Skye Bank's public offer closes today

Lanre Oyetade, Lagos - 20.02.2008

THE N50 billion hybrid offer of Skye Bank Plc closes today, paving the way for both old and new investors to make last- minute buying in into the bank, which has continued to create value for investors.

Skye Bank is shopping for N50 billion through offer for subscription of 2.231 billion ordinary shares at N14.00 each; and 1.50 billion shares by way of rights to existing shareholders at N12.50 each.

From the 1.785 billion ordinary shares of the offer that had been underwritten, the bank hopes to preferentially allot 446.139 million units at N14 each to identified investors.

The offer opened on Monday, January 14, 2008. According to the offer prospectus, the offer proceeds “will be used to deepen Skye Bank’s retail infrastructure in Nigeria, strengthen subsidiaries’ capital base to support business growth, expand Skye Bank’s capital, network of branches and fund its working capital.”

Specifically, Skye Bank hopes to utilise N17.34 billion or 36.20 per cent representing the lion’s share of the offer to beef up its working capital on a continuous basis.

This is to be followed by N15.476 billion or 32.3 per cent to be invested in the bank’s subsidiaries in a bid to make them contribute better to the group’s top and bottom-line growth in the next two years.

The subsidiaries include underwriting arm–Law Union & Rock Plc in which Skye Bank owns 51 per cent; and wholly owned subsidiaries–Skye Financial Services Limited; Skye Trustees Limited; Skye Mortgages Limited; and APEX Integrated Technical Limited.

There is also a plan to expand the bank’s branch network, within the next 36 months, with 21 new outlets proposed for Lagos, in addition to enhancing information technology infrastructure with N4.12 billion or 8.60 per cent of the net offer proceeds.

The directors forecast that using the offer proceeds, the bank’s earnings income is expected to grow first to N78.738 billion, up by N39.371 billion or 100 per cent from the N39.367 billion reported for the financial year ended September 30, 2007.

The bank’s earnings stream is expected to improve to N99.75 billion in the 2008 financial year and then N115.57 billion by 2010. Profit after tax is also expected to feel the impact of the new capital within the period, growing from N5.51 billion in 2007 to N16.981 billion initially and N19.774 billion
a year later, before growing further to N21.883 billion by the corresponding period of 2010. From this amount, Skye Bank’s directors have projected a dividend per share of 60 kobo, up from 35 kobo.

At the end of the 2009 full year, the bank hopes to recommend the payment of 70 kobo dividend per share and thereafter, 80 kobo the following year.

Fielding questions at a media parley in Lagos recently, Mr. Tokunbo Durosinmi-Etti, deputy managing director of the bank explained that the amount being sought was arrived at after considering the quantum of business the bank is currently undertaking.

The offer, he noted, is being undertaken because the board and management believes that “there is further need to grow and consolidate the gains so far recorded within the last two years of operation.

There is a lot of demand in the economy for banks to support growth and development in terms of project finance, consumer lending and so on.”

The DMD noted that amount being sought is just enough for the kind of business the bank intends to do for now.

“The issue of capital (raising) is a continuous one. There are various ways of raising capital, and as the business environment dictates, we will be raising more funds.

We feel we should do it in phases; we should be a bit more strategic. We felt that this is the amount of money we should have and still compete well. It is adequate for now to finance growth expansion,” he explained.