As Abiru Bows out of Polaris…

Effective from tomorrow, August 31, Group Managing Director/Chief Executive Officer, Polaris Bank Limited, Mr. Tokunbo Abiru, will retire after about 29 years out of a 32-year private sector life. At Polaris, Abiru successfully executed a transformation plan, which brought the bank from liability to profitability. Bamidele Famoofo writes

Last Monday, the Group Managing Director/Chief Executive Officer, Polaris Bank Limited, Mr. Tokunbo Abiru formally announced his retirement from the bank. His retirement will take effect from tomorrow after about 29 years in the banking sector, serving in different capacities.

The last four years were perhaps the most defining part of his 29-year banking career. On July 4, 2016, precisely, the Central Bank of Nigeria (CBN) appointed him to lead the defunct Skye Bank Plc out of insolvency. With other professionals on the board of the bank, Abiru has successfully led transformation of the defunct bank to become Polaris Bank in four years.

He provided synopsis of how he transformed Skye Bank to Polaris Bank in a short note he sent to his friends and associates, announcing plan to bow out of the bank. Specifically, Abiru wrote: “With the support of the Board and Executive Management of Polaris Bank and by God’s grace, I have delivered on the Central Bank of Nigeria’s mandate to stabilize and establish the Bank on the path of sustainable profitability.

“Polaris Bank is today a digitally enabled, customer-friendly and forward-looking enterprise, which has secured its rightful place in the vanguard of Nigeria’s banking industry. What remains outstanding is the divestment of government ownership from the bank to suitable investors in order to further solidify the journey on the path of continuous growth.”

From his personal account and the bank’s financial statements, Abiru has no doubt put Polaris on a good standing, pulling it out of liability to profitability. Evident from verified documents, the bank is now not just profitable and stable, but also poised to compete effectively with the established competitors in the Nigerian banking industry.

A Peep into Polaris

Indeed, the last two years have been noteworthy in the transformational history of Polaris Bank, a bridge bank the Central Bank of Nigeria (CBN) established September 21, 2018 to manage the assets and liabilities of Skye Bank. The apex bank resorted to this option on three related grounds.

First, as revealed in its records, Skye Bank, the defunct precursor of the bridge bank, had about 80 per cent non-performing loans far above the regulatory standard. Second, other prudential and adequacy ratios of the defunct bank abysmally performed much below the thresholds of the apex banks. Third, the owners of Skye Bank failed to recapitalise the bank.

Altogether, these grim realities shaped CBN’s decision first on July 4, 2016 and afterwards on September 21, 2018. On the former date, the apex bank announced the takeover of Skye Bank. With Abiru as GMD/CEO, consequently, the CBN appointed an 8-member Board of Directors under the chairmanship of Mr. Muhammad Ahmad for the defunct bank.

Also, on the latter date, the apex bank established Polaris to assume the assets and liabilities of Skye bank in consultation with the Nigerian Deposit Insurance Corporation (NDIC), a statutory body set up to protect depositors and guarantee the settlement of insured funds. That decision marked the second phase in the history of the troubled bank in which both customers and investors practically lost confidence.

Obviously, the rationale behind the strategy of the apex bank was pure and simple. As designed then, the CBN Governor, Mr. Godwin Emefiele, explained, the strategy is for the Asset Management Company of Nigeria (AMCON) to capitalise the bridge bank and begin the process of sourcing investors that will eventually buy out the AMCON.

Return to Profitability

From the abysmal records of its precursor, Polaris has come out stronger under its new management, now performing impressively and lucratively as much as other banks that are not in crisis. The bank’s first audited report bears witness to positive change a management structured around sound corporate governance can bring about.

Under his leadership, undoubtedly, Abiru has changed the narrative of Polaris Bank from pessimism to optimism, more aptly from liability to profitability. In its audited report, Polaris posted N27.35 billion profit after tax in the 2019 financial year. In terms of profits after tax, relatively, Polaris performed much better than N660 million posted by Ecobank; N7.13 billion by Sterling Bank; N10.66 billion by FCMB; N16.35 billion by Union Bank; N5.03 billion by Wema Bank and N2.95 billion by Unity Bank.

Besides its comfortable return to profit, Polaris reported N857.86 billion total deposits in the 2019 financial year, a major feat most banks of its status could not record. In the same financial year, for instance, Sterling Bank could only report the total deposit of about N827 billion, Stanbic IBTC 660.93 billion, Wema Bank N578.88 billion and Unity Bank 251.91 billion.

Likewise, its return on assets was quite impressive in the year under review. With its 2per cent return on assets, Polaris ranked ahead of Ecobank, which reported 0.03per cent; Sterling Bank 0.60per cent; FCMB 0.66per cent; Wema Bank 0.70per cent; First Bank 0.72per cent; Unity Bank 0.91per cent; Union Bank 0.94per cent; Fidelity Bank 1.21per cent; Access Bank 1.35per cent as well as UBA 1.54per cent.

In terms of return on equity, Polaris reported 33per cent, almost at par with GTBank at 33.67per cent. From available records, most Tier I banks did not post better returns on equity than the bridge bank. In the 2019 financial year, Zenith could only post 15.85per cent; Access Bank 17.44per cent, UBA 15.35per cent, First Bank 6.66per cent and Ecobank as low as 0.24per cent.

With the exception of Stanbic IBTC that returned 34.79per cent on equity, virtually all Tier II banks were ranked below Polaris in their performance. In 2019, as shown in their audited reports, Sterling Bank only returned 6.29per cent equity; FCMB 6.58per cent; Fidelity Bank 11.90per cent; Union Bank 7.55per cent; Wema Bank 9.20per cent and Unity Bank’s equity regressed by 1.22per cent, all of which were ranked below the bridge bank.

At the end of the financial year, Polaris’ capital adequacy ratio comfortably stood at 14per cent while its liquidity at 81per cent. These ratios are well above regulatory requirements, thereby demonstrating a strong return to prudential compliance and providing assurance of a strong capital buffer and careful liquidity management to customers and regulators.

With respect to its cost-to-income ratio, Polaris recorded 59per cent relatively better than Ecobank (83.33per cent), Access Bank (70.08per cent), UBA (68.26per cent) and First Bank (75.83per cent). Only GTBank and Zenith, both Tier I banks, posted better cost-to-income ratio than Polaris. When compared with banks of its status, Polaris did better than Fidelity Bank, which reported 73.79per cent; FCMB 86.71per cent; Sterling 84.24per cent and Union Bank 84.27per cent.

From about 80per cent record of its precursor, Polaris’ non- performing loans at 46per cent is relatively high given its inherited portfolio. Obviously, with its management’s aggressive efforts to improve loan quality, strengthen collateralisation and collect outstanding loans, the non-performing loans of the bank would come down significantly in the foreseeable future.

Challenges of Transformation

Without result-oriented management, Polaris would not have been able to transit from liability to profitability, only in four years of its transformation. This perhaps justified the decision of the apex bank to appoint Ahmed as the Chairman of Polaris Board; Abiru as its GMD/CEO and other reputable professionals as executive and non-executive directors to pull the bank from the brink of outright collapse.

At its takeover, a failure of corporate governance was one of the bank’s major problems. This was evident in what the new management described the bank’s high level of non-performing insider-related loans. By implication, its funding structure and risk asset portfolio mix signified improper risk management exposing it to policy and currency risks.

Also, reports of forensic audits, which reputable accounting were engaged to conduct, revealed significant infractions under the bank’s previous managers. As a result, Polaris suffered significant deposit attrition. Customers, depositors, shareholders and institutional partners alike doubted its future when the apex bank announced its take-over on July 4, 2016.

Under Abiru, however, the new management managed the bank’s grievous challenges, which culminated in reduction of deposit loss, restoration of customer confidence and stabilisation of the bank. Also, it settled many matured trade and expired bilateral obligations and restructured outstanding balances with the relevant institutions and counterparties.

Abiru’s team, substantially addressed the challenges of loan security inadequacy and improper collateral documentation in the legacy portfolio of the bank. It equally cleaned up loan and collateral documentation on most of the high value facilities, thereby putting the bank in a stronger position to enforce its rights as a lender.

With its aggressive loan recovery drive, the bank recovered over N60 billion of outstanding bad loans within Abiru’s first year in office. Under Abiru’s leadership, records showed, loan recovery rose to N100 billion at the end of the second year. Also, it reached settlement and restructuring agreements with many of the chronic bad debtors resulting in substantially improved payments and prospects of future recoveries.

Abiru, likewise, pursued other initiatives to restructure and reposition the bank based on its mandate including cost management and optimisation and divestments to improve the institution’s financial position. Among others, cost management initiatives include branch rationalisation, review of service contracts and cash management operations all of which have resulted in hundreds of millions of financial savings.

Repositioned for Future

With its profit before tax standing at N27.83 billion at the end of the 2019 financial year, Abiru and his team have returned Polaris to profitability in line with the mandate the apex bank set for the new management. Now on a strong foothold, the bank has been repositioned as a major player in Africa’s biggest economy with over 370 branches nationwide.

Already, the bank has been restructured for sustainability. At the beginning of the 2020 financial year, Abiru reeled out future plan for the bank in a note to its staff members nationwide. He wrote in part: “2018 was pivotal in the life of the bank with the transition from Skye to Polaris. 2019, however, is even more important as we commence the journey of truly building a bank and brand we will all be proud of in years to come.”

“I am confident our bank has indeed stabilised and is now headed towards our purpose, which is to become a top retail bank” in Nigeria. This was demonstrated by our collective and sustained performance trajectory in 2019. Our prudential ratios-capital adequacy and liquidity ratios are now in full compliance with stipulated regulatory requirements.

“We returned to profitability on a month-on-month basis throughout 2019. Our cost-to-income ratio is also in line with industry average. We aggressively pursued our IT infrastructure refresh with a view to replacing and upgrading the aged, obsolete and sub-optimal performance IT equipment. The impact on efficiency, effectiveness, transactions and customers’ experience will become noticeable from the end of the first quarter of 2020…”

With this impressive performance, therefore, Abiru laid out strategic initiatives for the bank’s future growth. He cited the bank’s digital transformation, which had begun with recruitment of professionals and setting up of structures and systems. He cited the bank’s agency banking platform, an initiative designed to provide banking services to the unbanked and under-banked, especially in locations where the bank is not present.

Confident of taking the bank to an enviable status in the nearest future, Abiru reaffirmed his resolve to execute its corporate transformation plan, which according to him, was designed to provide direction for the bank into the future and define its corporate and strategic aspirations.