Bank Plc in 2006 Skye Bank has 259 branches in Nigeria and foreign subsidiaries in Sierra Leone, Guinea and The Gambia Countries with Banking Presence Total Assets Ratings Key Highlights Nigeria (259), Sierra Leone (2), The Gambia (2) and Guinea (2) N1.1trillion No of Accounts 2.49 million ATMs / POS 658 / 8,605 GCR (A-), Agusto & Co (Bbb), S&P (B/ Stable/B) Branch Network Total Equity N116billion Staff Head Count 2,699 South West South East Market Capitalisation N35.2billion (Sept 30, 2014) Branches 154 Branches 22 Auditors PricewaterhouseCoopers South South North West Branches 32 Branches 16 North East North Central Branches 10 Branches 25 8

9 SKYE BANK PLATFORM AT A GLANCE Leading Tier II Bank Skye Bank is a Tier II bank in Nigeria Over a trillion Naira in total assets Designated by the Central Bank of Nigeria ( CBN ) as one of the Systematically Important Banks Diversified business model including corporate, commercial and retail banking, with increasing focus on the retail banking segment Wide Geographic Presence & Strong Distribution Platform 259 Branches, 658 ATMs and 8,605 PoS terminals across the country Strong revenue collection and electronic payment channels for both public and private sectors Strong presence in the core markets of Lagos and the South West Region of Nigeria Recent Massive Upgrade of IT Systems The first bank in Africa to deploy Oracle Flexcube 12.0 core banking system Data Centre remodelled to become robust and scalable Strengthened network and network security infrastructure Fully automated loan creation, scoring and rating system New Management Team With Clear Strategy New GMD/CEO assumed leadership on August 1, 2014 Revitalised strategy to bolster commercial and retail banking franchise and expand customer base 9

10 OUTLINE Operating Environment Skye Bank Overview Financial Highlights Risk Management Key Initiatives Strategies 10

11 FINANCIAL HIGHLIGHTS N billions unless otherwise indicated 3Q 14 3Q 13 FY 13 Revenue Drivers Gross earnings Non interest revenue Loan book (net) Customer deposits Loan to deposit ratio Net interest margin N97.1 N17.6 N576.0 N % 7.3% N102.0 N15.3 N545.4 N % 7.8% N127.3 N22.0 N549.9 N % 6.7% Earnings & Profitability Profit before tax Profit after tax Earnings per share Return on average assets Return on average equity N12.3 N9.9 N % 11.1% N14.5 N11.6 N % 14.7% N17.1 N16.0 N % 14.1% Operational Efficiency Operating expense Cost to income ratio Cost of funds N % 4.3% N % 5.3% N % 4.7% Asset Quality NPLs NPL ratio Coverage ratio Cost of risk N % 115% 1.7% N % 108.7% 1.1% N % 127.7% 2.2% Capital adequacy ratio 16.4% 17.3% 20.2% Capital Strength Tier I ratio Tier II ratio 13.7% 2.7% 14.4% 3.4% 17.2% 3.0% 11

12 GROUP COMPREHENSIVE INCOME HIGHLIGHTS 3Q 14 3Q 13 % Change YoY FY13 Gross Earnings 97, ,044-5% 127,340 Interest Income 79,507 86,756-8% 105,314 Interest Expense (30,373) (35,667) -15% (43,616) Net Interest Income 49,134 51,089-4% 61,698 Non-Interest Income 17,619 15,287 15% 22,026 Loan Impairment Charges (7,517) (4,641) 62% (12,677) Operating Income 59,236 61,735-4% 71,047 Operating Expenses (46,903) (47,173) -1% (53,911) PBT 12,333 14,562-15% 17,136 Income tax (2,467) (2,912) -15% (1,113) PAT 9,866 11,650-15% 16,023 Figures in N'Mn, Dec IFRS 12

13 GROUP BALANCE SHEET OVERVIEW 3Q 14 3Q 13 FY13 Assets: Cash and Balances with CBN 160, , ,056 Due from other Financial Inst. 94,373 65, ,323 Loans and advances 576, , ,858 Investment Securities 212, , ,347 Property, plant and Equipment 30,805 30,990 29,523 Others 34,111 29,328 65,529 Total Assets 1,107,868 1,080,820 1,116,636 Equities and Liabilities: Deposits 801, , ,323 Due to other Financial Inst , Borrowings 125, , ,685 Other Liabilities 64,323 92,003 36,068 Equity 116, , ,415 Total Equities and Liabilities 1,107,868 1,080,820 1,116,636 Figures in N'Mn, Dec IFRS 13

14 REVENUE GENERATION Operating Income (NGN, Bn) Operating Income (% Mix) % 3% 2% 4% 32% 21% 23% 26% % 76% 75% 70% FY12 FY13 9M13 9M14 FY12 FY13 9M13 9M14 Others Net Commission & Fee Income Net Interest Income Others Net Commission & Fee Income Net Interest Income Gross Earnings (NGN, Bn) Gross Earnings (% Mix) % 17% 15% 18% % 83% 85% 82% FY12 FY13 9M13 9M14 FY12 FY13 9M13 9M14 Interest Income Non Interest Income Interest Income Non Interest Income 14

15 MARGINS Net Interest Income (NGN, Bn) Net Interest Margin % % 7.4% 6.6% 7.3% M13 FY13 1Q14 1H14 9M14 9M13 FY13 1Q14 1H14 9M14 Cost of Funds Yields on Assets 5.2% 4.7% 4.8% 4.3% 4.3% 13.9% 11.4% 13.1% 11.2% 12.0% 9M13 FY13 1Q14 1H14 9M14 9M13 FY13 1Q14 1H14 9M14 15

16 FUNDING AND DEPOSIT Customer Deposits (NGN, Bn) Deposit % Mix 11% 11% 12% 11% 11% 15% 14% 15% 15% 15% 32% 31% 27% 31% 31% Comments The Bank currently has a stable deposit mix % 45% 46% 43% 43% 9M13 FY13 1Q14 1H14 9M14 9M Q14 1H14 9M14 Demand Term Domicilary Savings Funding Structure Q314 Deposits by Business Segments Q314 2% 9% 10% 6% Deposits Borrowings Equity 16% 27% Corporate Commercial Tier II Capital SME/Retail 72% Other Liabilities 57% 16

17 OPERATING EXPENSES 40.2 Operating Expenses (NGN, Bn) % Cost-to-Income Ratio 74.6% 71.6% 70.3% 63.5% Comment Improved CIR QoQ on the back drop of cost containment initiatives which is also reflected in the marginal drop in operating expenses FY12 FY13 9M13 9M14 9M13 FY13 1Q14 1H14 9M14 Full impact of initiatives to reflect in 2015 Operating Expense % Mix Breakdown of Other Costs 9M13 9M14 60% 68% 79% 73% 6% 11% 9% 7% 10% 10% 40% 32% 21% 27% FY12 FY13 9M13 9M14 Staff Cost Other Costs 75% Admin & General Expenses AMCON NDIC Depreciation 74% Admin & General Expenses AMCON NDIC Depreciation 17

18 EARNINGS AND PROFITABILITY PBT Trend (NGN, Bn) PAT Trend (NGN, Bn) FY12 FY13 9M13 9M14 FY12 FY13 9M13 9M14 ROaE Trend ROaA Trend 12.2% 14.1% 14.7% 11.1% 1.3% 1.5% 1.4% 1.2% FY12 FY13 9M13 9M14 FY12 FY13 9M13 9M14 18

19 LOAN GROWTH AND DIVERSIFICATION % 79.3% 75.4% 69.6% 72.4% H13 9M13 FY13 1Q14 1H14 Gross Loans LDR 80.0% 78.0% 76.0% 74.0% 72.0% 70.0% 68.0% 66.0% Loan Portfolio by Sector 8% 4% 4% 2%6% 5% N589.9Bn 21% 9% 5% 2% 5% 8% 7% 3% 8% 3% Oil & Gas Upstream General Commerce Power Retail Building & Construction Education & Educational Services Real Estate Maritime Oil & Gas Engineering Ser Manufacturing Hospitality Public Sector Telecommunication Oil & Gas Downstream Professional Services Comments A diversified portfolio mix which reflects the various sectors maintained Moderate Loan volume with a sustainable LDR Others Loan Portfolio By Business Segment FY13 Loan Portfolio By Business Segment 9M14 23% N572.8Bn 45% Corporate Commercial 29% N589.9Bn 43% Corporate Commercial SME/Retail SME/Retail 32% 27% 19

20 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% ASSET QUALITY Asset Quality Metrics 4.3% 127.7% 128.2% 108.7% 3.1% 3.2% 98.0% 115.2% Comments NPL ratio remains below the regulatory threshold of 5% as a result of improved lending practices M13 FY13 1Q14 1H14 9M14 NPLs Provisions Impairment Charge 2.4% 2.2% 2.0% 1.7% 1.7% 1.7% 1.1% 9M13 FY13 1Q14 1H14 9M14 NPL Ratio Cost of Risk Coverage Ratio Strengthened Enterprise-Wide Risk Management framework with investment in human and material resources in all areas of risk. NPLs By Sector FY13 NPLs By Sector - 9M14 6% 12% 12% N18.0Bn 31% Maritime Manufacturing General Commerce Oil & Gas Retail 34% 3% 5%5% 3% 7% N12.0Bn 22% Maritime Manufacturing General Commerce Oil & Gas Downstream Retail Transportation Aviation Deliberate policy of high impairment charge to ensure even spread through the year. 6% 22% 4% 7% Transportation Aviation Others 11% 9% 2% Real Estate Building & Construction Others 20

21 CAPITAL ADEQUACY & LIQUIDITY Risk Weighted Assets and CAR (NGN, Bn) Components of Capital (NGN, Bn) % 20.2% 18.5% 16.4% FY12 FY13 1H14 9M14 FY12 FY13 1H14 9M14 Tier I Tier II RWA CAR Components of Liquid Assets Liquidity Ratio FY13 9M % 39.8% 32.0% 41.1% 42.2% 19% 19% N281.6Bn 27% 35% 19% 39% 9% N295.3Bn 33% Cash & Others T.bills Bonds Placements 9M13 FY13 1Q14 1H14 9M14 21

22 OUTLINE Operating Environment Skye Bank Overview Financial Highlights Risk Management Key Initiatives Strategies 22

23 RISK MANAGEMENT Adequate Provisioning and Impairment Charge Provisions : Improved Loan Approval Process N13.9billion YTD N22.9billion YE 2013 N26.9billion 9M13 Adequate Provisioning and Impairment Charge Improved Loan Approval Process NPLs : N12.0billion YTD N18.0billion YE 2013 N24.8billion 9M13 Robust Internal Rating Model The Bank uses the Kalypto Rating software to determine the quality of its credit Robust Internal Rating Model Strengthened Management Governance Structure Intensified Efforts on Recovery Intensified Efforts on Recovery Recoveries: N1.1billion YTD N805million YE 2013 Strengthened Management Governance Structure An Organogram highlighting the various responsibilities and reporting lines within the risk management function is maintained 23

24 OUTLINE Operating Environment Skye Bank Overview Financial Highlights Risk Management Key Initiatives Strategies 24

25 KEY INITIATIVES Consolidating on a Group-wide IT transformation project, with focus on process automation Fully automated loan creation, scoring and rating system Branch revamping to improve customer experience Selective branch expansion into specific areas that support our low-cost deposit strategy Deploying stringent control measures to effectively manage operational cost Re-engineered risk management processes to be more proactive, efficient and effective, whilst supporting transactions Centralised all branch back-office functions expected to increase operating efficiency Realigning funding structure (with the introduction of structured medium to long term debt) to improve asset / liability matching, net interest margin and profitability Adopted a holistic approach towards performance management changed KPIs of both business development and support staff to raise overall productivity index 25

26 MAINSTREET BANK LIMITED (MBL) ACQUISITION The Rationale: Strategic Expansion of Branch Network Retail & Commercial Banking Focus MBL has 201 branches and 9 cash centres, of which 54 (26%) are in the South-East and South- South 28% of the 1.9million customers of MBL are located in the 2 regions, 2 nd only to Lagos & South- West which has 37% Skye Bank has relatively low presence in the 2 regions Uptake of MBL branches would save significant potential capital outlay on branch development Retail and commercial banking are core business focus areas of MBL The 2 segments contributed 78% of deposits, 36% of loan, and 18% of PBT of MBL in 2013 Deposit Mix of MBL: Savings 21%, Demand Deposits 43% and Term & Domiciliary 36% MBL s business focus aligns with our current business strategy Agriculture Lending MBL has had a remarkably successful history in lending to the agricultural sector Agriculture contributed 12.6% and 16.9% of loan portfolio in 2012 and 2013 respectively, only 2 nd to General Commerce sector NPL ratio on agriculture loan is very negligible, at 0.01% Synergy for increasing our agricultural lending foothold, from 0.71% of loan portfolio Loyal Customer Base 1.9million customers who had remained with MBL in spite of its status Significant number of retail, commercial, and corporate customers are still active Opportunity to upscale the transaction level of existing customers and exploit uncharted courses Deposit Mobilization MBL has successfully ran the Direct Sales Agents (DSAs) structure over the years We began the implementation of the DSA structure in Q Opportunity for synergy for low-cost funding and significant impact on the bottom line Skye Bank Plc Investor and Analysts Presentation November

27 MAINSTREET BANK LIMITED (MBL) ACQUISITION Cont d Pro-forma Financial Statements SKYE BANK PLC SKYE BANK & MBL STATEMENT OF FINANCIAL POSITION CONSOLIDATED PROJECTED 2014 DEC YTD =N='000 ASSETS Cash & short term funds 181,967,397 Due from banks & other financ ial institutions 112,400,341 Loans & advanc es 578,232,361 Advanc es under financ e leases 28,627,603 Investment sec urities 332,758,767 Asset c lassified as held for sale 190,554 Investments in subsidiaries 2,980,120 Prepayment, ac c rued inc ome and other assets 31,763,678 Deferred tax assets 132,619 Intangible assets - software 5,325,824 Property, plant & equipment 44,229,957 Goodwill 46,664,217 TOTAL ASSETS 1,365,273,437 LIABILITIES Deposits & other ac c ounts 931,786,274 Due to Loc al Banks & other financ ial institutions 13,806,875 Othe liabilities 285,318,871 TOTAL LIABILITIES 1,230,912,020 NET ASSETS 134,361,418 EQUITY AND RESERVES 134,361,418 Total Equity & Liabilities 1,365,273,437 Ac c epts, Bonds, Guarantees and other obligations: 161,792,150 TOTAL ASSETS + CONTINGENTS 1,527,065,588 Skye Bank Plc Investor and Analysts Presentation November

28 MAINSTREET BANK LIMITED (MBL) ACQUISITION Cont d Pro-forma Financial Statements STATEMENT OF COMPREHENSIVE INCOME INCOME STATEMENT 2014 DEC YTD =N='000 GROSS EARNINGS 167,464,198 Interest Inc ome 135,945,171 Interest expense (45,767,079) Loan impairment c harges (9,876,519) Net Interest Income After Loan Impairment Charges 80,301,572 Exc hange earnings 9,864,277 Commmissions and fees 16,757,194 Investment inc ome 310,089 Other inc ome 4,587,467 Net Operating Income 111,820,599 Personnel expenses (25,717,338) Deprec iation expenses (6,100,461) Other operating expenses (55,896,362) Total Operating Expenses (87,714,160) Profit Before Tax & Other Comprehensive Income 24,106,439 Skye Bank Plc Investor and Analysts Presentation November

29 MAINSTREET BANK LIMITED (MBL) ACQUISITION Cont d Integration Plan Operating Status The two entities, Skye Bank Plc and MBL, will operate as distinct organizations until 30 June, 2015 Integration Timeline Plans to execute a seamless integration of MBL into the existing Skye Bank on June 30, 2015 (at the latest) Extensive review of Human Capital Management, ICT, Risk Management, Operations, Compliance & Control, etc, at MBL Corporate Restructuring Review of MBL s structure considering its 9 subsidiaries in diverse sectors Maximizing shareholders value will be the main objective in decision to maintain existing Bank-stand-alone structure or a HoldCo Branding Branding of new entity will reflect Skye Bank s Mission and Vision Statements and Core Values Execute a comprehensive brand audit of the emerging entity Branch Network Leverage increased branch network for improved financial services to customers Ensure optimal branch location by eliminating location overlaps of the two entities as currently constituted Skye Bank Plc Investor and Analysts Presentation November

30 OUTLINE Operating Environment Skye Bank Overview Financial Highlights Risk Management Key Initiatives Strategies 30

31 STRATEGIES Retained focus on Retail and Commercial Banking segments (recent deployment of Direct Sales Agents) Blend of organic and inorganic growth. Acquisition of Mainstreet Bank will enable us explore identified business opportunities Focus on exceptional Customer Service Use of ICT for processing and scalable distribution channels Mobilization of low cost deposits through retail and commercial outlets Improved business activities in the remaining quarter of the year with emphasis on enhanced earning potential Creation of quality risk assets 31

32 COMMERCIAL BANKING OPPORTUNITIES Agriculture Automobile Sector Reforms Services Manufacturing Building & Construction General Commerce 32

33 GUIDANCE & FORECAST Performance Metrics FY 2014 Cost of Funds 4.5% Net Interest Margin (NIM) 8% Capital Adequacy Ratio (CAR) 16% Returns on Average Equity (RoAE) 15% Returns on Average Assets (RoAA) 1.9% Cost to Income Ratio 65% Loan Growth 8% Deposit Growth 10% Cost of Risk 2% NPL Ratio <5% 33

34 THANK YOU 34