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N25bn capital base: Intercontinental, 3 others merge
•Insurers may get same date
KENNETH MADUEKE, Asst. Business Editor
and KELVIN EGERUE, Insurance Editor
Intercontinental
Bank Plc and three other banks yesterday formally agreed to merge into one in a
bid to commence the consolidation process as required by the Central Bank of
Nigeria (CBN).
The apex bank had in July directed banks
in the country to recapitalize to the tune of N25 billion each up from N2
billion, by December 2005.
But there are indications that insurance
firms are to brace up for a rough road to recapitalisation as their own exercise
might run concurrently with that of banks, that is terminating December, 2005.
The merging banks, Equity Bank Nigeria
Limited, Gateway Bank Plc and Global Bank Plc yesterday signed a Memorandum of
Understanding (MoU) at the Intercontinental Bank Plaza, Victoria Island, Lagos.
According to vice-chairman/chief executive
of Intercontinental Dr Erastus Akingbola, the four banks plan to notify the
regulatory authorities any moment from now about this strategic move.
He stated that while they wait for the
approvals of this line of action, they shall continue to pursue the various
business expansion plans that will ensure the realization of the full potentials
of the envisaged new mega bank.
According to him, "Perhaps it is
noteworthy to remind you that ours is a family re-union. We are not strange bed
fellows. This is more of a consolidation rather than a merger."
He explained that over the years, the four
banks had operated as a group, complementing each other from the board and
management levels to business development and strategic areas.
Dr Akingbola said in the current financial
year, they had reinforced this group identity through a well co-ordinated
three-pronged development plan which addresses branch network expansion,
information technology and capital base expansion. He said that while the second
leg of the expansion plan addresses the beefing up of their information
technology framework to enhance cutting edge services delivery, the third leg
involves a substantial shoring up of their capital base.
Daily Champion
noted that by collapsing the Intercontinental Bank’s Group structure, its
consolidated balance sheet as at the end of 2003 showed N16.6 billion
shareholders’ fund.
However, the bank’s 2004 group projection
is N26 billion, which is N1 billion above the new capital base set for banks by
the CBN.
Detailed picture of the balance sheet
showed that by 2004, the group projection are gross earnings of N45 billion and
total assets of N200 billion.
The branch network which stands at 148 is
planned to grow to 200 by 2004 ending while total deposit and profit before
taxation are to increase to N160 billion and N10 billion respectively.
The chairman of Intercontinental Bank Plc,
Dr Raymond Obieri, stated that various boards of the affected banks are expected
to get approval from shareholders during their Annual General Meetings (AGMs)
for the change of their bank’s name.
He assured that there would not be job
losses as being feared in the consolidation effort meant to rationalise the
entire Nigerian economy.
Daily Champion
recalls that on September 6, 2004 five banks made up of
Allstates Bank, Gulf Bank, Universal Trust Bank, Hallmark Bank and Lion Bank
became the first set of banks to merge into First Consolidated Bank of Nigeria.
Although the minimum paid up capital of
the banks was raised from N2 billion with the government warning of the
extension of the deal to the insurance subsector, the various insurance
chieftains have assumed that the government would allow for more time
considering that insurers have just finished one such exercise last February.
But the chairman, House of Representatives
Sub-committee on Insurance, Hon, Aroh Eusebius Aroh said yesterday that there
will be no justification in waiting for the banks to run off their
recapitalisation project before the insurers take the turn.
He challenged Insurance practitioners to
brace up to the realities of another round of capital appreciation in the light
of the government’s current economic reforms.
Hon. Aroh, who spoke while declaring open
this year’s International Insurance Summit, commended the outcome of the last
insurance industry’s recapitalisation exercise, but quickly added that "the
issue of a second look at the minimum paid-up share capital requirement is self
evident."
This year’s international insurance
summit, the seventh in the series, has as theme: "Beyond adequately capitalised
Nigerian insurance industry: Challenges and Prospects for Enhanced Performance"
and is being hosted by the National Insurance Commission (NICOM).
No fewer than 100 insurance executives and
officials of the International Finance Corporation (IFC) are attending the
three-day programme whhich ends tomorrow.
"The industry should be able to
considerably increase local capacity in such areas as oil and energy insurance.
There is also the need to develop substantially, the life insurance market in
Nigeria. With the economic reforms currently going on, the insurance industry
should prepare to take advantage of regional market that are likely to emerge.
The insurance industry is strategic and needs to take proactive measures to
ensure that it is well positioned to remain at the commanding heights of he
financial services sector," Hon. Aroh stated.
According to him, it is the policy of the
present administration to enhance the economy through private sector
participation.
Asked later by newsmen on the dangers of
forcing out both the banks and insurers on funds drive at the same time, Hon.
Aroh insisted that each sector will likely be targeting different categories of
investors.
"I don’t think that it is going to cause
any form of stampede at all. I don’t see that happening in this case," he said.
"As I mentioned earlier, the issue of
adequate capitalisation in the industry has to be revisited and I am sure that
by the time you discuss extensively, sufficient light would have been thrown on
the need for a solid capital base for the industry," Hon. Aroh said.
Speaking earlier while welcoming
participants to the summit, the Commissioner for Insurance, Chief Dipo Bailey,
revealed that exploratory consultations on issues relating to capital increase
have already commenced with the relevant stakeholders. The various interest
groups, he said, will determine the criteria for pegging the new capital base.
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