Bloomberg News

Nigeria Banks Decline as Governor Says Risks to Recapitalization

June 10, 2011

June 10 (Bloomberg) -- Nigerian banks declined after Central Bank of Nigeria Governor Lamido Sanusi said the recapitalization of lenders risks being derailed by shareholders who have taken court action to stall the process.

Lenders affected by shareholders’ plans are Oceanic Bank International Plc, Union Bank of Nigeria Plc, Intercontinental Bank Plc, and Bank PHB Plc, Sanusi said in a statement published in the Lagos-based Punch newspaper today.

Oceanic dropped for a 13th day, the longest streak of losses since 2009, losing 4.8 percent to 1.20 naira by 12 p.m. in Lagos. Union Bank retreated 4.6 percent to 2.07 naira, erasing yesterday’s gain. Intercontinental headed for the lowest since at least February 2003, losing 4.1 percent to 93 kobo. Bank PHB lost 4.6 percent to 84 kobo. A close at this level would be the weakest since January 2006.

The central bank, known as the CBN, will continue supporting bank mergers and won’t be tied up in “endless litigation,” Sanusi said.

The CBN provided 620 billion naira ($3.9 billion) to eight of the nation’s 24 lenders after amassing 700 billion naira of non-performing debt by lending to investors who speculated in stocks, according to the Economic and Financial Crimes Commission in Abuja. Sanusi fired the chief executives of the distressed lenders and set up Asset Management Corp. of Nigeria, or Amcon, to buy bad debts from the banks to help recapitalize them before matching them with potential buyers.

Recapitalization Deadline

Historically, the central bank took over distressed banks and handed them the Nigerian Deposit Insurance Corp. “for management, resale or liquidation,” Sanusi said. “If the current attempt to arrive at a win-win situation is frustrated by shareholders, the CBN assures creditors and depositors that their savings, deposits and loans will be fully protected,” he said, adding that the central bank would have no obligation “to protect or give any value to shareholders.”

The rescued banks have until the end of September to conclude recapitalization or merger deals with new investors or face liquidation, Kingsley Moghalu, a deputy governor of the central bank said on May 24.

Others that the central bank injected funds to are Afribank Plc, Finbank Plc, Equitorial Trust Bank Ltd. and Spring Bank Plc.

To contact the reporter on this story: Vincent Nwanma in Lagos at vnwanma@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.


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