Banks woo shareholders on recapitalization


By Stanley Oronsaye August 27, 2010 03:48AM


The eight rescued banks have started reaching out to its minority shareholders to support the recapitalisaiton plans of the Central Bank of Nigeria (CBN).The board and management of Finbank met with various shareholders groups in Lagos yesterday to forge a common ground. In the last few weeks, similar meetings were held by Intercontinental Bank and Oceanic Bank. The bank promised shareholders that they would have the final say on those that would be approved as new investors in the banks.


Suzanne Iroche, Group Managing Director and Chief Executive of Finbank, said there was need to recapitalise the bank as quickly as possible. “If CBN takes away the forbearances without adequate capital and liquidity, immediately, we are failed institutions and we can’t afford that,” she said. “An institution that operates negative capital is an institution which loses value over time.”


State of the banks

She added that the bank cannot continue to operate with negative capital as 88 per cent of its loans are currently not performing. “We have taken deposits and shareholders fund up to N88 billion which is yielding nothing for us but that is costing us money,” she said. “We have to resolve this as quickly as possible.” Mrs Iroche also explained that the bank’s toxic assets is about N156 billion, while insider related loans totals about N25 billion, out of which only N2.7 billion has been repaid since August. She subsequently expressed the need to support the recapitalisation plans of the Central Bank so that the institutions can get new lease of life.


Shareholders who spoke said the intervention by the CBN was timely as it saved the banks from the brink. The Chairman of Onitsha Zone Shareholders’ Association, Goodluck Akpore, said the intervention by the CBN is what has kept the banks afloat. “What CBN has done is to save my investment and that is why we pray for Lamido Sanusi,” he said.


Minority interest

Nona Awoh, another shareholder, said the banks should make sure that the interest of minority shareholders are taken into consideration. Mr Awoh said beyond taking equity positions, the incoming investors must be made to make long term commitments to the banks. “The new core investors should take long term positions by also taking debenture,” he said. “It is important for the board to reach an arrangement that would be in the interest of the bank.”


Emmanuel Ikwe, the Chairman of Coordinating Committee of Zonal Shareholders Association, said the shareholders would resist any underhand negotiation that would hand over the banks to persons of questionable character. “If you want us to support you, we need to know those who are going to be the core investors,” he said. “You have to find out as a board the credibility of these people. CBN has taken a decision that is good.” Sunny Nwosu, the National Coordinator, Independent Shareholders Association of Nigeria, however said only the initial shareholders have a right to determine those that will recapitalise the banks. “The Central Bank said it has guaranteed depositors. So we say give our banks to us since you have guaranteed depositors let us recapitalise it because we are risk bearers,” he said, adding that the way the CBN was going about the recapitalisation plans was in the manner of taking institutions away from those who have toiled to build them over the years.






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