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Thursday, May 23, 2024


Bank Recapitalisation: M&A Option Under Scrutiny (2)

The April 30 deadline given to banks by the Central Bank of Nigeria (CBN) for them to furnish the apex bank with how they intend to raise the new capital base as it relates to their mode of operations has finally come.

Metrobusinessmews.com gathered that some banks are yet to conclude on the exact ways of raising the capital, due to lack of enthusiasm by investors who are skeptical on the health conditions of some of the banks.

The major concern in the industry is how the banks that are currently under the management of CBN would aggregate their capital raising plans since the interim management are accountable to CBN rather than the shareholders under normal situations.

CBN has not helped matters with the mute disposition, over three months after sacking their boards and management.

More worrisome, according to the analysts is the fact that the committal statement affirming the stability of all the banks to the whole world is causing another concern for CBN, who the say, to do otherwise amd some banks not meeting would further erode confidence in the economy.

Infact all the affected banks, whose boards were sacked are still not operating with the full compliments of management not to even talk of the boards.

It was further learnt that with some industry operators still below the zero level in terms of capital base, analysts are skeptical as to how they will survive without forebearance from CBN.

“Some of the banks need over N300 billoon to move from below to zero level before they talk of meeting the new capital base, and how will that happen and who will and can provide such an amount now?”, says a source close to one of the embattled banks.

Head of Financial Institutions at Agusto & Co, Ayokunle Olubunmi, said, in their report recently that for many banks, asides the top five, their options would be to merge or reclassify their licenses. According to him, the first thing that most of them will consider is if they want to raise capital or they want to partner with somebody.

“For those that have a significant amount of money to raise, they will be thinking of probably going ahead to raise the fund or look for another bank that also have that challenge, they come together and have a formidable entity.

“Another challenge that a lot of banks will face will be getting the right partners particularly those that want to go the route of mergers, because if they merge with a bank that they don’t share the same vision, the institution will fail from day one. After the last consolidation, there were some that from day one the board was always fighting.”

He noted further that, although the situation is improving, attracting foreign investors might be a challenge for some of the banks, adding that, the banks cannot afford to have foreign portfolio investors, rather, they will have to seek out “institutional investors who will be here for the long haul. Investments in Nigeria is not for the short term, particularly for banks. they need to understand the terrain. And it is not everyone that understands Nigeria’s environment. So, that might be a challenge.”

For the merchant banks, he said, “there are some banks that the investors will say it is not worth it. Like the merchant banks which have not been profitable and they have very low capital base. It is also the same for banks that are not that profitable it will be a challenge because the current investors will not want to invest more in something that is not that profitable and if they are going to get foreign investors they might not be able to get good valuation on the banks.”

Under previous Mergers and Acquisition, the coming together of ‘strange bedfellows ‘ had caused a lot of issues in the industry and according to some analysts some of the legacy issues are still hunting and hurting some of the banks today.

Interestingly, most of the leading banks operating in the country today, have in one way or the other involved in the exercise either inform of business combination or outright sale and acquisition.

However, alleged in fightings and court cases have dimmed and extinguished the bright prospects of some of the lenders and the issues are still fresh in the minds of investors and discerning Nigerians.

Sources closer to CBN told Metrobusinessnews.com (MBN) that the concept as one of the options for the current recapitalisation is causing disquiet, following alleged manipulation in the recent exercises.

This is why some Nigerians are skeptical about the plan of Providus Bank Limited, a commercial bank founded in 2016, making bold steps to acquire majority stake in the over 20 years Unity Bank Plc, as part of the former’s business expansion plan.

But, since the Yemi Cardoso administration, the issue has been kept in the cooler for other pressing issues threatening the industry.

“I cannot tell you the exact position on the proposed business combination since it’s no longer on the priority list of Cardoso administration. But one thing I know is that both parties have gone back to the drawing table. This is so because of alleged controversies on similar exercises conducted or in the pipeline,” a source with Unity bank told MBN.

Also, the report of the special investigator, Jim Obazee, had alleged that Emefiele used proxies to acquire Union Bank of Nigeria for Titan Trust Bank Limited, as well as Keystone Bank without any evidence of payment.

As a result, it recommends that the Federal Government should reverse the sale of the banks and also take them over.

But CBN has neither come out with position on the M&A proposals nor those whose boards and management were dissolved.

The deadline for submission of implementation plans ends today, but anxiety and suspension will continue until CBN comes out with its position on the embattled banks as well as immediate action on the plans submitted by all the banks

 MetroBusinessNews/a strategic cross-reporting initiative


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