Nova Merchant Bank, a three-year-old Nigerian lender, said it has raised long-term funds to finance projects in Agriculture, Fintech, healthcare, and telecoms, among others.
Nova is focusing on these sectors for financing projects because they are the areas where the bank currently sees opportunities, managing director Anya Duroha said.
Nova set to raise 10 billion naira as Tier-2 capital, but the offer was oversubscribed by over 300 percent to 31 billion naira, Duroha said.
He said the bond has a tenor of seven years and is callable after five years. The coupon rate is 12 percent.
“Investors who bought the bond were quite diversified: individuals, corporate bodies, asset management companies, insurance companies, and foreign investors,” Duroha said in virtual media parley on Monday from Lagos, Nigeria.
Nova will deploy the funds in the areas of agriculture, fintech, telecom, and healthcare. “These are the areas we see opportunities now,” Duroha said. A substantial part of the funds will go into financing exporting capacity for Nigerian companies, he said.
While 12 percent may be considered high currently, given that rates have fallen, the CEO believes it was considered a good rate for corporates at the time the bank went to the market, especially given that the bond is callable after five years.
He said the bank’s Capital Adequacy ratio was 53.57 percent, far higher than the regulatory requirement of just 10%. That rate was considered good at the time, even though rates have subsequently fallen in the local market now to about 10 percent
Value Chain Approach
While focusing on corporates in its funding activities, Nova is also applying what it calls the Value Chain Approach, said Duroha. “We are not just looking at the corporate entity we are dealing with. We are also interested in the value chain of that entity, including their suppliers.”
He explained that while funding the corporates, the bank also makes provision for them to be able to support the SMEs that fall within their value chains. Nova takes these into account in providing the fund because, “even if you support the corporate and their value chain is not doing very well, then that corporate will also not do very well”.
The strategy is working for the bank, said the CEO. Beyond helping the corporates and the SMEs, it is also helping the bank. In Nova’s three years of operation, it has not recorded any non-performing loans. Even in the area of what they call delayed payments, Duroha said the bank does not have delayed payments longer than seven days.
Nova has done well within short that it has been in operation. In 2017, earnings stood at N1.2b but rose to N1.8b in 2018. Profit in 2017 was N510b, doubled to N1.15b in 2018, and rose to N1.56b in 2019. For the first half of 2020, Duroha said “We’ve done extremely well”.
“In the new environment created by the COVID-19 pandemic, traditional ways of doing things will no longer suffice. Every bank, every organization has to get creative about the business they offer and how they offer those services,” he said.
In the COVID-19 pandemic period, he said there are clear winners – in the fintech, telecoms and healthcare sectors. Let us say we are looking at those winners and we have rich pipeline of those winners.
