Polaris Bank Battles for Survival Amid Growing Concerns

By Modupe Gbadeyanka

All seems not to be too well with Polaris Bank, the bridge bank set up to take over the assets and liabilities of now defunct Skye Bank Plc.

A new report by National Daily said the lender is fighting a serious battle for survival following customers panic over the sudden demise of Skye Bank.

Business Post reports that despite efforts being made by the management of Polaris Bank to assure its customers that nothing will happen to their money in its care, nobody wants to take the risk of leaving his hard-earned money with the financial institution.

This is because in the past, some people have had to kiss their money goodbye as a result of similar situation and those who were part of the collapsed banks walking on the streets as freemen.

In order not to be caught unawares, some customers of the defunct Skye Bank are reportedly taking their money out of Polaris Bank to safer banks, giving them the opportunity to have sound sleep and have nothing to worry about again for fear of the unknown.

It will be recalled that in a move that took bank customers and even shareholders and other financial industry stakeholders by surprise, the Central Bank of Nigeria (CBN), last month  announced the winding up of business activities of the much harried and cash strapped, Skye Bank Plc.

The CBN admitted that as a result of the shaky outlook of the defunct Skye Bank, it had no option than to intervene because results of forensic audit of the bank’s books revealed that it required urgent recapitalisation as it could no longer continue to survive on life support (meaning indefinite liquidity support).

Whereas no one doubts the ability of the regulator to stabilise Polaris and save depositors of the new financial institution, shareholders are still confused as to the implications of what has happened.

It has been argued that the new bank will lose some customers (depositors) who are edgy about their deposits and have lost some trust in the old bank and by extension its successor. They will migrate to other banks.

The challenge of huge non-performing loans hanging over Polaris, industry observers believe cannot be wished away despite the huge amount the CBN has injected in the bank.

Details show that the CBN has injected over N1 trillion into the bank; the over N300 billion when it sacked and replaced its management and the recent intervention of N786 billion.

Meanwhile, industry analysts do not seem comfortable with the new arrangement given the developments of 2009 when the CBN under Sanusi Lamido Sanusi, the current Emir of Kano, Muhammadu Sanusi II.

Lagos based financial analyst and a senior lecturer at the prestigious Lagos Business School (LBS), Dr Adi Bongo, expressed discomfort with the emergence of Polaris Bank, adding that Skye Bank should never have been allowed to acquire Mainstreet Bank which was much bigger than her at that time.

However, Dr Afolabi Olowokere of Financial Derivatives Company limited held a contrary view, arguing that the liquidation option was capable of wrecking the financial system and cause confidence crisis.

‘’Depositors will lose their monies, there will huge job losses and the financial system can crash if the CBN fails to come in the way it did’’, he said.

Recall the bank erstwhile chairman of the collapsed bank, Mr Tunde Ayeni and another director, Mr Festus Fadeyi, had borrowed huge loans from the bank to run other business concerns, which have not been fully repaid.