By , FINANCE EDITOR

Indications were rife at the weekend that two middle-level banks are presently locked in the battle to take over “rescued” Afribank of Nigeria Plc, as part of the ongoing determination by the Central Bank of Nigeria (CBN) to sell the bank, which clocked 50 quietly in January.

Sources close to Afribank listed the two contenders as Fidelity Bank and Ecobank Nigeria, both of which incidentally had links in the past to two of the executives appointed by the CBN for the bank that had been subject of fierce takeover battles in the not-too-distant past.

Nebolisa Arah, the Group Managing Director and chief executive of Afribank, was before his recent appointment by the CBN, the founding and immediate past CEO of Fidelity Bank, which h helped nurture from its days as Fidelity Union Merchant Bank Limited, which later became simply Fidelity Bank. Mrs. Joke Giwa, a CBN appointed executive director, was a former senior management staff of Ecobank Nigeria.

Besides Afribank, the apex bank has also placed on the shelve for sale- Oceanic Bank International, Bank PHB, Intercontinental Bank, Spring Bank, Union Bank of Nigeria, and Finbank. Owners of Equitorial Trust Bank, whose executive management team was sacked in two separate tranches on August 14 and October 2, have since reacquired it through an agreement that involved recapitalization and a promise to entrench good corporate governance, among others.

Afribank had in t he past also survived several battles by various contenders to takeover what has come to be known as the BIAO (Banque International Pour l’ Afrique Occidentale) shares which dated back to 1964. The ownership crisis became compounded with the death of BIAO abroad. 

Before then, the bank had adopted the English version of its former name- International Bank for British West Africa (IBWA), a name by which it was known between May 30, 1969 to 1990 when it became Afribank Nigeria Limited and subsequently Afribank Nigeria Plc on October 7, 1992, preparatory to its being listed on the Nigerian Stock Exchange (NSE).

Alluding to the strong investor interest during a recent media briefing in his office on the current state of the bank a few weeks ago, Arah, while fielding questions recalled that advisers have been appointed, who have subsequently engaged in initial and detailed due diligence. What is left, he said, is for the various stakeholders- management and board, will select who’s the preferred bid would be, for presentation to shareholders at the annual general meeting.

According to him, the bank needs to address the issue of the adequacy of its capital as shown by the stress test, adding that “we need to recapitalize for growth and it is ongoing. Afribank has been able to restore value through the (CBN) intervention, otherwise, everyone would have been a loser.”

The impact of the provisions on shareholders fund, he said, has been massive, stressing that the whole idea is to extract value for shareholders.

Options open to the bank, just like its peers, Arah said, includes recapitalisation, mergers or submit themselves for acquisitions. The CBN, he said, matter-of-factly, “has no role to play in the process, except to act as regulator,” with the board and management taking the driver’s seat.

According one of the sources, a staff, the painful aspect of the entire exercise, beyond the fact that the bank is being sold, is the decision to submit for acquisition to those who “whose books are not so much better than ours. Our books are not as bad as what they (at the CBN) claim they are.”

Ahead of the eventual sale, Sanusi Lamido Sanusi, Governor of the CBN recently said the sale of the various banks will be concluded by the end of July, just as Finance Minister, Olusegun Aganga, assured on Sunday in a statement that local investors will not be excluded from the purchase the banks soon to be put up for sale by the CBN.

“Local investors can buy them; foreign investors can buy them; consortium of both local and foreign investors can buy them too.  And as far as I am aware, this has also been the position of the CBN governor,” he said adding that the current debate about the propriety of selling the restructured banks to foreigners was misinformed.

What is important now, he was reported as saying at the weekend, is that the banks be acquired by corporate bodies with demonstrable capacity and expertise to run them, adding that “there is no reason why credible existing shareholders, who have the required technical competence or partner, as well as capital, cannot invest in the banks.”

“We are interested in building a robust, healthy and strong financial sector capable of meeting both its economic intermediation and social functions to Nigeria. Whoever shows us the expertise and capacity to deliver on these, whether local or foreign, or a combination of both, is welcome to buy the banks. Our target is to get our banks to be among the strongest in Africa and the world,” he added.

Those reported in the past to have shown interest include South Africa’s Standard Bank Group Limited, parent of Stanbic IBTC Bank; FirstRand Limited, also one of the biggest financial institutions in South Africa; and Old Mutual Plc, with operations in U.K. and U.S., is parent company of Nedbank Africa’s biggest insurer, which already has an “insignificant” stake in Oceanic Bank.

Fidelity Bank

Incidentally, the bank has been in the news in recent months, as one of those angling to buy over one the nine “rescued banks,” a move for which it was said to be awaiting guidelines on how such a bid would proceed.

Ihejiahi told Reuters in an interview in his Lagos office: “We are interested in making a bid. There are a couple of things for a serious minded institution … that we would like to see as part of this opportunity, which we have expressed to the consultants.”

He declined to specify which banks Fidelity might be interested in acquiring but said the CBN appeared keen to get the process underway as quickly as possible.

The apex bank had injected N620 billion into the troubled banks, approving a two-year tenure for the executives to run them as going concerns until new investors can be found to recapitalise them and that its preferred option is for them to be bought out. Ihejiahi said, according to reuters, that whereas past takeovers of failed banks in Nigeria involved buying assets of institutions whose licenses had been revoked, the nine rescued banks still had shareholders, meaning the acquisition process would be more complicated.

“This is the first time that we are seeing this sort of structure. I wouldn’t call it a concern, I would call it something that you have to put on your checklist and see how it is treated and how it is going to be considered for anybody who is making a bid in a circumstance that is new,” he said.

Fidelity Bank is one of those eyeing the corporate bonds market, from which some banks are hoping to raise N1.4 trillion beginning from this year, led by First Bank and United Bank for Africa. While First Bank and UBA are opting for N500 billion, Fidelity plans to scoop N200 billion, which Ihejiahi told Bloomberg, another international newswire, is on-lending to nation’s ailing manufacturers, as well as the capital intensive, but lucrative and the oil industry.

The bond, approved by shareholders in December, will be sold in tranches, Ihejiahi told Bloomberg in his Lagos office during an interview, declining to provide further details because the Securities & Exchange Commission was yet to give its blessing.

Fidelity Bank, according to the report, recorded non-performing loans growth of 25 per cent to N59.7 billion, comprising 28 per cent of total loans, up from 18 per cent at the end of June last year.

The bank recently submitted its audited result for six months ended December 31, 2009, emerging as one of the very few that closed the year in positive territories, following which its share price notched 3.38 per cent on the day the result was released to investors by the NSE.

A major highlight of the result was the recommended dividend of N724 million, representing 2.5 kobo per share from the N1.5 billion net profit between July and December 2009.

Gross earnings was N34.71 billion, down by more than half from N72.27 billion reported for the 12-month ended June 30, 2009, owing reportedly to the tight lending regime and tough business environment in the banking industry.

Profit before tax and after exceptional items for the period stood at N2.05 billion, comparing favourably with the N3.98 billion recorded for the previous 12-month, while net profit stood at N1.50 billion in contrast to N1.60 billion, an increase of 87.5 per cent over the June 2009 figure, on an annualized basis.

A statement by the management of Fidelity Bank noted that it remains one of the very few “operators in the Nigerian banking industry that has not made a loss all through the turbulent period,” adding that the six-month result represent the transition accounting period in order to comply with the common year end for all banks in the country which took effect by December 2009.

“The bank’s ability to improve its annualised profit performance is largely attributable to increased efficiency resulting from cost management as the challenging operating environment characterized provisioning and declining interest income put pressure on the earnings of most operators in the industry,” the statement added.

The statement also noted that the dividend payout makes five unbroken years that the bank has continually paid dividend to its shareholders, a development that industry sources consider very unique.

Fidelity Bank, also stressed that it successfully shielded its shareholders’ funds from the threat posed by the harsh business operating environment as this indicator stood at N130.69billion at the end of 2009 as against N129.42 billion in June.

Ecobank Nigeria

With strong backing from its Lome, Togo based parent company- Ecobank Transnational Incorporated, the bank, which remains one of the most prominent part of the Pan-African group has continued to adopted inorganic growth as a path to becoming a major player in the nation’s banking industry. The bank, in December 2008, got a life-line of N46 billion, as “deposit for shares” from ETI, ahead of its planned recapitalization before the global market down became more pronounced in Nigeria.

The placing, which raised Ecobank Nigeria’s shareholders’ funds to N73.5 billion from N31.8 billion, improving its capital adequacy ratio to 24 per cent from 10 per cent, increasing ETI’s holding in Ecobank Nigeria to 85 per cent, which is above the maximum 75 per cent allowed under the rules of the Nigerian Stock Exchange (NSE).
The bank, during the purchase and assumption exercise acquired Allstates Trust Bank Limited and Hallmark Bank, two of the biggest 14 banks that failed to meet recapitalisation during the 18-month exercise. Allstates added 65 branches and a bulk of 414,000 accounts to Ecobank Nigeria’s pool.

The bank certified as healthy during the CBN audit did not however go unscathed, as it was left with huge provisions for loan loss, following which it could only grow earnings at the end of December 2009, by 9.0 per cent from N55.16 billion in 2008 to N59.86 billion.

 

 Loss before tax and extraordinary item stood at N5.944 billion, as against the previous N898 million loss while net loss stood at N4.588 billion, helped by a tax credit of N1.356 billion. Net profit in the comparative period of 2008, net profit was N2.135 billion. The loss resulted from a demunition in asset value of about N16.094 billion, from N12.497 billion, just as operating expenses soared to N30.614 billion from N25.974 billion.

Reactions

Reactions to the proposed sale of the banks, have continued to be varied, with stakeholders like Chris Enyinnanya, a chartered banker, author and public commentator, wondering where the CBN will get the shares to be sold to the acquirers. Sanusi, he said, can’t sell the banks, “going by the legal principle- that you can’t give what you don’t have.”

But Gbadebo, Olatokunbo, a shareholder activist and retired civil servant noted that the CBN would be well aware of the fact that they cannot sell what they don’t have, and may not have revealed everything in their arsenal. He recalled that the CBN Governor, last year, said shareholders have lost their investment.

 

The statement, he continued, was not referring to small shareholders, but the big ones, many of who were listed among the big debtors last year.
“We don’t know what has happened behind closed doors, between the debtors and former bank chiefs and the CBN. They may have agreed to sell their holding to defray their debts.

 

When the CBN published names, some of the big debtors threatened to go to court, but they went behind and started paying. The CBN knows where the shares they are going to sell will come from,” Olatokunbo said.

Adetunji Adeleke, also a shareholder activist and General Secretary, Independent Shareholders Association of Nigeria (ISAN) would rather wait to see whose shares would be sold to the bidders, since there is a caveat, with the institutions and CBN are subject of ongoing litigations.
While confirming interest by investors, Moshood Isamotu, spokesman for Afribank insisted that “speculations on the identity” of the bidders, at a time like this could jeopardize ongoing discussions.
Ecobank Nigeria was yet to react to the an e-mail sent to them as at press time.