How Polaris Bank is redefining lending business with impactful finance

Polaris Bank, a leading digital retail bank in Nigeria, is setting a new standard in the lending business by blending traditional risk management with a focus on impact-driven finance. This unique approach is benefiting stakeholders across the board, demonstrating that empathetic funding for critical sectors of the economy and households can lead to success even in challenging times.

Recent results show that Polaris Bank has achieved a significant performance breakthrough, surpassing its previous full-year profit before tax by more than 28 percent in just the first eight months of the year. This reflects the bank’s improved cost efficiency and enhanced credit risk management.

With rising customer confidence, stronger margins, and robust growth in its core banking operations, Polaris Bank is poised for a potentially record-breaking performance in 2024, signalling continued momentum in its pursuit of impactful and sustainable finance.

A review of the loan disbursements during the first eight months of the year showed an uptick, with the bank continuing a strong focus on small and medium enterprises (SMEs). The loan portfolio continues to reaffirm the brand essence of Polaris Bank, impact-focused banking that prioritises retail banking, SMEs, equal opportunity, youth, healthcare, education, family and environment among others.

A member of the United Nations Environment Programme Finance Initiative (UNEP FI), Polaris Bank sees its business as not only a sustainable profitable entity but also as a social intervention to help humanity, starting from Nigerians, to achieve self-satisfaction and safety. The UNEP FI seeks to engage the private sector and the global financial sector to help create a financial sector that serves people and the planet while delivering positive impact.

About N60 billion has so far been disbursed in new loans to SMEs over the past eight months while about N17 billion was disbursed under personal loans. Instructively, in a period of macroeconomic headwinds, the bank has remained supportive of small and medium entrepreneurs. Invoice financing totaled N22.17 billion by August 2024, already ahead of N21.12 billion disbursed for the full year 2023. Business loans were up to N23.8 billion by August 2024, on course to surpass N35.21 billion disbursed for the whole of 2023.

Annualised, management accounts for the eight-month period ended August 31, 2024 showed that Polaris Bank would significantly surpass all key performance indicators recorded in the year ended December 31, 2023.

With average profit on every transaction four steps ahead of the previous year, the bottom-line performance underscored a steady improvement in the core banking business, despite the challenging operating environment.

The overall outlook of the bank lent credence to the growing confidence and success of the new management of the bank, under the leadership of Kayode Lawal.

The constitution of a full board for the bank two weeks ago was seen by industry analysts as a clear endorsement of the bank’s remarkable strides under the current management by the Central Bank of Nigeria (CBN).

Pre-tax profit margin for the eight-month period ended August 2024 stood at 10.62 per cent as against 6.61 per cent recorded for the full-year 2023, an increase of about four percentage points. Net interest income margin stood at about 52.6 per cent in August 2024 as against 52.1 per cent in December 2023. Pre-tax return on total assets for the eight-month period rose to 1.22 per cent as against 0.63 per cent recorded in full-year 2023. Pre-tax return on equity stood at 21.44 per cent in August 2024 compared with 13.15 per cent in December 2023.

At N16.733 billion in the first eight months of this year, profit before tax was 28.4 per cent ahead of the N13.033 billion recorded in full-year 2023. The bank had recorded a net profit of N10.91 billion in 2023.

Key extracts of the management accounts and report for the period ended August 2024 indicated gross earnings of N157.59 billion, with interest income at N137.15 billion. Net interest income stood at N72.18 billion. Non-interest income closed at N20.44 billion while net operating income stood at N78.17 billion.

With total operating expenses at N61.43 billion, pre-tax profit surged to N16.733 billion, setting up the bank for its highest profit performance in recent years.

Read also: CBN appoints Board of Directors for Polaris Bank

Key balance sheet items also underscored growing brand adoption and business penetration, with the bank continuing its tradition as a bank-to-go-to for small and medium enterprises. Customers’ deposits closed at N1.663 trillion. Total equity has surpassed full-year performance at N115.86 billion in August 2024 as against N99.13 billion for full-year 2023. Total assets are also already ahead of the previous full-year performance, at N2.060 trillion by August 2024 as against N2.058 trillion recorded by the end of 2023.

Kayode Lawal, managing director of the Bank, said the results evidenced the early successes of the ongoing strategic initiatives aimed at strengthening the bank’s overall position in the banking industry.

According to him, Polaris Bank is positioned to sustain its upward growth trajectory while remaining focused on its people-centric principles.

“We are in a stronger position now to steadily build on the early gains and deliver exceptional value to our stakeholders,” Lawal said.

He pointed out that increasing brand penetration shows that the discerning banking public continues to trust Polaris Bank as a safe haven for their deposits and a reliable partner for their businesses.

Audited reports and accounts for the year ended December 31, 2023 had shown gross earnings of N197.04 billion with interest income of N144.68 billion and net non-interest income of N44.9 billion. Non-interest income was boosted by net trading and unrealised foreign exchange (forex) income, which stood at N32.24 billion during the year. Operating income stood at N97.19 billion. With operating expenses at N84.15 billion, pre-tax profit closed at N13.033 billion. After taxes, net profit stood at N10.91 billion, implying earnings per share of 44 kobo.

The bank continues to provide support across all key social impact lines of education, health and environment. A bit expository of the structural components of the loans underlines how Polaris Bank has been a major enabler for Nigerian businesses and households. Under its cash flow-lending product for SMEs known as Polaris Business Loan, the bank offers existing and new SME customers the opportunity to access quick loans for stock replacement, equipment finance, working capital and business expansion to sustain and scale up in the business. SMEs which take the business loans, are also eligible to access free tailor-made capacity-building training which is offered periodically by the Polaris Business Advisory Academy.

Polaris Bank is a major funding sponsor and partner for several large-impact empowerment programmes, including the Lagos State Employment Trust Fund (LSETF) through which it provides multi-million-naira amenable loans to artisans operating in Lagos State. Lagos State’s informal economy, under which artisans are categorised, is estimated to employ some six million people – about three-quarters of the state’s estimated eight million labour force. Lagos alone is estimated to account for some three-quarters of Nigerians in the informal economy. Despite its evident potential, the informal economy is often faced with difficulties, one of which is the lack of access to finance. The LSETF was established by The Lagos State Employment Trust Fund Law 2016 to provide financial support to residents of Lagos State, for job, wealth creation and to tackle unemployment.

Under its ‘Polaris Education Loan’, the bank sets aside a dedicated credit line to support private school owners. The Polaris Education Loan offers both new and existing private primary, secondary, and tertiary institutions customers access to loans of up to N100 million to meet their various funding needs. About N2 billion has been disbursed in the past 20 months.

With Nigeria’s education sector at the centre of the nation’s rebirth; the credit line forms part of the bank’s effort to support Nigeria’s vital educational sector by ensuring that schools meet their goals and growth aspirations. The product offers the promoters of private schools credit facilities to meet their various administrative needs: payment of salaries, finance rent, purchase of laboratory equipment, school buses, furniture, books for the library, school renovation and expansion.

Also, the Bank’s Health Sector Loan is designed to meet the funding needs of healthcare service providers in Nigeria, especially SMEs in specific health sub-sectors such as dental and optometry clinics, pharmacies and medical laboratories and diagnostic centres among others. The Polaris Health Sector Loan product offers a lot of benefits for SMEs including tailor-made funding, payment solutions for collections of fees, financial advisory services, capacity-building programmes and dedicated relationship management among others. The product is available as an overdraft or term loan with extended tenors, depending on the unique funding needs which include a working capital requirement for stock and consumable purchases, term loan for rent, renovation, remodelling or expansion, acquisition of operational vehicles, generators, air conditioners and refrigerators for storage. The product is available to existing and new customers looking to grow their businesses in the sector.

With its award-winning digital lending platform, VULTe digital bank, digital lending continues on the rise, with about N10 billion disbursed within the past eight months, on course to surpass N12.8 billion recorded for the whole of 2023.

The continuing growth in digital lending underscored the user-friendly experience of VULTe. In its Digital Channels ScoreCard Report, sub-titled: Leveraging Superior User Experience (UX) on Digital Channels to drive Retail Banking Growth in Nigeria; KPMG identified five distinctive metrics to assess digital relevance including digital onboarding, payments and transfers, digital lending, self-service and customer care.

A full digital bank that provides fast, convenient and reliable solutions to banking needs; some of VULTe’s unique features include QR payments, end-to-end account opening, instant loan request debit card requests, issuance and activation, without the customers leaving the comfort of their homes, offices or wherever they may be. The platform does not just cater to Polaris Bank’s customers alone but non-customers can also download and enjoy banking services on VULTe. Another key feature is VULTe’s API Banking, which allows merchants and businesses to integrate VULTe with other business-critical systems, enabling a portfolio of services including risk assessment, bank statement requests, lien accounts, direct debits and more

Industry analysts expected the recent constitution of the full board of the bank, with a stronger management team and diverse board experience and expertise, to deepen growth and enhance the operational performance of Polaris Bank.