SKYE Bank has revealed that it is seeking to raise fresh capital in the first quarter of 2016 in a bid to shore up its capital base. This was disclosed by the company’s Group Managing Director/Chief Executive Officer of the Bank, Mr. Timothy Oguntayo at an at an interactive session with top stockbrokers in Lagos during the week.
According to reports, the CEO claimed that the bank is already in discussions with its key shareholders and some potential strategic investors who it believes provide the required capital. The sell-offs in the capital market has impacted negatively on fund-raising activities in the capital market with investors preferring to pitch institutional investors or shareholders with significant equity stake.
Skye Bank’s a capital adequacy ratio stands at 15.87 per cent presently. The bank also reported an earnings per share of 91 kobo in the 9 months period of 2015, compared to 75 kobo a year earlier. Its share price was down 46 per cent in the last one year and closed just at N1.11 on Wednesday.
Skye Bank had raise about N30 billion via a rights issue in the first quarter of 2015. Whilst this plan has been on the cards for some months now it did arouse some ironies for us at Nairametrics. Here are the top 5 ironies
It raised about N30 billion in rights issue (raised about N50b in 2013). However, the market capitalisation (value) of the bank currently stands at N29 billion and just N1 billion shy of what it raised. It means that for Skye Bank to raise N30 billion, it probably needs to issue a one for one rights issue at the current price of N2.18 (shares down 17 per cent year to date).
This probably means there will be some action on this share price in the coming days and weeks which may fizzle out again depending on the price momentum.
The bank spent N126 billion (net N103 billion) in acquiring Mainstreet Bank Ltd from AMCON last year. At the time the deal was consummated, the bank was valued at just over N32 billion. It nevertheless has a book value of about N141 billion suggesting it may be undervalued.
However, many investors doggedly believe otherwise and continue to value the stock at a huge discount to its book value. A rights issue after dolling out N126 billion seems rather odd.
Skye Bank perhaps in anticipation of this equity raising activities intensified efforts to ensure results for the first and second quarter of 2015, which was a stellar. In Q1 2015, it grew pre-tax profits by 81 per cent, YoY and followed that up with another 47 per cent growth in pre-tax profits in the second quarter. This is the same bank that posted a 47 per cent drop in profits in 2014. What exactly could have changed in the last 6 months? Is the economy any better?
Skye Bank also in 2015, issued a 1 for 20 bonus issue as it shelved any plans for cash dividend. Issuing out an equivalent of 5 per cent of its total equity just before another round of right issue suggest a disproportionate set of goals. Why bother giving out new shares as bonus issues when you will be going back to those same shareholders to raise money. Whatever impetus that move provided has surely evaporated with the price firmly rooted N2.10-2.20.