Although the Central Bank of Nigeria (CBN) has continued to keep industry stakeholders guessing over the list of successful bidders for the nine rescued banks, interested parties have continued negotiation for the affected institutions,
reports Festus Akanbi
With all indications, it is a matter of time for the ownership structures in the nation’s nine rescued banks to change. This is because going by the body language of the Central Bank of Nigeria (CBN), the ongoing banking sector reforms must be concluded before the end of the year.
The apex bank, which earlier in the month bowed to pressure to allow shareholders to midwife the recapitalisation of the affected banks insisted that the industry should be able to resolve all the issues pertaining to recapitalisation before the last quarter of the year.
Before the latest olive branch extend to shareholders, who had earlier shouted themselves hoarse over the fear that they might be short-changed in the scheme of things, the CBN had said there would be no other option but to liquidate any of the banks rescued in a bailout last year if they are unable to find fresh capital.
The CBN last year injected $4 billion into nine banks deemed to be so weakly capitalised because they posed a systemic risk to the economy. It has said it wants new investors to recapitalise them.
Industry watchers, however, said what the CBN’s position of shareholders role will do is to douse the noise of local investors because the latter can hardly muster the strength to raise the needed capital.
Incidentally, the appetite of foreign and local investors was rising as at the weekend as pictures of interested financial institutions continued to emerge.
Interested financial institutions include First Bank of Nigeria Plc, Skye Bank Plc, Fidelity Bank, Ecobank Nigeria Plc and Diamond Bank Plc, FCMB, UBA, Sterling Bank, and Access Bank while foreign investors include Standard Bank Group Ltd, (a South African bank) FirstRand Ltd, also of South Africa and Old Mutual Plc.
THISDAY checks showed that most of them have concluded due diligence on the rescued banks while CBN is at the verge of picking successful bidders especially with the take-off of the Asset Management Company of Nigeria (AMCON).
The National Assembly has passed legislation to create AMCON to soak up bad loans at the troubled banks in exchange for government bonds, in a bid to clean up their balance sheets and make them more attractive to investors.
But while potential investors have been doing due diligence on the rescued banks, financial industry sources say it is unclear whether all of them will find the capital injection they need.
A consultant to World Bank, Dr. Biodun Adedipe cautioned the apex bank against indiscriminate choice of core investors for the banks. He spoke at last week’s seminar of business editors and financial sector reports by the CBN in Benin that it is imperative for the CBN to make sure that those eventually picked for the rescued banks should be fit to clear all the rots in the affected banks.
Ecobank Nigeria Plc, the Nigerian arm of the Ecobank Transnational is among the banks that scaled the hurdle of the far-reaching audit of banks last year. Although the CBN has declined to name the bidders and the banks they are gunning for, sources said Ecobank is eyeing Afribank Nigeria Plc.
Analysts said what would go in favour of Ecobank is the strength of its parent company, ETI and its partnership with a South African bank, Needbank Group Limited. Also Sources in the industry said the presence of a former senior manager with the bank, Mrs. Joke Giwa, who is on the board of Afribank would be an added advantage.
Rumours of intense jostling between Ecobank and Fidelity Bank, another local bank angling for Afribank were rife in the industry. Bloomberg recently quoted Needbank’s chief executive designate, Mike Brown as saying:"Nedbank and its African partner, Ecobank Transnational Inc., has registered their interest with the CBN to investigate a possible purchase."
Another interested party in the ensuing scramble for rescued banks is First Bank of Nigeria Plc.
The bank, which is the oldest in the country, according to its Chairman, Mr. Oba Otudeko is interested in the banks being offered for sale.
Its robustness was underscored in its results for the six months ended June 30, 2010. The bank posted a Gross Earnings of N122.3 billion, Profit Before Tax of N31.7 billion; Profit After Tax of N25.3 billion, while it declared total Assets of N2.3 trillion.
The picture of which of the banks First Bank is aiming at was not clear as at the weekend but industry sources said that it had done due diligence in a number of rescued banks.
Oluyemisi Lanre-Phillips, head of investor relations at First Bank said: "We responded to the central bank general request for expression of interest for the banks." She added: "We are interested in an acquisition which is part of our strategy to grow in Nigeria."
The case of Fidelity Bank in the emerging scenario in the banking industry is interesting. There were speculations that the bank is in a pitched battle for the acquisition of Afribank Plc, which is being run by Mr. Nebolisah Arah, a pioneering chief executive of Fidelity Bank. THISDAY gathered that already, a due diligence has been carried out on Afribank by Fidelity Bank, while the report of the technical consultants appointed to midwife the acquisition is still being assessed by the apex bank.
However, a source in Afribank dismissed the report that two members of its current board are being used by potential investors to win the bank to their side.
The source, who spoke to THISDAY on condition of anonymity last week, said the bank is open to all prospective investors.
According to him, the consultants appointed by the CBN have done their job. He added that Afribank as an organisation also has the right to conduct a due diligence on any successful bidder picked by the apex bank and that such could be rejected if found wanting.
Fidelity Bank Plc began operations in 1988, as a merchant bank. In 1999, it converted to commercial banking and then became a universal bank in February 2001. The current enlarged Fidelity Bank is a result of the merger with the former FSB International Bank Plc and Manny Bank Plc (under the Fidelity brand name) in December 2005.
Diamond Bank is one of the latest entrants into the struggle for the acquisition of the rescued banks. The bank began as a private limited liability company on March 21, 1991 (the company was incorporated on December 20, 1990)
In February 2001, it became a universal bank. In January 2005, following a highly successful Private Placement share offer which substantially raised the Bank's equity base, Diamond Bank became a public limited company. In May 2005, the bank was listed on The Nigerian Stock Exchange. Moreover, in January 2008, Diamond Bank's Global Depositary Receipts (GDR) was listed on the Professional Securities Market of the London Stock Exchange. The first bank in Africa to record that feat.
The bank has no doubt returned to profitability despite lower yielding environment. Its first quarter results showed that it posted Gross earnings of N24.5 billion, net interest income of N10.2 billion and profit before tax of N2.0 billion.
Skye Bank was one of the local banks that showed its interest in acquiring rescued banks last year.
Analysts however said the focus of the in-coming chief executive of the bank, Mr. Kehinde Durosimi-Etti will determine whether it will continue to push for the acquisition or not. The idea of acquisition was made public by its immediate past managing director, Akinsola Akinfemiwa, whose tenure expired yesterday. Skye Bank evolved into one of the top financial institutions in Nigeria, after its very seamless consolidation exercise in 2006.
To date it operates out of over 250 branches and transaction centres across Nigeria. For its first quarter 2010, the bank posted gross earnings of N23.77billion while its Profit After Tax was put at N2.24billion.
Access Bank is one of the formidable local banks which have not hidden its interest in the rescued banks that may be put for sale.
The bank serves over two million customers from 130 branches located in all major commercial centres and cities across the country, eight other African countries (Burundi, Cote D’Ivoire, Democratic Republic of Congo, Ghana, Rwanda, Sierra Leone, The Gambia, Zambia), the United Kingdom.
It has three non-banking subsidiaries - United Securities Limited, Access Homes and Mortgages Limited, and Access Investment and Securities.
Industry sources said at the weekend that United Bank for Africa Plc (UBA) is also nursing the idea of acquiring any of the rescued banks although management of the bank has kept mum on the speculated acquisition bid. UBA’s history dates back to 1948 when the British and French Bank Limited (“BFB”) commenced business in Nigeria. However, today’s UBA is the product of the merger of the old UBA and the erstwhile Standard Trust Bank Plc (STB) respectively, and a subsequent acquisition of the erstwhile Continental Trust Bank Limited (CTB). The union emerged as the first successful corporate combination in the history of Nigerian banking.
Sterling Bank Plc which emerged as one of the first set of banks to scale through last year’s audit is yet to say categorically whether it is bidding for the rescued banks or not. But a source from the CBN however said the bank is thinking in the direction of either a merger or outright acquisition of one of the banks being offered for sale.
In January 2006, as part of the consolidation of the Nigerian banking industry, NAL Bank completed a merger with four other Nigerian Banks namely Magnum Trust Bank, NBM Bank, Trust Bank of Africa and Indo-Nigeria Merchant Bank (INMB) and adopted the Sterling Bank name. The merged entities were successfully integrated and have operated as a consolidated group ever since.
First City Monument Bank has been linked to several attempts to acquire one bank or the other in the past. Although the bank is yet to publicly name its preference among the rescued banks, speculations were rife at the weekend that FCMB has continued to eye Wema Bank.
From its early origins in investment banking as City Securities Limited in 1977, First City Monument Bank (FCMB), established in 1982, has emerged as one of the leading financial services institutions in Nigeria.
Some of the banks that may be put for sale include Intercontinental Bank; Oceanic Bank; Union Bank; Finbank; BankPHB; Spring Bank; Afribank, while managements of Equitorial Trust Bank, Wema and Unity Bank were given a waiver to recapitalise their institutions.
A South African bank with the licence to do the business of a universal bank, Standard Bank is a full-service financial group offering transactional banking, saving, borrowing, lending, investment, insurance, risk management, wealth management and advisory services. Earlier in the year, the bank said it’s looking at Nigeria for possible acquisition opportunities as a banking crisis in the country slashes valuations. “The current situation in Nigeria does present opportunities, and we are watching developments with interest,” said Erik Larsen, spokesman for Johannesburg-based Standard Bank, in a recent interview.
He said Nigeria is a key strategic market for Standard Bank. The bank already operates in Nigeria through its controlling stake in Stanbic IBTC.
It recently took position in Nigeria with a merger with the former IBTC Chartered Bank, a business arrangement that produced Stanbic IBTC.
FirstRand, another South African bank with interest in Nigerian economy, provides a comprehensive range of products and services to the South African market and niche products in certain African and international markets. Acknowledging its interest in the rescued banks in Nigeria, Managing Director of the bank, Sizwe Nxasana said: “We did register interest in that process. I'm not able to mention (which bank), but we certainly registered our interest."
The bank, which is South Africa's number two banking group, was the first foreign bank to confirm it is interested in buying one of the troubled banks. FirstRand provides a comprehensive range of products and services to the South African market and niche products in certain African and international markets.
Since the creation of the Group in 1998, its diversified earnings base has delivered a strong track record. This has been achieved through a combination of organic growth, acquisitions, innovation and creating extra sources of revenue through the start-up and development of completely new businesses.
Another foreign investor, which has continued to feature prominently in the list of those eyeing the rescued banks, is Old Mutual Plc.
The organisation which operates primarily in the long-term savings market has a majority shareholding in another South African bank, Nedbank, which itself is a leading South Africa’s banking franchise. Old Mutual also has banking interests in other countries in southern Africa and in Sweden. Sanusi met with the management and shareholders of the rescued banks recently, telling them that having secured depositors' funds the focus was now to salvage some value for shareholders.
He noted that liquidation and nationalisation are not desired options, stating that he is convinced that fresh injection of capital through strategic partnership remains the best approach.
The banks had up to last month to meet the CBN conditions or risk outright take over by the government.
The central bank had rescued Union Bank of Nigeria plc, Afribank Nigeria Plc, FinBank Plc, Intercontinental Bank Plc, Oceanic Bank International Plc, Bank PHB Plc, Equitorial Trust Bank Limited, Spring Bank Plc and Wema Bank Plc. The Central Bank said the businesses will be run as going concerns until new investors can be found to recapitalise them and that its preferred option is for them to be bought out.
Sanusi had late last year after a CBN audit declared 10 of Nigeria's 24 commercial banks weak and consequently injected over N600 billion in government fund into them so as to keep them afloat.
The apex bank after a review of their situations early this year, gave them three options to recapitalise. The banks were either to get new investors, go into a merger or acquisition or liquidation.