Source: Oluwaseyi Bangudu, 234Next, December 13, 2009

CBN Building

Anxiety is widespread in the Nigerian banking community ahead of yesterday’s release of the balance sheets of the 10 banks queried by the Central Bank after its special audit. Banking industry experts believe the financial position of eight of the banks is “grave” with combined losses hitting over ₦1 trillion.

This new development is as a result of the nine months balance sheets of the banks that was released to the Nigerian Stock exchange yesterday. Inside sources reveal that the balances of all the books were in red, with some banks revealing losses as high as ₦200 billion.

“We estimate that the combined banks’ losses of these banks are estimated to be over ₦1 trillion. We haven’t seen the total figure but Oceanic Bank have come out with their own books, with about ₦200 billion losses. Union Bank we hear, is with another ₦200 billion, so if the others present similar losses, we are talking of about ₦1 trillion. That is a tremendous amount of money,” he said.

Way forward
“This means that those banks no longer exist. Atuche has been asking for Bank PHB to be given back to him, but then, he needs to recapitalise up to the tune of about ₦250 billion. Where is he going to see that kind of money from?

The best bet for these banks are for them to be handed over to foreign institutions. How many would take them on? I don’t know of many foreign investors who would be interested in these banks, at this point,” he said. A source at Intercontinental Bank Plc confirmed to NEXT that the rescued banks were required by the Central Bank to submit their nine months results, but he would not be drawn to the balance sheet outlook of his bank. “The Central Bank said that all the nine banks should bring their results. There is no going back on that,” he said.

However, a top official of Fin Bank Plc, claims the concern is not only for the rescued banks. “It is an industry wide concern. For the past two weeks, all banks have been submitting their third quarter results, so it’s not all about the rescued banks,” he said.

Bismarck Rewane, in his outlook for the rescued banks reasoned that investors are increasingly pessimistic. “While market indications look impressive, investors are shorting their stocks. Policy statements such as ‘Investors in the distressed banks have lost their entire worth and bank shares cannot qualify as collateral for loans’ have made investors increasingly pessimistic, with no hope of recovery in sight. Despite low interest rates, investors do not consider equities a lucrative asset class,” he said.

On August 14, the governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi raised concerns that as far as October last year, some Nigerian banks showed serious liquidity strain and had to be given financial support by the Central Bank in the form of an “Expanded Discount Window,” (EDW), where the CBN extended credit facilities to these banks on the basis of collateral in the form of Commercial Paper and Bankers acceptances.

According to him, as at June 4, 2009, the total amount outstanding at the Expanded Discount Window was ₦256.571 billion. After about four months of special auditing of all Nigerian banks, nine banks were declared to be in grave situations. The banks are currently seeking investors to recapitalise them. The banks are Afribank, FinBank, Intercontinental Bank, Oceanic Bank and Union Bank, Wema Bank, Bank PHB, Spring Bank and Equitorial Trust Bank.

The banks were accused by the Central Bank of “excessively high level of non-performing loans, Poor corporate governance, lax credit administration, failure to meet prudential ratios such as liquidity and capital adequacy, high level of loan concentration to the capital market and oil and gas sectors.” Mohammed Abdullahi, head, corporate affairs department of the Central Bank of Nigeria explained to NEXT recently that the Finance Ministry, with the Central Bank of Nigeria were considering three possible solutions for stabilising the rescued banks.

“There are options, three options to go about stabilising these banks. The first is for foreign investors coming to invest in the banks and buy them up. The second is to encourage acquisition and mergers by strong local banks in Nigeria. The third option is the one that government would acquire equity shares and then sell to the public at a later date, which is not nationalisation,” he said.

Nigerian Bank Nigeria Afribank Plc, Bank PHB Plc, Equitorial Trust Bank Plc, Finbank Plc, Intercontinental Bank Plc, Oceanic Bank Plc, Spring Bank, Union Bank PLC, Wema Bank Plc

Source Next: Oluwaseyi Bangudu, 13th December 2009

Anxiety is widespread in the Nigerian banking community ahead of yesterday’s release of the balance sheets of the 10 banks queried by the Central Bank after its special audit.

Banking industry experts believe the financial position of eight of the banks is “grave” with combined losses hitting over ₦1 trillion.

This new development is as a result of the nine months balance sheets of the banks that was released to the Nigerian Stock exchange yesterday. Inside sources reveal that the balances of all the books were in red, with some banks revealing losses as high as ₦200 billion.

“We estimate that the combined banks’ losses of these banks are estimated to be over ₦1 trillion. We haven’t seen the total figure but Oceanic Bank have come out with their own books, with about ₦200 billion losses. Union Bank we hear, is with another ₦200 billion, so if the others present similar losses, we are talking of about ₦1 trillion. That is a tremendous amount of money,” he said.

Way forward

“This means that those banks no longer exist. Atuche has been asking for Bank PHB to be given back to him, but then, he needs to recapitalise up to the tune of about ₦250 billion. Where is he going to see that kind of money from?

The best bet for these banks are for them to be handed over to foreign institutions. How many would take them on? I don’t know of many foreign investors who would be interested in these banks, at this point,” he said.

A source at Intercontinental Bank Plc confirmed to NEXT that the rescued banks were required by the Central Bank to submit their nine months results, but he would not be drawn to the balance sheet outlook of his bank. “The Central Bank said that all the nine banks should bring their results. There is no going back on that,” he said.

However, a top official of Fin Bank Plc, claims the concern is not only for the rescued banks. “It is an industry wide concern. For the past two weeks, all banks have been submitting their third quarter results, so it’s not all about the rescued banks,” he said.

Bismarck Rewane, in his outlook for the rescued banks reasoned that investors are increasingly pessimistic. “While market indications look impressive, investors are shorting their stocks. Policy statements such as ‘Investors in the distressed banks have lost their entire worth and bank shares cannot qualify as collateral for loans’ have made investors increasingly pessimistic, with no hope of recovery in sight. Despite low interest rates, investors do not consider equities a lucrative asset class,” he said.

On August 14, the governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi raised concerns that as far as October last year, some Nigerian banks showed serious liquidity strain and had to be given financial support by the Central Bank in the form of an “Expanded Discount Window,” (EDW), where the CBN extended credit facilities to these banks on the basis of collateral in the form of Commercial Paper and Bankers acceptances.

According to him, as at June 4, 2009, the total amount outstanding at the Expanded Discount Window was ₦256.571 billion.

After about four months of special auditing of all Nigerian banks, nine banks were declared to be in grave situations. The banks are currently seeking investors to recapitalise them. The banks are Afribank, FinBank, Intercontinental Bank, Oceanic Bank and Union Bank, Wema Bank, Bank PHB, Spring Bank and Equitorial Trust Bank.

The banks were accused by the Central Bank of “excessively high level of non-performing loans, Poor corporate governance, lax credit administration, failure to meet prudential ratios such as liquidity and capital adequacy, high level of loan concentration to the capital market and oil and gas sectors.” Mohammed Abdullahi, head, corporate affairs department of the Central Bank of Nigeria explained to NEXT recently that the Finance Ministry, with the Central Bank of Nigeria were considering three possible solutions for stabilising the rescued banks.

“There are options, three options to go about stabilising these banks.

The first is for foreign investors coming to invest in the banks and buy them up. The second is to encourage acquisition and mergers by strong local banks in Nigeria. The third option is the one that government would acquire equity shares and then sell to the public at a later date, which is not nationalisation,” he said.

Nigerian Bank Nigeria Afribank Plc, Bank PHB Plc, CBN Central Bank Of Nigeria, ETB Equitorial Trust Bank Plc, Finbank Plc, Intercontinental Bank Plc, Nigerian Stock Exchange, Oceanic Bank Plc, Spring Bank Plc, Union Bank Nigeria Plc, Wema Bank Plc