Banks: Anxiety Looms Over More Acquisition

By Bayo Bernard

Apprehension is on the rise that more of the 23 commercial banks in Nigeria face uncertainty in 2019 as stakeholders expect the Central Bank of Nigeria, CBN to release a damning report on the health status of some banks, through the Financial Stability Report, FSR.

The FSR is used by the CBN to measure the resilience of the financial sector to the economy.

According to checks, some banks may get the CBN harmer for poor governance issues before half year 2019 after serious indictment in the FSR.

The fear of more banks collapse has also being looming recently in the sector.

The possibility of acquisition and outright takeover of banks cannot be ruled out, sector analysts warn.

In the 2017 report released by the apex bank, the CBN governor, Godwin Emefiele had warned then that three commercial banks in the country faced uncertain future after they failed the stress test.

Within the course of the year, two commercials banks obviously exhausted their pay cheque.

Skye Bank was taken over by CBN which renamed it Polaris Bank Ltd, while Diamond Bank has been swallowed by bigger Access Bank.

The magazine investigations from various regulators and those with deep knowledge of the sector indicate that few banks will manage to survive 2019.

There will be more acquisitions and takeovers by healthy banks the magazine was told.

There are ominous signs to this effect. More have now found themselves in the same situation with those three banks which failed CBN stress test last December.

A source in the apex bank told the magazine on Friday that “more banks have failed preliminary test conducted by the CBN as would be released in a comprehensive report soon”

“The outgoing year has been one of the most difficult one for the banking sector. Aside the fiscal policy of the federal government which affected their fortunes, the sector is not helped by external factors which limited foreign investment inflow into the sector in one hand and the economy at large ,” Adetoro Oyebo a financial sector analyst also told the magazine on Thursday.

Though the ‘stressed’ banks were not mentioned, but what happened in the course of the year directly pointed to the fact that some banks are only managing to survive the harsh economic situations.

According to the National Bureau of Statistic, NBS report obtained by the magazine the banking sector is one of the most affected in the declining investment inflow into the country in 2018.

The report said the sector recorded a nine month decline of $891m from $1.18bn to $298.4m between March and November this year.

Last month, the CBN warned that commercial banks in the country faced more risk. According to CBN Deputy Governor, , Corporate Service, Edward Adamu ,non-performing loans, NPLs is rising astronomically due to exposures to the oil and gas sector.

Adamu also warned that interest rates normalization in developed economies of the world has led to decline in foreign capital inflow and thus posed a high risk to Nigerian banks.

Another major pointer to the fact that local banks are sick, according to insiders in the sector, is progressive decline in their Capital Adequacy Ratio, CAR.

A member of the Monetary Policy Committee, MPC, Dahiru Hassam Balami had warned after the last MPC meeting that the sector’s CAR fell from 12.08 per cent from June to10.79 per cent in August.

Lenders will be further pushed to the abyss, insiders warn, due to rising rate of non-performing loans, NPL, which the apex bank said has rising beyond the five percent maximum requirement.

The NPL from CBN records rose from 12.45 percent in June to a high 14.7 per cent.

One source in the CBN hinted the magazine that poor credit administration is one of the major factors that affected the Uzoma Dozie led Diamond Bank.

“The bank obviously gave loans without adequate security. Most of those given loans were either family members or friends who did not provide collateral.

They were granted loans based on false impression that they had the capacity to liquidate such credit facilities,” the source said.

Diamond bank has now been acquired by Access Bank after a three year run to turn its fortune around failed.

The CBN spokesman, Mr Okoroafor did not respond to calls made to his telephone to respond to the issue.