Troubled banks look abroad for recapitalization funds

THERE are strong indications that the seven troubled banks that are yet to be recapitalised are resorting to foreign stock exchanges to raise fund to beat Central Bank of Nigeria’s (CBN’s) deadline.


The apex bank had, on Tuesday, issued September 30 deadline to the banks yet to be recapitalised to boost capital or face nationalisation. The affected banks are Intercontinental Bank; Oceanic Bank; FinBank; Afribank; Spring Bank, Bank PHB and Union Bank.

Confirming this development, London Stock Exchange’s (LSE’s) Head, Primary Markets for the Middle-East and Africa, Ibukun Adebayo, said some of the affected Nigerian banks were actually seeking to be listed on the LSE to raise funds to beat the CBN recapitalisation deadline.

Though Adebayo refused to disclose the identities of the banks,it was gathered that four banks that have challenges with their partners are fine-tuning the necessary documents to raise money from the London Exchange.
“Financial services in Nigeria are an area where we see increases in listings. I will not disclose the names of the banks because it is still confidential,” said Adebayo.

The apex bank had in 2009 injected N620 billion into eight banks deemed by auditors to have become so weakly capitalised that they posed a risk to the entire banking system.

The Asset Management Corporation of Nigeria (AMCON) was set up to restore them to zero shareholders’ funds, while new investors have been sought to bring them up to minimum capital adequacy.
Where banks fail to reach merger agreements, the CBN had said AMCON could inject funds, effectively nationalising them, but there has been resistance to this from some bank directors and shareholders.

Meanwhile, Oceanic Bank said it would meet the CBN’s deadline for completing its recapitalisation and has received several expressions of interest.

According to the bank’s Head of Corporate Corporation, Monye Mpho, Oceanic Bank would choose the bidder that offered the best value, adding that the bank would soon make public its new partner.
FinBank has signed an agreement to merge with First City Monument Bank Plc (FCMB), FCMB said on May 5, while Union Bank, on March 23, said it signed an agreement with African Capital Alliance, under which the group would invest $750 million in the bank.

Access Bank Plc, on March 27, said it would merge with Intercontinental Bank.

The LSE has 18 companies trading on its main market and 56 on its Alternative Investment Market that are incorporated or have operations in sub-Saharan Africa.

Four African companies have global depositary receipts listed on the exchange, including Lagos-based lenders Diamond Bank Plc and Guaranty Trust Bank Plc.

Meanwhile, the World Bank, on Thursday, released a report on ways of achieving Nigeria’s financial system strategy by 2020, in which it said there was the need for further banking reforms in the country.

The bank said in spite of the recent efforts, the banking system in the country remained relatively small, with credit at only 35 per cent of Gross Domestic Product (GDP).

In the 174-page book obtained by the Nigerian Tribune, the World Bank said for further growth of banks to be sustainable, a number of significant risks should be addressed.
The bank advised the Central Bank of Nigeria (CBN) to address the absence of transparency on questions of ownership of the banks and the lack of financial reporting consistent with international standards.

It raised the alarm that the involvement of the apex bank in the Asset Management Company of Nigeria (AMCON) may result in perceptions of conflicts of interest, adding that to deal with this, a separate state-owned special purpose vehicle should be established to take over CBN’s quasi-equity holdings and the functions of AMCON.

Speaking while presenting the report to critical stakeholders represented by the Director-General of the Securities and Exchange Commission (SEC), Ms Arunma Oteh; Director General of PENCOM, Mr M. Ahmed; Director, Strategy, CBN, Walter Ahrey, among others, the World Bank’s Country Director, Onno Ruhl, insisted that other issues that remained to be addressed by the CBN included assessing the full extent of portfolio weaknesses in all banks and designing suitable exit strategies for government, following the capital injections into the troubled banks.

Others, according to him, were dealing with defaulting debtors and recovering troubled assets, as well as pursuing reforms to address weaknesses in governance and transparency.

“Most of Nigeria’s banks were closely held by individuals and family interests, leading to concerns about connected lending and concentration of risks. Furthermore, financial statements in Nigeria are not prepared according to International Financial Reporting Standards (IFRS),” he said.

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