By Ademola Alawiye

Friday, 11 Feb 2011

Following the directive given to Deposit Money Banks by the Central Bank of Nigeria to submit compliance plans on their business models, investigations have revealed that five banks may apply as holding companies in the new banking regime.

According to a research investigation report by FSDH, obtained by our correspondent on Thursday, First Bank of Nigeria Plc, United Bank for Africa Plc, Zenith Bank Plc, First City Monument Bank Plc and Bank PHB Plc may likely apply for a holding structure.

The report added, “Our preliminary discussions with some of the quoted banks reveal that some of them will adopt the holding company structure and will list the holding company on the floor of the Nigerian Stock Exchange to replace the current group companies that are listed.

“In other words, except for the restructuring costs that will be associated with migrating to the holding company model, the value of the current group structure will be identical to the value of the proposed holding company.”

The research noted that the other 19 banks would likely apply as non-holding companies for their models.

A holding company is basically a corporation that holds a controlling interest in another company, often called subsidiaries.

A bank or banking group that wants to retain non-banking business will evolve into holding company model, which will hold investments in the bank and each non-core banking operation in subsidiary arrangement.

The objective of the new model, according to the CBN, is to make banks focus on their core banking business and develop specialisation.

The CBN had said that banks operating in Nigeria were required to submit their plans on how they intended to transform to the new system not later than 90 days from October 4, 2010.

Our correspondent spoke to some of the banks and they confirmed the report.

For instance, the Head, Corporate Communications, UBA, Mr. Charles Aigbe, told our correspondent in a telephone interview that the bank would operate as a holding company.

He said, “It is part of our plans to go for a holding structure. It has been decided upon and we are working towards it.”

An official of the corporate affairs department of First Bank, who craved anonymity, also told our correspondent that First Bank had concluded plans to operate as a holding company.

He said, “We have announced plans to form a holding company that will be listed on the NSE. The group holding company will be the listed entity and will be 100 per cent owner of the bank, as well as other subsidiaries.”

Source: Punch