Lagos, Odidison Omankhanlen
10 rescued banks for acquisition in coming days- Sanusi
Despite the various regulatory interventions put in place by the Central Bank of Nigeria (CBN) to put the banking sector on a sound footing, 12 banks in the country still operated sub-optimally last year. The CBN has, however, not named the affected banks.
According to the CBN half year economic report as of the end of June 2010, released at the weekend, an assessment of the health of the banking sector it conducted, based on capital adequacy, asset quality, management, earnings and liquidity (CAMEL) during the period under review, showed that none of the 24 banks was rated in the top grades. Half of the banks were rated average while the remaining ones had poor rating. Also, the average Capital Adequacy Ratio (CAR) of the banks was below the stipulated minimum of 10.0 per cent.
The rating was put on five points scale as the highest rating, indicating very sound financial health condition and very weak standing. During the review period, the CBN conducted a post-crisis assessment of the health of the banking sector using CAMEL ratings with a view to determining the impact of the various regulatory interventions. The result of the assessment indicated that as of end-June 2010, 12 banks were rated C, four D, and eight were rated E. No bank was rated either A or B.
The apex bank linked the poor performance to the lingering impact of the global financial crisis on the sector, adding that it was also the recognition of audited losses for the accounting year ended December 2009 and the requirement for full provisioning for all non-performing credit by the banks during the review period. However, the banks industry-wide average liquidity ratio was above the 25 per cent minimum requirement. Three banks failed to meet the stipulated ratio, same as the number at end-December 2009.
Also, during the period under review, there were 3,119 cases of attempted or successful fraud/forgeries involving the sum of N8.1 billion and $2.0 million in the banking industry, this compared with 1,777 reported cases of fraud and forgeries involving N15.3 billion and US$62.646.0 in the corresponding period of 2009. Actual losses for the period were N3.4 billion and $671.773.16 relative to N1.5 billion and $18,346.0 in the corresponding period of 2009.
The non-performing credits of the banks, in absolute terms, stood at N3,268.0 billion in the first half of 2010, compared with N2,922.8 billion and N641.0 billion at end-December 2009 and the corresponding period of 2009, respectively.
Similarly, the industry ratio of non-performing credit to total loans rose to 36.6 per cent from 33.6 and 8.4 per cent at end-December 2009 and the corresponding period of 2009, respectively. The ratio was well above the acceptable contingency threshold of 20.0 per cent for the industry.
The development was said to have reflected the deterioration in the quality of credit facilities, coupled with the ongoing reclassification of bank assets.
Similarly, a routine review of the finance company sub-sector revealed that 53 were active, while 39 were inactive. A total of N4.7 million was collected from 85 operators for various breaches and violations of the approved guidelines.
This represented 264.4 per cent increase over that collected during the first half of 2009, reflecting the banks renewed resolve to enforce zero-tolerance for prudential violations.
On electronic payment, Automated Teller Machine (ATM) remained the most patronised channels accounting for over 80-90 per cent of the total e-payment transactions both in value and volume terms.
Mobile payments were the least in both value and volume terms.
The use of ATM transactions increased in the period under review, with the volume and value standing at 168,171,231 and N405.87 billion, respectively, at end of June 2010.
This represented an increase of 200.0 and 43.3 per cent respectively, above the levels in the corresponding period of 2009.
The increase in the use of ATMs was attributed to the increased number of the facility in the country and the ease as well as convenience of the system.
Meanwhile, the focus of monetary policy during the first half of 2010 was on ensuring adequate banking system liquidity and access to bank credit by the private sector, against the backdrop of the lingering effects of the global financial and economic crises.
Meanwhile, the CBN governor, Mallam Lamido Sanusi, has said deva-luation of the nation’s currency would push up inflation and impact negatively on the economy.
He also confirmed that six of the 10 banks that were bailed out by the apex bank in 2009 were set for new partners in the coming days.
Sanusi, who disclosed this in London, at the weekend, said the naira should not be the “whipping boy for wrong economic policies, adding that he would not let the naira depreciate, as a stable exchange rate was the most effective tool for controlling inflation, while a weaker currency would not compensate for poor economic policy.
“The exchange rate, to us, seems to be far more important for price stability than interest rates. With local farm produce, fuel and imported food making up more than 70 per cent of the inflation index, borrowing costs have a limited impact on prices,” he said.
He maintained that the CBN was comfortable with the current band in which the naira traded, adding that the apex bank aimed to keep the currency within a range of three per cent above or below N150 per dollar,
Sanusi also confirmed that two of the 10 bailed-out banks had already signed memoranda of under-standing (MOUs) with new partners, adding that four others were close to signing takeover agreements but refused to name the banks or disclose further details.
“I can confirm that two banks have signed memo-randa of understanding, I’m just not able to disclose their names because we do have an approval waiting from the Securities and Exchange Commission (SEC). One signed almost two weeks ago and one signed yesterday. We have two that are ready to sign in the next week or two and two others that are also close,”he said.
Nine Nigerian banks were in a grave situation and one was under-capitalised after the crisis. Since then, Wema Bank Plc and Unity Bank Plc had fixed their problems, he said.
Source: Nigerian Tribune
