SALVAGING N75BN INVESTORS' FUND
The need to salvage over N75 billion of investors' fund trapped in the remaining troubled banks - Intercontinental Bank Plc, Oceanic Bank International Plc, Union Bank Nigeria Plc and Finbank Plc, have brought to the fore the need for stakeholders in the nation's financial sector to ensure a speedy conclusion of ongoing consolidation and also support the plans by certain banks to merge with or acquire the troubled banks.
With the recent nationalisation of Afribank, Spring Bank and BankPHB by the Central Bank of Nigeria, CBN, and the Nigerian Deposit Insurance Corporation, NDIC, it has become necessary to ensure a successful completion of the recapitalisation drive of the remaining banks, either through mergers and acquisition or through other means, leaving the CBN, NDIC and Asset Management Corporation, AMCON, minimal opportunity to repeat the feat of Friday, August 5, 2011.
The value of investors' funds in Intercontinental Bank stands at N13.202 billion, represented by its total issued capital of 18.86 billion ordinary shares at its current market price of N0.70 per share.
Oceanic Bank has a 22.22 billion issued shares currently selling at N1.15, putting investors' fund in the bank at N25.55. Union Bank has total issued shares of 13.51 billion and is currently trading at N2.09, putting investors' funds at N28.235 billion, while investors' holding in Finbank Plc stands at N8.361 billion, represented by total issued shares of 16.72 billion at a current market price of N0.50 per share.
The ongoing consolidation in the banking sector moved into high gear, last month, with the announcement on July 11, by Access Bank and Intercontinental Bank of a Transaction Implementation Agreement, TIA.
Since the announcement, three other intervened banks - FinBank, Union Bank and Oceanic Bank have announced the signing of a binding terms with their respective acquirer or partner - FCMB, African Capital Alliance (ACA) and Ecobank Transnational Incorporated, ETI.
According to analysts, in a report titled: 'Banking on the White Knights,' made available to Vanguard, it is critical that stakeholders in the Nigerian financial system do not lose sight of the critical issues thrown up by the consolidation exercise, such as the role of the regulator, the recapitalization process itself and third is the role and expectations of the banks and other stakeholders.
The report said that the legitimacy of the CBN in exercising its powers is consistent with its role as a regulator, adding that the CBN's careful consolidation of the Nigerian banking sector has already proven itself to be essential to the future stability and growth of the Nigerian economy.
The report further noted that about N3.5 trillion of Nigerian banking industry deposits, are held by the eight 'intervened' banks, with the largest portions in Intercontinental, Union and Oceanic Bank.
The report explained that with the signing of TIA by these three banks and FinBank, 80 per cent of deposits in affected banks have found safe harbour, adding that the 'white Knights' that have made this possible should be encouraged and supported by all stakeholders, especially the CBN and shareholders.
The report emphasised the need for the authorities and other stakeholders to ensure that the process leading to the resolution of the crisis in the banks remains professional, consistent and in line with international best practice.
It said that the CBN and other regulators such as the SEC and NSE must ensure they focus on the four banks that have demonstrated seriousness so far and ensure that necessary approvals and support needed to close the transactions is provided promptly.
The report said, 'Time is of the essence and the regulators should move fast and get the job done in the interest of the economy and the nation.
'At this point, it is important to note that the role of a 'white Knight' is more than capital injection. From the results of the 2009 CBN audit, it is clear that intervened banks require more than capital. A 'white Knight' therefore must be a bank with strong fundamentals, an institution the CBN and indeed Nigeria can hold accountable for safe delivery of a distressed entity.
'Such an institution would carry with it a strong brand, good reputation, an impressive track record of performance, effective leadership, robust risk management culture and 'best practice' corporate governance. These are qualities necessary for providing safe harbour to intervened banks. '
The report is of the view that the Access Bank and Intercontinental Bank combination appears to have become the reference point for efficiency and compliance in the recapitalisation process.
The analysts explained that under the watchful eyes of the CBN, both banks have managed the process with the highest levels of professionalism and focus, adding that report from insiders, claim that the integration teams of both banks have been working together for several months under the guidance of world-class advisers.
They added that the management of both banks have made compliance with best practice standards their watchword, coupled with extensive engagement of all stakeholders.
'As the 'white Knights' and their benefactors (intervened banks) approach shareholders in the coming days for approval, the nation expects nothing less than a resounding vote for the recapitalization process.
'Shareholders must vote to protect depositor's funds. They must vote to keep the respective banks alive. They must vote to keep the jobs of thousands of employees who would otherwise be thrown into the job market. They must vote right! If shareholders do the right thing, they will be celebrated. Nigeria will be celebrated. Nigeria cannot afford to lose this opportunity,' the report said.