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Home  News  Intercontinental saves N1bn monthly from 30% pay cut
Intercontinental saves N1bn monthly from 30% pay cut
Friday, 10 April 2009 00:04 Hope Moses-Ashike   
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Intercontinental Bank plc is expected to rake in about N1 billion monthly from the 30 percent pay cut of its staff. The action is in response to challenges being faced by the bank in recent times, according to analysts from Renaissance Capital (RenCap), a renounced global investment group and financial analysts based in London.
With the recent uncertainties pervading the banking industry, the bank had to subject its books to external independent scrutiny, said RenCap which observed that the cost base of the bank has increased three folds in the last two years alone.
Specifically, the report noted that between 2006 and 2008, it has grown from N22 billion to N72 billion over this period.
Between February 2006 and February 2009, the report further estimated that the bank’s cost base increased at a Compound Annual Growth Rate (CAGR) of 65 percent yearly, making it to have a cost base of over NGN100 billion Erastus Akingbola, MD, Intercontinental Bank
this year.
The report from the investment analysts noted that historically, the growth in the bank’s cost base has not been a problem because its income growth has been stronger, up 69 percent yearly over the past three years (2006 - 2009).
They further noted, however, that in the bank’s financial year 2010, its challenge will be to deliver strong profit growth in an environment of high loan loss provisions, for instance 60 percent year-on-year (YoY) and strong cost growth (20 percent YoY). In this scenario, with all other things being held constant, the report said the bank has to deliver income growth of 18 percent YoY for its profit before tax (PBT) growth to be flat year on year.
The report commended the management of the bank for the appropriate response to these challenges through the salary cut, adding that it will fetch the bank about N1 billion monthly.
“We are very encouraged that ICB recognises the challenges that its cost base presents and has taken the following steps:
*introduced a performance pay structure. Staff costs have become the largest component of ICB’s cost base over the past three years and now represent 54 percent of total costs, up from 41 percent of total in 2006. To reduce these costs, management has introduced a performance-based pay structure that has reduced salaries by 30 percent on a monthly basis. The remaining 30 percent is being paid out to employees on a quarterly basis when all their objectives are being met. The monthly savings are in the region of N1 billion.
*reduced overhead costs. ICB has set-up a strategic sourcing unit with the purpose of reducing overheads by capitalising on economies of scale to obtain lower prices/costs for supplies to the bank
*maintained cost target. For the next fiscal year, management has said it wants to limit its cost base to 35 percent of this year’s gross income. Based on our 2009 estimate for gross income, ICB’s cost base in 2010 should be around N81 billion, 20 percent lower than our 2009 estimate of its cost base (N101 billion),” RenCap said.
 
Author of this article: Hope Moses-Ashike
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You should have balanced views about this sort of sensitive issues , read this the article below

THISDAY Special Release

With recent uncertainty pervading the Nigerian banking industry, Intercontinental Bank Plc has subjected its books to external independent scrutiny in what industry analysts believe see as a new chapter on full disclosures by banks.
Analysts from Renaissance Capital (RenCap) told Reuters yesterday that after being shown the bank's balance sheet and its present financial position, the bank has enough capital to absorb its asset risks and there is no threat to its solvency.
A similar scrutiny has been done on Access Bank Plc and Diamond Bank Plc.
Renaissance is a renowned global investment group and financial analysts based in London.
According to Renaissance, “Weak disclosure requirements in Nigeria have fuelled concern about the health of its banks, particularly their exposure to falling capital markets after explosive balance sheet growth in recent years saw them take on higher levels of unsecured risk.”
Stocks of all the quoted banks have depreciated between 40 and 70 per cent over the past three months in high-volume trading amid speculation that their capital base is at risk from margin loan exposure and other non-performing loans.
They are now being traded as distressed institutions.
Intercontinental Bank Plc was not speared as its stock fell by 46 per cent within the period.
"The market is currently pricing the stock as a distressed asset and not as a going concern," Renaissance Capital said in a research note, maintaining a "hold" rating but lowering its target share price to N10 from N13.
“By publishing the bank's asset risks and stress-testing them, we hope to close the chapter on the de-marketing of this name and provide investors with the means to assess these risks,” said Renaissance Capital report on the bank.
Renaissance said an "aggressive assumption" would put the total capital at risk at Intercontinental Bank at N90 billion ($618 million) and that its capital adequacy ratio would still be 15 per cent even after absorbing that full charge.
This is in line with what the Governor of Central Bank of Nigeria, Prof. Chukwuma Soludo, had said earlier concerning the banking industry toxic assets to the effect that putting together all the exposures in the stock market and oil and gas, the capital adequacy ratio of Nigerian banks could write off the entire exposures and still remain strongly capitalised against global industry benchmark.
The aggressive “assumption” and “stress-testing” of Intercontinental Bank Plc would mean putting the bank’s entire exposure in the stock market and other bad loans as unsecured.
But Renaissance Capital said the bank’s margin loan exposure was 15 per cent of total loans and that the current cover (security for the loans) on the margin loan book stood at 70 per cent plus an additional 10 per cent of collateralised assets.
However, if the security is realised or called in, the N90 billion exposure would drop drastically by 80 per cent.
"While there are risks to Intercontinental Bank’s capital base and these risks need to be appropriately priced in by the market, they can be absorbed by the Intercontinental Bank’s balance sheet," Renaissance said.
"While maintaining its solvency is not a challenge for the group, we believe that the key operational concerns relate to its balance sheet structure and cost base."
The disclosure of its balance sheet position to independent international analysts points to the transparency and openness some banking industry critics have been clamouring for, following speculations that toxic assets in the banking industry is being covered up.
However, the interim report on the Bank’s financial year which ended in February 2009 shows that despite the global financial meltdown Intercontinental Bank has sustained its strong financial performance as one of the top five banks in the country in deposit, profitability and assets.
Intercontinental Bank was the first Nigerian bank to hit the N1trillion mark.
With this development, it is expected that other Nigerian banks may subject themselves to similar independent scrutiny.
The bank, in a statement on de-marketing, had said: “For several months now, the Banking Industry has been enmeshed in unethical practices of running down the competition, which has now been popularly known as ‘De-marketing’.
“Intercontinental Bank Plc had all the while been targeted for de-marketing by a crop of misguided bankers especially from a 1st Generation Bank, using smear campaign to scare our customers through deceitful remarks and text messages insinuating that Intercontinental Bank Plc is unsafe, all in an attempt to mislead the general banking public to believe that only their bank is safe in Nigeria.
“Central Bank of Nigeria three weeks ago made official statement on this matter. We wish to now formally make a public statement on this issue to all our customers and the general banking public.
“We believe that the attack on us by these bankers is their envious and desperate response to our God-assisted achievement in the last 20 years.
“Despite the de-marketing campaign against us, we thank God that Intercontinental Bank Plc has remained one of the strongest banks in the industry. Our financial results continue to show robust growth in our Deposit and Balance Sheet size.
“Since this de-marketing started and up till now by the grace of God, we have never defaulted on any of our obligations to any depositor whether foreign or local and we are not under any pressure that may warrant any such default.
“Our customers had not only remained loyal to the bank but have taken it upon themselves to compile names of staff of competing banks that are de-marketing us or any other bank for onward submission to the Central Bank of Nigeria for appropriate sanction.
“Intercontinental Bank Plc remains committed to ethical conduct and sound professional banking practice despite the on-going provocations, especially as our Chief Executive Officer is also the current President and Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN).
“We appreciate the support of all our numerous customers, the regulatory authorities and indeed the general banking public who have continued to express utmost confidence in our Bank despite the de-marketing.
“Once again, we promise, on behalf of the Board, Management and Staff of Intercontinental Bank Plc to continue to make you all our ‘Happy Customers’ in order for us to remain your ‘Happy Bank’.”


link http://www.thisdayonline.com/nview.php?id=140422

Ofcourse rencap is not tell Nigerians that intercontinental is broke. They use coded language like paycut, cut back in expenses, aggresive marketing e.t.c If Rencap just openly declare that IB is broke, do you think any other Nigerian bank will be doing business with them? Of course not. The fact still remains that IB is a ship steadily drowning.

the thing i dont understand with this 'demarketing' is that why is intercontinental the only bank being targeted and by who?

those naija banks and their funny way of doing business, how exactly is it possible for 80% of staff to be on the street chasing deposits?
how come other countries dont send their staffs on the street looking for deposits?

Dis Guy:

the thing i dont understand with this 'demarketing' is that why is intercontinental the only bank being targeted and by who?

those naija banks and their funny way of doing business, how exactly is it possible for 80% of staff to be on the street chasing deposits?
how come other countries dont send their staffs on the street looking for deposits?

Intercontinental bank is being targeted the most 'cause it's the only bank that internationalized itself more than any other bank in Nigeria. They kept receiving loans and credit facility from foreign banks at high interest rates. If you check my post from mid last year i was warning investors about the way IB is conducting business. I was voicing concerns shortly after they received a loan from one of the banks and shortly before the loan they posted huge profits in their book. No doubt this global crisis has and will hit IB more than most banks in Nigeria. These are the signs of a bank in trouble from jacked up deposit minimum to staff paycut, next it will be layoffs. A word is enough for the wise. NOBODY IS DE-MARKETING INTERCONTINENTAL BANK, THE BANK HAS BEATEN MORE THAN HE CAN CHEW. Did anybody believe the bank can survive at the rate they were going- unsustainable staff salaries, unreasonable share declaration, ill-advise operation tactics e.t.c.

People will not stop dealing with IB just because you say so , actually you don't have proves for this serious allegations , international agencies have rated IB in a positive way several times even while this rumor persists .Plz do read the articles below ;

Intercontinental Bank is Bank of The Year 2008 Financial - Times, London

Released on 01 Dec 2008

Intercontinental Bank Plc was named Bank of The Year in the 2008 edition of The Banker Awards,  in London. The most prestigious and credible industry award in the world is organized by The Banker Magazine, a publication of Financial Times of London, the world’s number one media conglomerate.

The Banker Magazine monitors the performance of key financial institutions across the world and articulates the profile of corporate actions for the purposes of rewarding best performers in their respective countries. Intercontinental Bank was adjudged best in Nigeria.

The bank’s ‘‘strengthened brand, strategic and growing global presence, and a clear mission to boost stakeholders’ returns”, are among the reasons given by The Banker for choosing  Intercontinental Bank as its Nigeria’s Bank of the Year 2008.

Fitch Ratings recently affirmed Intercontinental Bank’s National Long-term ratings at A+. This ranking indicates that the bank is a low risk financial institution. The agency also affirmed the bank’s international rating at B+, which is the highest for any Nigerian bank as at date by Fitch Ratings.

According to Fitch “the ratings reflect Intercontinental Bank’s developing domestic franchise, strong record of earnings growth and adequate capitalization’’. Standards & Poor’s has also pronounced the bank’s international rating as BB-, which is the highest for any Nigerian bank just as Nigeria’s sovereign rating is also capped at BB-. Fitch and S & P are the two world’s leading rating agencies for both corporate and sovereign risks.
.
The coveted Banker/Financial Times award was coming barely a month after the bank was named “African Bank of The Year’’ and “Financial Brand of the Year” by two leading international media groups in two separate events at the just concluded  World Bank/IMF meeting in Washington DC, USA. Industry observers believe that The Banker Magazine/Financial Times award shows consistency and confirmation of the judgment of all other awards the Bank won this year.

source http://www.intercontinentalbankplc.com/portal/general/pressrelease.php?n=49&mode=story&y=2008


Fitch Affirms Nigeria’s Intercontinental Bank at ‘B+’; Outlook Stable

Released on 11 Oct 2008

Fitch Ratings has today affirmed Intercontinental Bank Plc’s (Intercontinental) ratings at Long-term Issuer Default rating (IDR) ‘B+’ with a Stable Outlook, Short-term IDR ‘B’, Individual ‘D’and Support ‘4’. The Support Rating Floor of ‘B+’ was also affirmed. At the same time, Fitch affirmed Intercontinental’s National Long-term rating at ‘A+(nga)’ and National Short-term rating at ‘F1(nga)’.

The ratings reflect Intercontinental’s concentrated credit risk, rapid loan growth and Nigeria’s difficult operating environment. The ratings also consider the bank’s developing domestic franchise, strong record of earnings growth and adequate capitalisation. The Support rating and the Support Rating Floor reflect Fitch’s view that while support from the Central Bank of Nigeria (CBN) is possible, the authorities’ ability to do so may be limited, given Nigeria’s ‘BB-’ rating. The floor indicates the level below which Fitch would not lower its IDR in the absence of any changes to the assumptions underpinning the bank's Support rating.

Fitch believes Intercontinental’s earnings will continue to grow strongly in the medium-term. However, this may be tempered by the bank’s ability to raise capital to support loan book growth and possible margin squeeze as competition intensifies within the Nigerian banking sector. Intercontinental’s loan book has grown strongly in recent years (60.6% during FY08) and is concentrated in the riskier commercial/ SME sector, as well as the manufacturing and oil and gas industries.

Asset quality has been improving over the past four years, with a non-performing loan (NPL) ratio of 3.52% at FYE08 (FYE07: 4.39%) and a coverage ratio in excess of 100%. Excluding the impact of write-offs, Intercontinental’s absolute NPLs increased 70.3% during FY08. This should be seen in the context of its rapid loan growth,particularly to the commercial/ SME sector, an unseasoned loan book and a benign operating environment which may overstate the true level of asset quality.

At FYE08 Fitch considered Intercontinental’s Tier 1 ratio of 24.85% (FYE07:36.20%) to be acceptable. However, the agency notes that this ratio has been significantly eroded over the past 12 months after strong on- and off-balance-sheet growth in risk-weighted assets. The agency considers that a fresh injection of capital will be required should the rapid rate of credit growth continue. Intercontinental is one of the largest banks in Nigeria by system assets and capitalization. The bank commenced operations in February 1989 and provides universal banking services to multinationals, large domestic corporates, SMEs and individuals.

http://www.intercontinentalbankplc.com/portal/general/pressrelease.php?n=48&mode=story&y=2008


Now tell me , do you really think that financial times of London would wake up overnight and give this award to IB just like that ? Do you not know that they risk their own integrity and future trust in their rating competence by giving this award to IB
      I  do have IPSA and Normal savings account with IB and i withdraw collectively from both accounts 2 to 5 million naira every week , on no occasion have IB failed to honor my withdrawal requests to date .

And cutting employees salary by 30% ?? so much for the awards. yeah i have more awards for IBPLC


Best bank in Okitipupa - USA today

Most patronized bank iyun Ekiti - Forbes magazine

Tallest Building in Ijebu Igbo - New York Times

Most spacious banking hall in Abule egba. - Guinness book of world records.


Bunch of liars, yeye people.

@ Finecat,

What exactly is your problem? What has Intercontinental Bank done to you to warrant this demarketing strategy? Can you stand by your words if you are taken to the court of law on this? What exactly is your interest? What joy would you deprive in seeing millions of account holders with IB losing their money or its employees being thrown out of work?

If IB Plc is not safe but bankrupt as you claim, then what about the horde of microdinance organizations and banks springing up despite the recession. I really dont understand your point. Every business has its ups and down period, every entreprenuer makes mistakes but you dont have to kill them for it cos its part of the learning processes they use in coming back better.

which bank in Nigeria didn't borrow money from outside? What you claim the bank is doing is only normal if they need to scale thru the recession and hard financial times we are facing at the moment. If these procedures are needed for them to steer tru the hard times then its ok and not for pessimists like you to take advantage and ruin the efforts people have put in over the years to get to this stage.