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CEO Q & A with Abbey Building Society Plc


October 15 , 2008

Abbey Building Society Plc list October 21, 2008

-May raise post-listing fresh funds


“Abbey Building Society Plc (ABBEY) is the premier, largest and most profitable non-aligned Primary Mortgage Institution (PMI) in Nigeria. ABBEY was incorporated on August 26, 1991 and licensed to carry on business as a PMI by the Central Bank of Nigeria on January 11, 1992. ABBEY started with an Initial Authorised Share Capital of N5 million which has grown over the years through capital injection and bonus issue. (Source: Company’s profile made available to Proshare NI)


Proshare NI sought to find out more about the Primary Mortgage Institution (PMI) Abbey Building Society Plc (Abbey) and its proposed listing come October 21, 2008 on the Floors of the Nigerian Stock Exchange (NSE) in LagosNigeria.


In this interview with PETER OBIORA of Proshare NI, Rose Ada Okwechime, Managing Director/Chief Executive Officer (MD/CEO) of Abbey Building discusses issues concerning the proposed listing of the mortgage company, its last Private Placement (PP) that saw it raise N5.0 billion and its foreign investors.


Other issues discussed include the company’s  projected dividend payout, share certificate of investors that participated in its Placement, plans to do an Initial Public Offer( IPO) towards the end of year 2009 and the company’s efforts at providing mortgages for Nigerians; including its future outlook. Excerpts:


Abbey Building & listing of 4.2 billion shares on the Exchange

The 4.2 billion shares we are listing is what we believe we need at the moment. We have Authorised Share Capital of N3.5 billion of 50kobo each which translates to 7billion numbers of shares out of which 4.2 billion shares is being listed. Subsequently, we would see how it would help us in the creation of real mortgages between now and next year.



Our anticipation is that between now and next year, we may do an Initial Public Offer (IPO) to still increase our Share Capital. We are looking towards N15.0 billion Share Capital, for you to be a real mortgage bank player in the market, I think that is what Abbey Building requires and we are very hopeful we can achieve that; despite the current market situation.



EDITORS NOTE:   The company would on October 21, 2008 list 4,200,000,000 Ordinary Shares of 50 Kobo each at N3.50 Kobo per share. The mortgage company started business with an initial authorised share capital of N5.0 million divided into 5,000,000 Ordinary Shares of N1.00 each. Currently, the authorised share capital of the company is N3.5 billion divided into 7.0 billion Ordinary Shares of 50 Kobo each.


Abbey Building and last Private Placement

We went for Private Placement (PP) in late 2006 which was oversubscribed and we picked up over 300 subscribers and that was our motivating factor to apply to be a Public Liability Company (PLC).



A lot people showed interest and we are now going to the NSE to list by introduction. The Placement was successful.



EDITORS NOTE:   As at the time of filling in this interview, Proshare NI could not get a copy of the Placement Memorandum for further details.




Abbey Building and dividend payment to investors

We paid a dividend of 0.4 Kobo in year 2007 Financial Year End (FYE). For the current financial year, we would like to surpass our last years figure. Our total income before expenditure for the current financial year has crossed N1.0 billion.



Again, Abbey Building made a Net Income projection of N600 million, we made a forecast of 0.5 Kobo dividend payout in the 2008 FYE, however, we might surpass this figure, but we would not pay less than 0.5 Kobo.



Before we began to think making profit this year, it was past the month of March, by this time, we were still putting in place modalities for our listing, how to attract the market to

AbbeyBuilding and how to make profit quicker and the things to set aside for slow growing; which mortgage bank is all about.


Mortgage bank is unlike the commercial banks that overnight ballooned into large income base. Our asset will grow higher with the number of mortgages we are going to create and we are also into property development, Abbey Building have a lot of property as asset which are not reflected at market price in our books.



When we did a valuation of these properties in year 2006, they stood at over N1.5 billion; we don’t know the current value now. The CBN advised that we should not reflect valuation cost but maintain them at cost price.



This is one of the intrinsic value that ABBEY is bringing to the market to new investors which would also add to the assets of the shareholders. We consider the CBN advice as prudent.



In addition to the above, we also believe that with our relationship with foreign investors and their network, we would develop some of these properties and start making regular streams of income.



On dividend we are always very careful about this issue as we do not want to proclaim an unrealistic dividend. We want to grow our asset and shareholders fund so that investors are assured of long term value.



This strategy we believe will enhance the value of our stock on the Exchange which would eventually be translated into a consistent share bonus and capital gains.

AbbeyBuilding cannot start to operate like a commercial bank. Mortgage banking is a long term investment and involves hard work.


Apart from the above, we would continue to operate in a transparent manner, be ethical and professional in our work. We intend to have a good balance sheet that would enable investors have confidence in us and ultimately trade in our shares on a consistent basis in the market.



If individuals want to own their homes for instance, they have to cut down on their expenditure. The money realised from cutting down their expenditure would be invested into property, because it is the most important investment in their lives.



You can also buy shares, but owning a property gives you a peace of mind. If you own a home, when you walk in, you feel like a master, but if you are on rent, the Landlord may come in one day, and see how you have furnished your house and congratulates you. However, when the rent expires, the Landlord would subsequently give you a large increase in your rent which you may not afford.



Abbey Building and its foreign investors

Foreign investors bought into AbbeyBuilding, the major thing is that these foreign investors gave both equity and loan. Thus, this loan is convertible into equity. Their present equity is just right for the type of business we require.


The values they bring are numerous in terms of their network of fund providers from the international market, training and capacity development for all cadre of staff. These benefits cannot be easily quantified in Naira and kobo.



If they want to change their term loan into equity, you will find that they would have a significant holding in AbbeyBuilding and as time goes on, they can exercise the option to continue to increase their holding. ABBEY relies on the network of these investors for upgrade to international best practices in mortgage banking.


EDITORS NOTE:   “We have received Expression of Interest (EOI) from various investors (local and foreign) who are at various stages of due diligence. These EOI are being considered on the basis of their merit and synergy to our service offerings” (Source: Company’s corporate profile made available to Proshare NI)


Abbey Building and proposed IPO

We hope that by next year, maybe October or November, we would open an IPO; it all depends on how well we perform. If we perform very well on our present capital, we would not be in a hurry to increase our share capital.



It is only if we find out that the loans are not coming; because mortgage needs a long term loan and that is the reason we believe in asking the company’s shareholders to bring money; so that we would be able to give out mortgages for 15 to 20 years, we cannot do that with short term funding.



Future of AbbeyBuilding

The future is very bright; in terms of the opportunities in the market. Our vision is “to become the number one mortgage bank in

Nigeria”. We are looking at taking some of our staff to go abroad for capacity development in the area of mortgage banking practice. They would be trained more on mortgage banking and its operations; this would be between now and early next year. And this would be a continuous thing.


Also some would go to Dutch Development Bank (FMO) for an exchange programme. The future means that a lot of people that never thought it would be possible for them to own their homes; especially the middle and lower class individuals would do so. The lower class through the National Housing Fund (NHF) would apply and secure a mortgage.




Building is also aiding a lot for Property Developers; we have taken some of them that are serious and financed them; by helping them to develop affordable housing. We are also looking at infrastructure financing in the educational sector in collaboration with some developers.


Abbey Building also hope to keep its investors and attract more, we actually need long term financing and the Government is making arrangements with the Federal Mortgage Bank of Nigeria(FMBN) for a secondary market.



However, we have to initiate first and foremost the primary market; which is the reason we are working hard and to have a big bulk mortgage which we would discount and still get cheap funds to be able to grant mortgages to a lot of Nigerians.



There are so many Nigerians that can afford to own their homes, but they do not know how to go about it. This is already working; people can walk into

AbbeyBuilding and talk about getting mortgages to own their homes.


The major thing is to get Nigerians to come to AbbeyBuilding for their mortgages; no matter the level they are, we can advice them better. Majority of income Nigerians earn, goes on rent, but they can start saving and come to ABBEY and we advice them on the type of house to have and offer them mortgages after assessing them.



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