=. outline: 2 investment story macro and banking sector overview business overview strategic outlook...

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May 19, 2010

Pan-Africa Conference Investor and Analyst Presentation

2

Outline:

Investment Story

Macro And Banking Sector Overview

Business Overview

Strategic Outlook

Appendices

3

Strong Industry LeaderStrong Industry Leader Skye Bank ranks 5th in industry for Book Value and Assets (N622 billion) Processed highest number of automated transactions in industry in 2009

Independent Banking Institution

Independent Banking Institution

Skye Bank is a publicly quoted company with 481,272 shareholders, none owning more than 5% of total capital

Fairly incentivized management - board members hold approx. 9%

Established Distribution Network

Established Distribution Network

Strategically positioned 261 business offices across Nigeria About 800 ATMs (about 9% of industry total) Nation-wide presence:

- Lagos: Top bankers to Lagos State Government- Abuja: Strong branch network for sustainable deposit growth- Rivers State: 3yrs exclusive Internally Generated Revenue (IGR) collection mandate in oil producing region (all revenues due to the State government is remitted through Skye at a fee)

Strong Asset QualityStrong Asset Quality

One of the 14 banks cleared by CBN during the audit Reinvigorated recovery efforts now paying-off (in 2010 NPLs declined by N18Bn) Diversified business portfolio with demonstrated strength in core areas (share of top-10

borrowers does not exceed 21% of total loan portfolio) Limited exposure to margin lending (6% of Gross loans)

Skye Bank has unique combination of success factors to leverage growth opportunitiesSkye Bank has unique combination of success factors to leverage growth opportunities

Lucrative payment business with significant entry barriersLucrative payment business

with significant entry barriers

Superior E-platform for sustainable earnings growth More than N180 Bn flow of customer funds, over N2 Bn net result for 15M to Dec-09 Payment services for all types of payments by state organizations Significant entry barriers for other players: unique technologies and subsisting

agreements

Strong Financial PerformanceStrong Financial Performance Solid profitability despite crisis environment (2.55% RoAE as of Mar-10) Solid and sustainable interest margins (41%, 37%, and 42% in FY’08, FY’09, and Q1 ‘10 1

respectively)

Investment Highlights

Source: audited 12M to Sep-07/08 financials, unaudited 15M to Dec-09 and Q1 2010 financials, data in accordance with local GAAP

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Healthy capital position with CAR above 17% as of March 2010

NPLs peaked in September 2009 and declined by almost N18 Bn by Q1’10 (from N84.7 Bn to N66.5 Bn)

Provisions are fully adequate under highly conservative Nigerian GAAP

Recovery of RoAE from 1.28% in FY’09 to 2.55% in Q1’10

However, earnings slowdown resulted in worsening operating efficiency (cost / income up to 74%)

Recent Financial Highlights – 1Q 2010 financial resultsUnaudited management accounts

Notes: annualised ratios for 15M to Dec-09 and Q1 2010 financials;Source: audited 12M to Sep-08 financials, unaudited 15M to Dec-09 and Q1 2010 financials, data in accordance with local GAAP

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Response to the crisis

EnhancedRisk Profile

Stringent credit process Sector focus on high-quality industries Strong Capital Adequacy ratio Well diversified loan portfolio

Liquidity Growth

Controlled asset growth Leveraging branch network for

enhanced deposit growth Growth in market share

Positioning &Cost Containment

Engaged consultants (CIUCI Consulting) in developing market Strategic Positioning

Staff realignment & rationalization Change in remuneration policy Realignment of job responsibilities

Recoveries & Capital/Debt Raising

Reinvigorated recovery effort Exploiting market opportunity

(leveraging flight to safety) Lengthen maturity profile of

liabilities

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Outline:

Investment Story


Business Overview

Strategic Outlook

Appendices

7

GDP growth dynamics Inflation

FDI dynamics, US$ Bn

Nigeria Economic Outlook

Comments

2004 2005 2006 2007 2008 2009E

1.9

5.0

8.8

6.0

3.63.0

2004 2005 2006 2007 2008 2009E

87.8112.2

145.4165.9

207.1173.4

10.6%

5.4%6.2%

7.0% 6.0%5.6%

Nominal GDP, US$ Bn Real GDP growth, %

2004 2005 2006 2007 2008 2009

10.0%11.6%

8.5%6.6%

15.1%

11.9%

CPI change, %

Source: IMF, Economist Intelligence Unit, CBN

Nigeria is one of the largest economies in SSA region with solid and sustainable growth opportunities

Historically, it has attracted significant interest of international investors who invested more than $28Bn over the last 6 years

Nigeria is the region’s largest oil producer thus accumulating significant portion of investments going to SSA region

The impact of the crisis was not so severe partly due to substantial financial support provided by the government and CBN

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Stimulating Credit Growth

Progressing the establishment of Asset Management Company of Nigeria (AMCON) to take up over N1.5 trillion toxic assets towards recapitalizing banks

Sustaining guarantee on interbank lending Monetary Policy Rate (MPR) maintained at 6% Set up of Commercial Agriculture Credit Scheme of N200 billion (Skye Bank

received N5.6 billion at 0% interest for a 7year tenor for on-lending at 9%)

Infrastructure Financing

N200 billion SMEs Credit Guarantee Scheme (SMECGS) set up to encourage SME financing, and N500 billion Power & Manufacturing fund.

To setup an Infrastructure Finance Policy and Development Strategy (IFPDS) and Diaspora Mobilization Initiative (DMI) in 2010/2011, to improve infrastructure development financing

Proposing to establish an Asset Purchase Facility (APF) to purchase Federal Government Treasury Securities/Bonds and other high-quality private sector instruments

Revision of the Universal Banking Model – split of core and non-core banking activities

Categorization of banks into International, National and Regional banks with minimum capital base of N100 billion, N25 billion and N15 billion respectively

Remodeling Banking Landscape

Policy Direction of the CBN – Implications for the system

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Outline:

Investment Story


Business Overview

Strategic Outlook

Appendices

10

The Bank was established in 1990 as merchant banking business and converted into commercial bank in 2000. In its current form emerged following the series of efficient acquisitions and further consolidation in 2005-2006

Currently, Skye bank is a universal commercial bank focused on corporate banking

The bank has strong regional distribution which covers most cash-rich regions of Nigeria with strong shares in core markets

The bank is strong in the area of revenue collection, both at the federal and state levels

Skye bank has presence in Sierra Leone and Gambia

Skye Bank continues its normal operations. In March it signed a $15 million credit agreement with the Korean Export-Import Bank. The facility may be increased to $100 million

Description

Skye Bank Snapshot

Source: audited 12M to Mar-05, Sep-08 financials, unaudited 15M to Dec-09 and Q1 2010 financials, data in accordance with local GAAP

Total assets dynamics, NGN Bn

Mar-05 Sep-06 Sep-07 Sep-08 Dec-09 Mar-10

31,991

174,197

446,114

784,878

622,164 653,874

M&A activitiesOrganic growth Anti-crisis measures

and exploration of growth opportunities

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Business Trends

Assets Dynamics (by types), NGN Bn Gross loans and advances growth, NGN Bn

Net income & RoAE Cost / Income Dynamics

Sep-07 Sep-08 Dec-09 Mar-10

5,517.0

15,126.0

1,130.2 2,243.4

19.0%

13.1%

1.3% 2.6%

Net income, NGN Bn RoAE, %


117,484

260,862

365,852 360,665

Sep-08 Dec-09 Mar-10

784,878

622,164 653,874 Series6

Cash

Securities

Due from banks

Net loans

Other assets



71.0%

51.0% 55.0%

74.0%

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14.5%12.5%

14.5%15.6%

Loan Portfolio

Loan structure as at Dec 09 (by products) Industry structure of corporate loans

Yield on interest earning assets

2%

11%

13%

18%

56%Commercial

SME

Large corporate

Other

Retail3%

3%4%

5% 2%4%

2%1%

2%5%6%

8%15%

18%

21%

Others

General Commerce

Oil & GasReal Estate

Capital Market

Maritime

EducationBuilding & Construction

Agriculture

Comments

Source: audited 12M to Sep-08 financials, unaudited 15M to Dec-09 and Q1 2010 financials, data in accordance with local GAAP

Skye bank has diversified loan book with focus on O&G and general commercial sectors

The bank has limited exposure to capital markets loans (as opposed to other market players)

The bank focuses on high margin products Going forward, the Bank would focus on up-tiering i.e.

increasing the share of high quality, large corporate borrowers

Others: NGOs, Education, Professional Services etc

Health

Telecoms

Transport & Aviation

Finance

Individuals

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Capita

l Mark

et

Constructi

on

Agricu

lture

Real E

state

Oil & Gas

Maritime

Genera

l Commerc

e

Telec

oms

Finan

ce

Public Se

ctors

Individual

Educa

tion

99%

41%34%

26% 21%9% 9% 7% 7% 7% 2% 1%


1.5% 1.5%

6.9%

0.7%

Assets quality

NPL ratio and coverage

LLP charge

NPLs by industry (Dec-09)

Notes: [1] annualised ratios for 15M to Dec-09 and Q1 2010 financialsSource: audited 12M to Sep-06/08 financials, unaudited 15M to Dec-09 and Q1 2010 financials, data in accordance with local GAAP

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5.2% 3.6%

19.4% 19.2%

109.9%102.7%

54.5% 54.0%

NPLs/Total loans Provision coverage

Recovery volumes

About N10 billion recovered between Sep 09 & Dec 09 Recovery target of N14 billion for FY 2010

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CLASSIFICATION AMOUNT (N’BILLION) SUB STANDARD 2.08DOUBTFUL 2.69LOST 5.19TOTAL 9.96

About N10 billion recovered between Sep 09 & Dec 09

Huge opportunity for earnings growth in 2010 as a result of write-backs

Reinvigorated recovery efforts paying-off

4.0%4.7%

4.7%

15.9%

17.8%25.4%

27.4%

Manufacturing

Oil & gas

General commerce

Hospitality

Maritime

Construction

Real estate

Classification of Loans Recovered as at Dec 2009

Top 10 recoveries by industry

Post August 09 National Audit…

12M

to Sep-09 15M

to Dec-09 Q1 2010

NGN mln NGN mln NGN mln Gross Loan 254,098 355,432 365,127 Non-Performing -Substandard 13,699 20,744 19,109 -Doubtful 27,994 12,310 9,648 -Lost 14,405 14,470 16,545 Dimunition in margin loans 28,645 21,576 21,186 Sub-Total (with margin facilities) 84,743 69,100 66,488 Sub-Total (without margin facility) 56,098 47,524 45,302

NPL and Gross Loans as at March 2010

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Funding strategy

Funding Structure Customer Deposits, NGN Bn

Net loans / deposits Capital adequacy ratio


269,316

501,594452,918 451,109


10.4%

22.0%

16.6% 17.0%


64% 73% 69%

24% 13% 18%

12% 14% 13%Equity

Other liabilities

Deposits



42.8%47.8%

72.5%64.7%

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Operating income

Operating income Structure, NGN Bn Net Interest Margins

Operating expenses structure Comments


51,937

75,020

12,964

Series4

Other income

Net commissions


55.4%49.8%

16.0%

42.4%


36% 41% 41%

11%16% 17%

53% 43% 42% Other

Depreciation

Staff costs


Skye Bank historically had stable income base with share of volatile trading gains approx. 5%

Skye Bank efficiently implemented cost control programs and decreased its share of Other expenses over 2009-2010

Cost / Income ratio affected by: Severance allowances to separated staff Staff training cost Higher operating cost, especially from power generation Depreciation charges on newly-put-into-use assets

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Sep-07 Sep-08 Dec-09

1,257

2,5672,161

Government settlements processing

Revenue collection mandate in 30 out of 36 states (including Lagos & Rivers, accounting for 70% of national IGR (Skye Bank generates income from remittances of accruable revenue to State governments)

Implementing collection mandate in the remaining 9 States; 3 years exclusive collection in Rivers State (over 30% of national IGR)

Major collecting Bank for Lagos State government Top collecting bank in 7 States

Payment Administration

Skye provides automated salary payment solutions that optimizes resources and ensures efficiency of the payment process

Top 3 in industry for e-payment solutions Top 5 in industry for ATM & POS Major Federal Government Retirees Pension paying bank Top 5 in industry for Import Duty collections (6% of industry total) Top 3 in industry for Federal Revenues (FIRS) collections (8% industry total)

Unique Payment Solutions

Collection volumes (NGN Bn) Income from Collections, (NGN mln)

Sep-06 Sep-07 Sep-08 Dec-090

20406080

100120140160180200

Source: Bank Business Segment Report

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Risk Management

Head, Enterprise Risk Mgmt

Existing Customer

Mgmt

Asset Review & Monitoring (Loan

Recovery)

Quality Assurance

(Originations) - Corporate

Loan review and Credit Monitoring (Corporate)

Head, Market/Liquidity Risk Mgmt

Head, Operational Risk MgmtHead, Credit Risk Mgmt

Retail Risk

AR&M Region 4

MIS/Policy

Origination/CPV

Collections/Recovery

• Team 1• Team 2• Team 3• Team 4

Internal Control &

Compliance

Credit Admin

Loan Revie

w

AR&M Region 1 AR&M Region 2 AR&M Region 3 AR&M Region 5

Biz/Support Unit

Internal Audit

•South West•Abuja•South South•North•Ikeja•Lagos Mainland•South East

Portfolio Mgmt Policy Team

Credit Admin(C

orp)

GMD/ CEO

Robust Corporate Governance practiceIndependent of any controlling interest

BOD

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Outline:

Investment Story


Business Overview

Strategic Outlook

Appendices

20

Key Strategic Targets

Market position and growth

Business mix and diversification

Capital and funding

Risk management

Leading provider of universal banking services in Nigeria with top-5 position on the market Grow the business at above the market-average rates through organic growth Bigger size to benefit from lower funding costs Sustain regional positioning in key money centers Up-tiering in the corporate segment

Financial position

Continue focus on upper level products for leading corporate clients Leverage existing payment business capabilities to strengthen market positioning further Cross selling between public sector and retail Strong sector focus (Upstream O&G, hospitality, education, real estate)

Sustain best-in-class operating efficiency with Cost / Income ratio approx. 50% Strengthen NIM at above 8% through focus on high-margin products Target profitability measured by RoAE above 25%

Continue focus on self-funding business model Sustain solid capitalisation through internal capital generation

Efficient management of bad loans through internal capabilities Participate in AMC program Sustain adequate reserve coverage of existing bad loans

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Outline:

Investment Story


Business Overview

Strategic Outlook

Appendices

22

Financial summary – balance sheet


12M to Sep-07

12M to Sep-08

15M to Dec-09 Q1 2010 12M

to Sep-07 12M

to Sep-08 15M

to Dec-09 Q1 2010

NGN mln NGN mln NGN mln NGN mln US$ mln US$ mln US$ mln US$ mln

Balance sheet Cash and cash equivalents 17,807 40,216 30,579 40,213 141 338 201 265 Due from banks 89,303 214,376 121,603 126,406 706 1,803 798 832 Securities 75,078 109,935 63,655 50,594 593 925 418 333 Loan portfolio (net) 110,722 251,211 328,184 323,351 875 2,113 2,154 2,129 PP&E 12,414 32,658 40,893 38,864 98 275 268 256 Other assets 140,790 136,482 37,250 74,446 1,113 1,148 244 490 Total assets 446,114 784,878 622,164 653,874 3,526 6,601 4,084 4,305 Deposits 232,775 501,594 452,918 451,109 2,129 4,219 2,973 2,970 Due to banks 36,541 20,000 5,450 48,750 0 168 36 321 Borrowings 27,157 41,254 30,038 22,831 215 347 197 0 Other liabilities 120,466 128,177 45,726 43,152 952 1,078 300 434 Shareholder's equity 29,175 93,853 88,033 88,032 231 789 578 580 Total liabilities and shareholders equity 446,114 784,878 622,164 653,874 3,526 6,601 4,084 4,305

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Financial summary – income statement and key ratios


12M to Sep-07

12M to Sep-08

15Mto Dec-09 Q1 2010 12M

to Sep-07 12M

to Sep-08 15M

to Dec-09 Q1 2010

NGN mln NGN mln NGN mln NGN mln US$ mln US$ mln US$ mln US$ mln

Income statement Operating income 28,020 51,937 75,020 12,964 213 434 516 85 - Net interest income 18,265 30,474 47,088 8,988 139 255 324 59 - Net commission income 8,178 19,450 24,687 3,093 62 162 170 20 - Trading income 1,256 1,270 2,100 884 10 11 14 6 Operating expenses (18,427) (27,531) (41,535) (9,560) (140) (230) (285) (63)Loan loss provisions (1,726) (3,981) (31,337) (600) (13) (33) (215) (4)Net income 5,517 15,126 1,130 2,243 42 126 8 15 Key ratios ROAE 18.9% 16.1% 1.3% 2.6% ROAA 1.2% 1.9% 0.2% 0.3% Cost to income 71.0% 51.0% 55.0% 74.0% Yield on IEA 14.5% 12.5% 14.5% 15.6% Yield on IBL 5.2% 5.3% 7.9% 8.7% Interest spread 9.2% 7.2% 6.6% 6.9% NIM 55.4% 49.8% 16.0% 42.% LLP charge 1.5% 1.5% 6.9% 0.7% Equity to assets 6.5% 12.0% 14.1% 13.5% CAR 10.4% 16.0% 16.6% 17.0% NPLs/Gross loans 5.2% 3.6% 18.9% 18.4% LLPs/Gross loans 5.8% 3.7% 10.3% 10.3% Provision coverage 109.9% 102.7% 54.5% 56.1% Net loans/Deposits 41.1% 50.1% 72.5% 71.7%

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Economic downturn..

•GDP declined from 6.1% in 2008 to 3.20% in Dec 2009 •Marginal increase in contribution of oil & gas (from -1.72% to 0.57%)•Increase in non-oil contribution ratio•International Monetary Fund estimates GDP at 5% and 5.2% in 2010 and 2011 respectively

Nigeria Banking Sector slowed by…..

The recent CBN intervention has led to structural changes in the industry dynamics

Premised on an attractive industry in the long run despite temporary setback

National Audit has cleared 14 out of 24 banks

Injection of N620 billion into ailing /undercapitalized banks by the CBN

Significant impairment of banks’ assets

Scarcity of funds to the productive sectors of the economy (reduced funding from 84% to 32%)

Strategy re-evaluation and alignment with market realities

National Audit: a positive development for Nigerian banks…

Improved level of Transparency and Corporate Governance

Risk Management framework has been enhanced

Ownership structure of Nigerian banks has deviated from conventional practiceCulture of impunity being addressedForex volatility has been

significantly curbed

Navigating economic challenges: Implications of Regulatory Intervention

Most significant unintended consequence is the downside risk to economic recovery and growth

Capital erosion and need for additional capital raising is imperative for banks

Liquidity problem and reduced business confidence

Delayed recovery of the capital market

Significant diminution in share prices of banks

Policy contradictions and political risks

Credits to the private sector in 2009 increased by only 3.75% from N8trn to N8.3trnCyclical effect of the credit squeeze negatively impacted fiscal measures

Market Environment (Cont’d)

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Caution regarding forward-looking statements

This presentation may contain certain forward-looking statements,

estimates and targets with respect to the operating results, financial

condition and business of Skye Bank. Such statements and information,

although based upon Skye Bank’s best knowledge at present are

certainly subject to unforeseen risk and change. Future results or

business performance could differ materially from those expressed or

implied by such forward-looking statements and forecasts. The

statements have been based upon a reference scenario drawing on

current market conditions, economic forecasts and assumptions,

competitor analysis including the regulatory environment.

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Q&A

=. outline: 2 investment story macro and banking sector overview business overview strategic outlook...

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