NATIONALISED BANKS: Shareholders to sue CBN, NDIC, AMCON

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By Omoh Gabriel, Emma Ujah, Babajide Komolafe, Victor Ahiuma-Young and Michael Eboh
LAGOS— The decision of the Federal Government to take over three of the eight rescued banks has thrown the Nigerian Stock Exchange into a quandary as the shareholders of the three banks- Afribank, Bank PHB and Spring Bank are making moves to commence mass legal action against the exchange for not protecting their investment.

Following the nationalisation of the banks by the government last Friday, the shareholders resorted to panic dumping of their shares at the secondary market, thereby depressing the market even as the Nigerian Labour Congress blamed the Central Bank of Nigeria for the crisis in the banking sector and warned against victimisation of workers.

Also yesterday, the Nigeria Deposit Insurance Corporation, NDIC was busy explaining how Equatorial Trust Bank escaped regulators’ hammer, last weekend when the other three banks were nationalized, saying that it was confident that on-going negotiations with investors would result in sealing a deal before the September 30, deadline.

Council member reacts

A council member who spoke angrily on condition of anonymity disclosed that the Nigerian Stock Exchange was not taken into confidence in the decision to take over the banks, saying that it has a lot of implication for the future of the market.

According to him, the decision did not take into account the interest of both the majority and minority shareholders who are affected by the sudden take over of the banks. It was learnt that the unilateral decision is causing some furor at the exchange as there is the fear that shareholders may take legal action against the exchange for not protecting their investment. He said that the government and its agencies are acting as if Nigeria is still in a military era where procedures do not matter.

According to the Exchange official, to de-list a company from trading at the exchange, the management of the Stock Exchange will take a paper to council members to discuss it and they have to agree with the appropriate fees paid before a company can be de-listed. He said that “the CBN had given September 30 for the banks to recapitalize but the investing public woke up on Friday to hear that the three banks have been acquired. Worse still, the following Monday, managements, boards and new names were announced for the banks. When will Nigeria’s public officials learn to obey the rule of law?”

He said the action of the authorities has further damaged the shaking confidence that was building in the market, noting that shareholders have given hint to sue the CBN, NDIC and AMCON for taking over the banks and making their shares worthless.

The CBN had in August 2009 injected the sum of N620 billion into the eight banks it bailed out and the three nationalised banks were among them. Last Friday AMCON injected N679 billion of public funds into the three, bringing the total fund injected into the rescued banks to N1.299 trillion. But before the CBN intervention, the Expanded Discount Window the CBN opened for banks to support them was N270 billion facility from which they could borrow. That window was closed by CBN governor, Mallam Sanusi Lamido Sanusi thus leaving the troubled banks naked.

Reacting to the development, Mr. Opeyemi Agbaje, Managing Director, Resource and Trust Company Limited said that the NSE has failed in protecting investors, adding that the NSE may be deemed complicit in the series of events beginning from the consolidation share offers and subsequent abuses that have led to the banks’ problems and nationalisation. He said further: “Unfortunately the current leadership of NSE/SEC may correctly claim that these issues pre-dated their tenures, and that they are taking corrective action. Ordinary investors are the ultimate losers in this crisis. The bankers have become rich; depositors are protected; while CBN/NDIC/AMCON among others flex muscles with the bank owners.

On Monday, investors lost a total of N138.932 billion as the market value of all the shares listed, which opened the day’s trading at N7.484 trillion, dipped by 1.86 per cent to close at N7.345 trillion. The All-share index, another key performance indicator also dropped by 1.86 per cent or 434.33 basis points to close at 22,963.11 points from 23,397.44 points at which it opened. Banks’ stocks were the worst hit, as 11 banks recorded significant decline in their share prices. As a result, the NSE Banking index, representing major banking stocks dipped by 3.66 per cent to close at 317.33 points from 329.38 points.

Investors had last week lost N137.4 billion as market capitalization dropped by 1.80 per cent to N7.484 trillion from N7.621 trillion at which it opened the week.

Yesterday, investors lost N141.96 billion as the total value of all the shares listed at the Exchange dipped by 1.93 per cent to close at 7.203 trillion from N7.345 trillion at which it commenced the day’s trading. The All share index dropped by 1.93 per cent or 443.79 bases points to close at 22,519.32 points from 22,963.11 points. The NSE Banking index further declined by 4.22 per cent to close at 303.93 points from 317.33 points. This was brought about by massive decline in the share price of majority of the banks, as 13 banks recorded significant losses in their share prices. A turnover of 401.08 million shares valued at N2.96 billion was recorded in 5,196 deals.

How Equatorial Trust Bank escaped regulators’ hammer

Meanwhile The Nigeria Deposit Insurance Corporation, NDIC, yesterday explained how Equatorial Trust Bank escaped regulators’ hammer, last weekend when three banks, Afribank, Bank PHB and Spring Bank were nationalized, saying that it was confident that on-going negotiations with investors would result in sealing a deal before the September 30, deadline.

“In the case of ETB which is a small bank, it is not even publicly quoted, they are in active negotiation with some interested buyers and there is an arrangement which will ensure that ETB strike an acceptable deal before the deadline. That is why it is not in this category”, the managing Director of the organization, Alhj Umaru Ibrahim, told journalists in Abuja, while fielding questions on developments in the banking industry.

He assured that the steps taken so far were in the best interests of all stakeholders and that depositors had no reason to panic nor rush to withdraw their deposits in the new banks, as according to him, they have been well capitalized by the Asset Management Company of Nigeria, AMCON. “ We want to re-iterate that there is no need for depositors to panic. The most important matter for depositors is that they need to be educated, they need to be assured that their funds are safe in all these banks.

“There is no need to panic or rush to withdraw money. I can assure you that whatever money you have in your accounts, any time you want to assess such money you can do so. So there is no reason to panic. The new banks will continue to give you excellent services. We want to appeal through you, please continue to educate our teaming Nigerian depositors to the effect their monies are safe in these banks.

Banks now well capitalized —AMCON MD

“The banks are new. All I can say at this point is that AMCON has stepped in and they are now well capitalized”, Alh Ibrahim said. According to the MD, “AMCON has filled the hole by bringing them from minus zero to zero level and from zero to above zero. Therefore the banks have now met the statutory minimum capital requirements. In fact from every indication, they should be in a position to re-pay the temporary loans given to the erstwhile banks by the Central Bank of Nigeria”, he said.

The NDIC boss also assured that the AMCON would not interfere in the running of the new banks, which boards were announced at the weekend. His words, “even though AMCON is the new shareholder until new credible shareholders are found, it will not in any way have cause to interfere. No government functionary for that matter will have any business interfering in the running of the banks. That is why there are very credible people on the boards”.

The MD expressed confidence that the other rescued banks which have already signed the Transaction Implementation Agreement, TIAs, with core investors would have such agreements fully implemented before the December 31, 2011 deadline given them by the Central Bank of Nigeria, thereby bringing the resolutions to an end. On Societe Generale Bank Alh. Ibrahim disclosed that the owners were discussing with investors who were prepared to bring in money and that it was being given the chance to finalise the negotiations.

His words, “together with the CBN, we are in active discussion with the SGBN. In fact they have proposed a new name. They have tried to identify credible shareholders who will pump in money into the bank and we are quite mindful of the need to resolve the issue and to get them to go back into business either as a national bank, a regional bank or which ever format it wants to operate.

But I can assure you that we are quite mindful of that and we in the NDIC are quite concerned because of our statutory obligations to depositors of those banks”. He also explained that the attempt to buy Afribank did not receive regulators’ nod due to issue about credibility.

“The truth was that the regulatory authorities did not advice that they should go ahead with that transaction with Bank Capital for reasons that border on credibility issues and governance issues. They had a choice to go with one other suitor but they said no”.

Nationalised banks repay CBN bail-out loan

Two of the nationalised banks, MainStreet Bank and Keystone Bank yesterday repaid the bail-out loan injected by the Central Bank of Nigeria (CBN) in 2009.

MainStreet Bank repaid N50 billion while Keystone Bank repaid N70 billion.

It will be recalled that the CBN injected N620 billion tier two capitals as bail-out fund into the eight rescued banks in 2009. The banks were expected to repay the money upon achieving recapitalisation.

Managing Director/Chief Executive, Keystone Bank, Mr Otti Icome yesterday disclosed that the bank has repaid the N70 billion the apex bank gave its forerunner bank as bail-out loan.

“I can confirm to you that we have repaid fully the CBN loan”, he said adding that this was consequent upon full recapitalisation of the bank by its shareholder-Asset Management Corporation of Nigeria (AMCON).

“AMCON has fully capitalised the bank and we have met the minimum capital base of N25 billion. Also the bank has met all capital adequacy requirement”. He said the new management will operate professionally and meritoriously and stay in touch with all key stakeholders.

“Keystone Bank is looking after depositors funds and it represents a safe and sound stone where depositors’ funds are safe. We want to thank all our customers for their support and for standing by us. I can confirm that we have met all obligations and we shall meet all obligations. Our mission is to reposition the bank to be enviable bank and attractive to investors. So we are open for business and we would introduce solutions and services”, he said

Mainstreet Bank repays N50 bn bail-out money to the CBN

In a statement issued yesterday, Mainstreet Bank announced it has repaid N50 billion bail-out money to the CBN.

The statement said, “Mainstreet Bank Limited (MBL), a fully recapitalized Bank, today (August 9, 2011) demonstrated her financial strength by repaying the =N=50billion (Fifty Billion Naira) Tier-Two capital obtained by the former Afribank Nigeria Plc on August 14, 2009.

With the payment of the long term bail out fund, Mainstreet Bank is no more indebted to the apex bank arising from the operations of the former Afribank.

MBL is now well positioned to fulfill its financial obligations. The loan repayment is a demonstration of the bank’s strong liquidity position. It is also an assurance of the safety of customer deposits and a demonstration of the bank’s capacity to play big in the banking industry.

MBL is now in a good position to be an active player in the interbank market, handle big ticket transactions and support customer businesses.”

NLC blames CBN for crisis

NIGERIA Labour Congress, NLC, yesterday expressed grave concerns over the un-ending crisis in the nation’s banking sector, blaming the Central Bank of Nigeria, CBN, for the crisis which resulted in the nationalization of Bank PHB, Spring Bank and Afribank by the government.

NLC in a statement by its President, Comrade Abdulwaheed Omar, warned that workers of banks should not be used as scapegoats for the ineptitude and poor performance of Management.

It called on stakeholders to be vigilant “as all might not be well until the financial authorities have the courage to completely overhaul the banking system to root out the issue of falsification of financial records for narrow gains and make-believe profits.”

The statement read in part, “The NLC has noted with concern the nationalization of three major banks by the Federal Government – the Bank PHB, Spring Bank and Afribank. Although the explanations for the use of the bridge mechanism option in resolving the liquidity crisis in these supposed distressed banks seem plausible, it is rather unfortunate that the long-drawn and complex reforms embarked upon by the Central Bank would come to this excruciating reality.

While we appreciate the need for quick and decisive intervention by the financial authorities in order to forestall the collapse of the banks and the resultant panic such collapse would have engendered in the financial sector, we hope that the measures would in practice truly protect depositors and workers in the affected banks as well as attempt to redress the plight of shareholders some of whom are poor Nigerian working people.”

“We are of the view that the CBN cannot altogether escape blame in the prevailing crisis. It would be recalled that the CBN appointed the Interim Management of the banks, who failed to perform optimally despite a generous bailout with tax payers’ funds few years ago. What is the guarantee that the CBN-floated bridge banks through the proxy of the Asset Management Corporation of Nigeria AMCON would not face the same disastrous fate? Again, the financial regulators cannot extricate themselves from responsibility.

As supervisors of the banking system, they have failed to check the continuous wobbling of the bailed banks some of which escaped the bridging hammer by a whisker through hasty and inconclusive mergers.

While acknowledging the injection of much required funds into the nationalized banks for sustainability, the CBN must further guarantee confidence in the banks by ensuring that depositors are able to withdraw funds as desired without hindrance, and continue to give public assurances that none of the banks would be allowed to fail.”

The statement added that “the newly constituted management of the banks must operate in a transparent and open manner and cooperate with unions in the banks. This is of utmost importance for the guarantee of industrial harmony, as workers in these banks were not responsible for the problems of the banks and should not be used as scapegoats for the ineptitude and poor performance of Management.

We believe that there is need for more vigilance by all stakeholders in the banking sector, as all might not be well until the financial authorities have the courage to completely overhaul the banking system to root out the issue of falsification of financial records for narrow gains and make-believe profits.”

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