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Polaris Bank: A Tale Of Financial Woes And Acquisitions

Strategic Capital Investment Limited (SCIL) recently paid N50 billion to acquire Polaris Bank, which has had a “checkered” history marked by numerous financial problems and acquisitions.

When it was still known as Mainstreet Bank, the bank was acquired by the now-defunct Skye Bank for N126 billion in October 2014 after it won the Asset Management Corporation of Nigeria (AMCON) bid.

After the acquisition, however, Skye Bank’s journey was short-lived as it encountered difficulties, which prompted the Central Bank of Nigeria to take control of it and remove its board in July 2016. Timothy Oguntayo, the managing director, the deputy managing director, and some other management personnel all left as a result of this.

The central bank proceeded to pump as much as N800 billion into the bank in a bid to resuscitate it. “The Central Bank of Nigeria and the federal government have invested close to N800 billion in this bank, at some point, it had to be seen to be owned by the CBN until we find investors that will be willing to pay a fair price for the business”, CBN governor, Godwin Emefiefe, said at the time.

The measures were not enough to save the bank as the CBN revoked the operating license of Skye Bank in September 2018 and changed its name to Polaris Bank. The bank was consequently transferred to AMCON.

On why the Bank’s license was revoked, the CBN said it noted that the result of its examinations and forensic audit of the bank revealed that the bank required urgent recapitalization, as it could no longer continue to live on borrowed times with indefinite liquidity support from the CBN. Not even shareholders were able to recapitalize it.

Besides the AMCON, the NDIC was also at work, at the time, to protect depositors’ funds. This, the NDIC did, adopting the bridge bank option, which allows unhindered operations of the bank while searching for would-be investors and addressing other fundamental issues.

Bank

The managing director of Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim revealed that it decided on the bridge bank option because it was the most effective and efficient way to resolve the Skye Bank crisis without much loss to the fragile financial system and the economy generally. He further revealed that the bridge bank option saved the country from contagious risks that could have led to a gap in the financial system, loss of more than 6,000 jobs, and disruption of banking services in the 300 branches of the defunct bank.

As all of this was happening, The Nigerian Stock Exchange (NSE) placed the shares of Skye Bank Plc on suspension in September 2018. The bourse made this known in a press release posted on its website.

The move, according to the statement, was taken following CBN’s revocation of Skye Bank’s banking license and in accordance with the Exchange’s rules on suspension of trading in listed securities.

The NDIC revealed In August 2019, in its annual report, that following the establishment of Polaris Bank Ltd, a total of N949.6 billion deposits from 5.4 million depositors were safeguarded with over 6,000 jobs in order to ensure the continuity of banking operations in 227 branches nationwide.

With the latest acquisition by Strategic Capital Investment Limited (SCIL), perhaps there will be an end to this perpetuity but the blurry identity of the actors in the SCIL cocoon does not suggest that. How experienced are they in relation to running a bank and how much financial muscle can they muster to keep it going as a competitive going-concern?

Acquisition Timeline At A Glance

  • October 2014: Mainstreet Bank sold by AMCON to Skye Bank for N26 billion
  • July 2016: CBN sacks Board of Skye Bank
  • September 2018: CBN revokes Skye Bank’s operating license
  • September 2018: The Nigerian Stock Exchange suspended trading on Skye Bank shares
  • CBN/AMCON change Skye Bank’s name to Polaris Bank
  • October 2022: Polaris bank sold to Strategic Capital Investment Limited

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