16 June 2015, Abuja – DESPITE warnings over the rising incidence of non-performing loans, NPL, especially as it relates to exposure to the energy sector, Skye Bank Plc gave out N449.872 billion loans to energy firms in two years, between 2013 and 2014. Specifically, information obtained from the bank’s Annual Report and Financial Statement for the 2014 financial year, showed that the bank recorded total loans and advances of N651.261 billion in 2014, compared to N549.858 billion in 2013.
Out of these loans, the N240 billion issued in 2014, represented 36.97 per cent of the year’s total to energy firms, while in 2013, the N209.076 billion loans, represented 38.02 per cent of the year’s total to the firms. A breakdown of the bank’s loans to the energy sector is as followed:
In 2014 oil and gas downstream companies – N21.304 billion;
oil and gas engineering services companies – N79.456 billion;
oil and gas upstream companies – N120.678 billion;
power sector companies – N19.358 billion.
In 2013, oil and gas downstream customers – N20.554 billion;
oil and gas engineering services companies – N70.656 billion;
oil and gas upstream companies – N105.772 billion; and,
power sector customers – N12.094 billion.
Board executives related loans
Worthy of note are some insider-related loans granted to some directors of the bank. Specifically, two non-executive directors of the bank were significant beneficiaries of the bank’s loans to the energy sector.
According to the annual report, two companies — Newcross Explortation and Production, and Pan Ocean Oil Corporation, linked to Mr. Jason Fadeyi, a Non-Executive Director of the bank received N8.35 billion and N17.077 billion respectively from Skye Bank in 2014, compared to loans of N5.613 billion and N15.479 billion respectively, received by both companies in 2013.
Two other companies — PPP Fluid Mechanics Limited, and Integrated Energy, Distribution and Management Company, linked to Mr. Olatunde Ayeni, Chairman, Skye Bank, received N11.17 billion and N9.061 billion respectively as loans in 2014, compared to N1.59 billion and N8.122 billion received in 2013.
The bank also recorded off balance-sheet engagements in terms of loans granted to Newcross and PPP Fluids totalling N50 million and N233 million respectively.
The Central Bank of Nigeria, CBN, PriceWaterhouse Coopers, PWC, and other analysts had in the wake of the declining crude oil price warned that financial institutions in Nigeria risked erosion of their capital. Also, the financial sector and the economy are at risk of being plunged into another crisis over banks’ exposure to the energy sector.
Even Skye Bank’s Chairman, Mr. Olatunde Ayeni, confirmed this in his note to shareholders of the bank in its Annual report and Financial Statement for the 2014 financial year. He said: “The local and global environments within which your bank operated in 2014 was not different from 2013, but this time, it faced heightened threats on diverse fronts.
“The 2014 financial year was one in which the local economy, and by extension, commercial banks, endured significant decline in crude oil prices, elevated inflation owing to pre-election spending, uncertainty related to the political environment, continued monetary policy tightening by the banking, and a consistent depletion of external reserves.”
Ayeni further stated that the tough operating environment negatively affected the bank’s financial performance in the 2014 financial year. Specifically, the bank’s profit before tax and profit after tax declined by 46.7 per cent and 47.4 per cent to N10.47 billion and N9.74 billion respectively.
The decline in its bottom lines was in spite of a 6.4 per cent increase in its total revenue to N134.78 billion compared to N126.67 billion recorded in the 2013 financial year.
*Michael Eboh – Vanguard