By Omoh Gabriel, Business Editor
Bond Bank limited took off on a very strong and promising note recording an impressive result in its fifteen months of operations. Inspite of the enormous competitive pressures, vilitilities and uncertainties in the financial operating environment, the great challenges of a start up Bond bank recorded a very impressive result. Gross earnings for the fifteen months stood at N2.96 billion, while profit before tax amounted to N530.15 million. From a paid up capital base of N2 billion on November 1, 2002 when the bank opened its doors for business the bank achieved a total asset base and contigents of N19.26 billion at the close of business on January 31, 2004. Total deposit base stood N8.7 billion while total loans and advances amounted to N4.1 billion with a one percent mondatory provisions for doubtful loans.
The bank‚Äôs loans are princpally to the manufacturing sector, commerce-import, export and domestic trade. During the fifteen months ended 31st January 2004, the baqnk‚Äôs loans portfolio stood at N4.1 billion being its base year. As the first year of its operation there was a minimal level of non performing loans but a one per cent general provision was made which amounted to N41.3 million.. This compares favourably to that of its peers which started operations at about the same time. During the period under review, the bank had no bad and doubtful loans to write off its books this boosted its profit figure.
During the financial year ended 31st January 2004, net earnings amounted to N1.850 billion. Net revenue from funds accounted for 23.6 per cent of net earnings, while commissions accounted for 23.4 per cent and foreign exchange income was 7 per cent, Fees income was 33.2 per cent and other income represented 14.3 per cent of the bank net income.
During the period under review, the ratio of operating expenses to net income remained high at 86.4 per cent. Though this ratio is in line with happenings in the industry where operating cost is very high. It is significantly higher than industry average of 70 per cent. The banks high cost is attributable to initial cost of operation for a start up business.
In the period under review, the Bank‚Äôs pre tax return on average asset was 3.9 per cent, while its pre tax return on average equity was 23 per cent. These ratios are both lower than the industry average of 4 per cent and 50 per cent respectively.
The bank‚Äôs profitability requires improvement.
As at 31st January 2004, the bank had a capital base of N2.252 billion, making it one of the medium sized bank in the country, on the basis of first tie one capital. The bank which started operation fifteen months ago posted the sum of N120.7 million to its statutory reserve, N53 million as reserve for small and medium scale enterprises and N78 million as general reserve thus bringing the total shareholders‚Äô funds to N2.252 billion.
The bank‚Äôs adjusted capital to risk weighted assets ratio at 16.7 per cent is above the industry average and in line with that of its peers. The adjusted capital total loans at 62 per cent is six times the regulatory minimum of 10 per cent. The bank has satisfied all regulatory requirements for capital adequacy. The bank‚Äôs capital base is strong.
Liquidity and liability generation
As at 31st January 2004, the bank had a local currency deposit base of N8.698 billion, making it one of the medium sized banks in Nigeria banking industry as at that date. The bank contorlled 0.1 per cent of the industry‚Äôs local currency deposits. The bank‚Äôs growing deposit base is attributable to its values of integrity, excellence, loyalty, courage and discipline.
As at 31st January 2004,demand deposits accounted for 61 per cent of total deposits, savings :0.3 per cent and time deposits:4.8 per cent, Domiciliary account: 12.6 per cent, commercial papers: 21 per cent. This translated to a weighted average cost of funds of 12.3 per cent which compares favourably with those of its peers.
As at 31st January 2004, the bank‚Äôs liquidity ratio was 61 per cent, above the regulatory requirement of 40 per cent. The bank‚Äôs loan to deposits ratio remained low at 41.7 per cent , compared to the regulatory maximum of 55 per cent.
Trade reputation checks on the bank confirms that the bank has overwhelming capacity to refinance and market perception is very good. The bank‚Äôs liquidity is very good.
Ownership and management
The bank has four principal shareholders holding more than ten per cent each. They are Prince E. O. C Eludoyin who has a total of 300,000,000 ordinary share of N1 each, representing 15 per cent of the bank‚Äôs total shares. He is followed by Mr. Olatunde Ayeni with 293,452,381 ordinary shares of N1. This represent 14.67 per cent of the bank shares. Otuba Gbenga Daniels the governor of Ogun state owns 202,380,952 ordinary shares of the bank representing 10.12 per cent of the bank total shares. Also Chief Olufemi Somolu has 202,380,952 ordinary share of the bank total shares representing 10.12 per cent. No other share holder hold up to 5 per cent of the bank shares. The bank is a privately promoted bank as its share are not listed on the stock exchange. Its board of directors comprises eight persons who control about 20 per ncent of the bank‚Äôs equity. Two directors are executive including the managing director Mr. John Darlington, while six including the chairman Chief Olufemi Somolu are non executive.
The management of the bank has been stable and consists mainly of persons who have had the majority of their carrier outside the bank.
During the period under review, the staff strength of the bank stood at 128 persons. This is as a result of of the fact that the bank is just fifteen months old in operation. Staff productivity as measured by net earnings per staff was N14.4 million, which is far above the banking industry average of N5 million. Average cost per staff amounted to N3.4million, which is in line with the industry average of N3 million. The bank should improve on staff cost in order to attract some of the best personnel in the industry. The management of the bank is competent, qualified and experienced, and the performance of the bank is at par with that of its peers.
The bank has a growing position in the Nigeria banking industry and has shown tremedous promise in its fifteen months of operation. During the fifteen months ended 31st January 2004, its asset base increased from N2billion to N13.428 billion. This translated to an increase in market share of all key indices, The bank market position is growing fast.
Strength and weakness
The bank has strength in, strong capital, good liquidity, growing market position, strong domiciliary account and good management. The bank‚Äôs major weakness is weak earnings, weak ownership base and low saving deposit accountg.
Following the 2003 general election one of the pioneer director of the bank Otunba Gbega Daniel was elected governor as a result he resigned his membership of the board while retaining his shares in the bank. The bank in its resolve to to maintain the highest standards of ethics and professionalism approved the code of corporte governance recommended for banks by the bankers‚Äô committee. It also instituted a self evaluation mechanism, and constituted an audit committee. The bank has its own corporate building from where it commenced operation unlike most banks which started their operations from rented apartments. The bank has within the spade of fifteen months opened branches in Abuja, Port Harcourt, Apapa, Ikeja and abeokuta. The bank has made huge investment in information technology that will put it at cutting edge of service by providing tailor made business solution to its clients. The bank has the latest model of flexcube banking application software, reputed to be one of the best in the banking industry worldwide. The success of the bank in the coming year depends on the management ability to utilise its investment in these core area and its ability to read the banking environment and meet the ever changing Nigeria banking scene.
While the banks initiatives will consolidate its position in the industry, its ability to keep quality personnel will remain a key challenge for the bank‚Äô management.