CBN Directive: Banks Explore Strategies
By Amarachukwu Ona
Various banks in the country are already exploring strategies on how to beat the deadline of the recent directive from the Central Bank of Nigeria (CBN) for banks to raise their capital base to a minimum of N25 billion from December 2005.
Amongst the 89 banks in the country at the moment only First Bank of Nigeria Plc and Union Bank of Nigeria Plc have capital base of N25 billion and above. While Union Bank's capital base is N37.485 billion, that of First bank is N27 billion, this is expected to increase to about N42 billion when it takes into account the new capital of N15 billion from the right issue it made in 2003.
While some banks are exploring the possibility of mergers, others are determined to go it alone.
Those that are likely to go it alone include Zenith Bank which has gone to the capital market with N8.72 billion initial public offer (IPO) information gotten from its 2004 financial results shows that it has a capital base of N15.67 billion, if the IPO is fully subscribed it's capital base will increase to N24.39 billion.
Guaranty Trust Bank which also recently went to the capital market with a N10.6 billion offer will also likely go it alone. As at the end of the 2004 financiai year, the bank's capital base stood at N11.754 billion. A full subscription of the last offer will take its capital base to N72.12 billion. Since the offer has an option that any over subscribed shares will be allotted, Guaranty Trust is likely to beat the N25 billion mark
Oceanic Bank is one of the banks that is also likely to go it alone. The bank rated "Aa" by Augusto & Co. "AI+ and "AA- by Global Credit Rating based in South Africa and "Aa' by Pharez Risk Rating, in the profit and Loss statement for the period ended June 30, 2004 achieved a gross earning of N9,985,724,000 against N7,672,032,000 recorded in the corresponding year. Profit before taxation also grew by 30 percent increasing from N2,449,772,000 to N3,188,678,000 while profit after tax stood at N2,742,263,000. A 32 percent growth from the corresponding year's N2,081,287,000. The only bank that won CBN bankers committee award as the first in real sector financing- manufacturing.
Oceanic Bank is one of the banks with a capital base in excess of their current Central Bank of Nigeria's (CBN) prescribed minimum of N2 billion. With an authorized share capital at incorporation of N20 million, the authorized share capital has over the time increased to N7.03 billion fully paid up.
Afribank Nigeria Plc, and Standard Trust bank, Habib Bank are also likely to go it alone.
Those that are already exploring the merger option including Chartered Bank, Magnum Trust, Prudent bank, NAL Bank, Hallmark Bank and ACB among others.
Other banks such as Fortune bank, City Express, Broad bank, Triumph among others have assured the ir customers of their ability to meet up with the directive to ensure the safety of depositors funds.
The Managing Director of CDB Trust Bank Plc has also confirmed that merger is one of the strategies being explored by his bank to meet the CBN's mark.
The new capital base according to the President of the manufacturer Association of Nigeria, Chief Charles Ugwu will sanitize Nigeria's money market in particular and the economy in general as interest rate will come down with rise as transaction volume.
The MAN President further stated that under the new policy, longer term funds would be available in the economy, large chunks of investments, including high profile international projects could be syndicated and the banks would be enabled to play a more supportive role for the productive sector.
However, some analysts have faulted the CBN directives insisting it will have a deleterious impact on the economy.
One thing that is however certain if the CBN stick to the N25 billion mark is that there will be a reduction in the number of banks in the country after the 18 months deadline.
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