CBN okays Sterling Bank’s move to restructure as Holding Company

The Chief Executive Officer of Sterling Bank Plc, Abubakar Suleiman, has announced that the bank obtained the Central Bank of Nigeria’s approval in principle to enable it restructure as a Holding Company.

Mr Suleiman made this known in a disclosure sent to the Nigerian Stock Exchange (NSE) by the bank.

The bank said its desire to operate as a Holding Company was driven by its plan to spin off its non-interest banking window which became operational in January 2014 into an autonomous entity.

The bank said it believes that the proposed structure incorporates efficiencies around operations and financing efforts that will support the individual businesses in reaching full potential through a number of strategies.

It said in terms of increased portfolio diversification, the Holding Company structure enables the non-interest bank and other non-core businesses achieve greater results based on focused management of the distinct businesses.

In terms of improved efficiency resulting from the consolidation of key functions such as compliance, risk management and other support functions, the new move will yield improved prospects for individual business growth.

It will also enhance corporate governance which serves to promote a consistent culture across the group and quality of service to customers thereby facilitating sustainability of earnings.

In the same vein, it will encourage better access to capital by leveraging the consolidated financial strength of the group which would have been otherwise difficult for each individual subsidiary company.

“Going into the Holding Company structure, our desire is to entrench our business model premised on impact capitalism where we believe that private sector capital and market-based tools will offer the best types of solutions to Nigeria’s most pressing social and environmental challenges,” the bank said in its disclosures.

“HoldCo”

A holding company is a corporation that owns a controlling interest in one or more banks but does not itself offer banking services. Holding Companies do not run the day-to-day operations of the banks they own. However, they exercise control over management and company policies.

In 2009, after Nigeria went through crisis in its banking sector, the central bank announced measures to forestall another crisis in the banking industry.

Central to the CBN’s strategy at the time was the abolition of universal banking licences.

To reduce risks and ensure a clearer separation of depositors’ funds from volatile and riskier businesses, banks were asked to divest subsidiaries unrelated to commercial banking, or move to a holding company structure.

A number of banks have since been embracing the Holding Company (“HoldCo”) option.

PREMIUM TIMES reported on Tuesday that Access Bank Plc announced that it had equally received the Central Bank of Nigeria’s approval-in-principle for the bank’s restructuring to a holding company (“HoldCo”).

The bank said the proposed HoldCo structure would enable it to further accelerate its objectives around business diversification, improved operational efficiencies, talent retention as well as robust governance.

Major Premises

In its latest disclosure, Sterling bank noted that the Holding Company gives it the structure to explore its business model further.

It said: “The Holding Company is designed to operate on 3 major premises – Specialization, Partnership and Digitization. The Conventional Bank will focus on building skills and using technology to provide solutions in the areas that are critical to development in the country – Health, Education, Agriculture, Renewable Energy, Transportation (HEART).

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“The Non-Interest Bank will focus on building partnerships that connect individuals and businesses leveraging technology to create business optimization while solving for an individual’s daily financial needs.

“The overall business will focus on social impact, corporate responsibility and the highest ethical standards in its dealings. Our Digitization drive will create an enabling environment for both financial institutions to grow while providing services and support to build efficiencies in different ecosystems.”

The bank said execution of its plans is fully dependent on interwoven operating model of agility, specialization and digitization.

“Essentially, for us to be successful, we require people who are adaptable and knowledgeable running processes that are simple, quick and tech-led to ensure efficiency,” it said.

The bank said that it is currently in the process of meeting the conditions for the final approval.