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Number game, how deep is the hole in the banks

By Omoh Gabriel, Business Editor
As the controversy over the injection of funds into the five banks in the country continues to rage more facts are
beginning to emerge. Available data from industry study as at March 2009 provide an insight into developments in the industry.

The  data indicate that as at March 2009, 18 out of the 24 banks operating in the country   total loan portfolio stood   at N 4.4595 trillion.

R-L Sarah Alade, deputy Governor, Policy, central Bank of Nigeria,  Mallam Sanusi Lamido Central Bank Governor and Babatunde Lemo  deputy Governor, Operations, Central Bank of Nigeria during a press briefing by the Central Bank of Nigeria's Governor to announce the managerial  restructuring and developments of some Nigerian Commercial banks at the CBN office in lagos yesterday. Photo: Nwankpa Chijioke
R-L Sarah Alade, deputy Governor, Policy, central Bank of Nigeria, Mallam Sanusi Lamido Central Bank Governor and Babatunde Lemo deputy Governor, Operations, Central Bank of Nigeria during a press briefing by the Central Bank of Nigeria's Governor to announce the managerial restructuring and developments of some Nigerian Commercial banks at the CBN office in lagos yesterday. Photo: Nwankpa Chijioke

Total deposit of the banks was N4.0673 trillion. Of the N 4.4595 trillion loans and advances in the 18 banks four of the sanctioned banks Union Bank, Intercontinental, Oceanic and Afribank carried N 1.3175 trillion of the loans representing 30 per cent of the total loans and advances granted by the 18 banks. While the total non performing loans of the 18 banks stood at N 239.4 billion out side the margin loans, the four banks non performing loans was N 115.3 representing about 45 perm     ent of non performing loans in the 18 banks.

But the CBN accused the five banks of high level  non-performing loans   which was attributable to poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the bank’s credit risk management practices.

Thus the percentage of non-performing loans to total loans ranged from 19 per cent to 48 per cent. The 5 banks will therefore need to make additional provision of N539.09 billion.

The total loan portfolio of these five banks was N2,801.92 billion. Margin loans amounted to N456.28 billion and exposure to Oil and Gas was N487.02 billion. Aggregate non-performing loans stood at Nl,143 billion representing 40.81 per cent .

The huge provisioning requirements have led to significant capital impairment. Consequently, all the banks are under capitalised for their current levels of operations and are required to increase their provisions for loan losses, which impacted negatively on their capital. The CBN did not give the nation the benefit of the state of each of the banks. It gave a total view of the situation without giving specifics.

But a number of persons and corporate bodies listed as owing the five banks various sums of money are contesting the amount the CBN claimed they are owing. Among those who reacted to the CBN publication were the Chairman of Obat Oil and Petroleum Company, Fredrick Akinruntan, businessman Jimoh Ibrahim and Rockson Engineering Company.

Akinruntan described the inclusion of his name in the debtors’ list as embarrassing, claiming that the report did not reflect the reality on ground. He was said to be owing Oceanic Bank N4.47 billion.

He denied owing any unserviceable loan. He said he collected N2.5 billion from the bank to develop a property in Abuja and has never defaulted on the terms he agreed with the bank. Akinruntan said the bank should speak up on his claim. Also, Ibrahim, who is the Group Managing Director of Global Fleet Group, denied owing Oceanic Bank N14 billion.

He threatened to sue the CBN for “lying about the amount” involved. In a briefing in his office in Abuja Ibrahim said: “My company did not owe Oceanic Bank N14. 7 billion. The CBN lied on the figure, a development that has affected the credibility of the CBN’s regulatory function.

“Oceanic Bank, by a letter dated May 18, 2009, had put all the outstanding debts of all Global Fleet Group at N8 billion as the bank acknowledged receipt of N3 billion I paid in May this year. In the letter acknowledging the receipt, the bank had written that ‘the total outstanding on your facilities will be N8 billion.’

He accused the apex bank of unfairness by describing the loan as “non_performing” even after paying N3 billion. Ibrahim said that “the turnover on the account of Global Fleet Group since inception is over N100 billion and will need Oceanic Bank to do reconciliation and provide evidence of withdrawal to enable us pay.

“ Similarly, the management of Rockson Engineering Company said that the funds it allegedly raised from Intercontinental Bank were meant for implementation of the power projects it is handling for the Federal Government, which has failed to release money for the plants. The projects are the Alaoji (1072MW), Gbarain (225MW), Egbema (338MW) and Omoku (230MW) power stations.

Describing the step taken by the CBN as inaccurate and uncalled for, the Chairman of Rockson, Senator Aniete Okon, said the firm was indebted to Intercontinental Bank to the tune of N14.4 billion and not N36.9 billion as claimed by the apex bank.

His words: “Specifically, CBN claims that Rockson Engineering Limited is indebted to Intercontinental Bank Plc to the tune of N36, 989, 685, 692.84. For the avoidance of doubt, we like to state that our reconciled and mutually agreed commitment with Messrs Intercontinental Bank Plc is N14, 423, 291, 589.49.

A statement from Dangote Industries stated inter alia: “We refer to the CBN advertorial in various print publications dated 19th August 2009, listing Alhaji Aliko Dangote as a Director and Shareholder of Dansa Oil and Gas Limited, a defaulting customer to Intercontinental Bank Plc.

“We wish to state for the records that Alhaji Aliko Dangote is neither a Director nor a Shareholder of Dansa Oil and Gas Limited as averred. This is verifiable through the Company Registration documents held by the Corporate Affairs Commission (CAC) wherein directors of the said company are listed as: Alhaji Sani Dangote, Alhaji Mohammed Dangote, Mr Ali Dangote.

“With reference to Dangote Industries Limited’s indebtedness to Oceanic Bank Plc to the value of N2,526,460,000.00, we are in dispute over the charges and are very close to resolution.

“A company of our size will take on facilities from bankers and financiers in the course of our business. As a responsible organization, we deliver to our obligations in servicing these loans. “It is on record that our credit rating remains admirable and our bankers have confidence in our ability to meet our obligations.”

Also, Chairman of Global Fleet Group, Jimoh Ibrahim, on his N14.5 billion indebtedness to Oceanic Bank, described the publication by CBN as laughable.

The Central bank in reaction to criticism said it has noted claims by some individuals on the published
list of debtors/defaulters that the figures posted against them are not correct and threatened to go to court.

The bank has also noted some typographical errors regarding the titles of some government officials and some companies and wish to comment as follows: The general public and all concerned should note that the list published is as at 31st May, 2009 and if any of the defaulters/debtors have made any repayments after that date, they should sort it out with the relevant bank.

The Central Bank of Nigeria regrets any inconvenience caused as a result of the typographical errors mentioned. Meanwhile, list of other debtors/defaulters is being compiled and will be published on an on-going basis.

The CBN claimed that these banks were unable to meet their maturing obligations as they fall due without resorting to the CBN or the inter-bank market.

As a matter of fact, the outstanding balance on the EDW of the five banks amounted to N 127.85 billion by end July 2009, representing 89.81 per cent of the total industry exposure to the CBN on its discount window while their net guaranteed inter-bank takings stood at N253.30 billion as at August 02, 2009.

As at March 2009 for which data are available on the Nigerian banks from published figures, Union Bank had a total loan portfolio of N 291.9 billion, total deposit of N 682.3 billion and non performing loans of N 71.5 billion. The bank’s  loan/deposit  ratio was 42.8 per cent.

This implies that out of every N 100 cash deposit with Union Bank N 42.8 of the cash deposit was given out as loans during the period leaving N 57. 20 in the vault. The non performing loan as against total loan ratio was put at 24.5 per cent implying that out of every N 10 given out as loans N 2.45 was not coming back to the bank as when needed.

First Bank on the other had as at March 2009 on its books had a total loan portfolio of N 469 billion, total deposit of N 700.2 billion and non performing loans of N 7.3 billion.

Its loans to deposit ratio was 67 per cent meaning that for every N 100 deposited with it N 67 was given out as loans while the ratio of non performing loans to total loans stood at 1.6 per cent indicating that only about N 1.6 out of every N 10 given out as loans was not returning to the bank as when required.

For the United Bank for Africa, its total loans portfolio stood at N 461.7 billion, total deposit was N 1.33 trillion while non performing loans amounted to N 16.2 billion.

The bank loans to deposit ratio was 34.6 per cent implying that for every N 100 cash deposit the bank gave out N 34.6 as loans and the non performing loans as against the bank’s total loans stood at 3.5 per cent indicating that for every N 10 granted as loans about N 3.5 was difficult to recover.

Zenith on the other hand, as at the time under review, had a total loan portfolio of N 288.1 billion, total deposit of N 1.185 trillion and a non performing loan account of N 4 billion.

The bank’s loan to depositratio was 24.3 per cent showing that the bank was giving out about N 24.3 out of every N 100 cash deposited with it and a non performing loan ratio of 1.4 per cent showing that it was unable to recover N 1.4 out of every N 10 it gave out as loans as at the period under review.

Intercontinental Bank one of the five banks the CBN effected changes on its top management including the pioneering Managing Director on its part had N 456.3 billion total loans portfolio, a deposit of N 1.057 trillion, Non performing loans of N 16.6 billion.

Intercontinental’s total loan to total deposit ratio had a record of 43.2 per cent implying that out of every N 100 cash deposited with the bank it gave out N 43.2 as loans while keeping N 56.8 in its vault and its non performing loans to total loans as at March 2009 was 3.6 per cent implying that for every N 10 given out as loans N 3.6 was difficult to recover from debtors.

Gtbank on the other hand had as at March 2009 a total loan account of N 294.4 billion, total deposit of N 364.6 billion, non performing loan of N 3.8 billion. Gtbank’ total loan to deposit ratio at the time stood at 80.7 per cent showing that the bank gave out as loans 80 kobo  from every N1 cash deposit while its non performing loans to total loans ratio was 1.3 per cent meaning that for every N 1 granted as loans the bank was not able to collect from debtors 1.3 kobo .
In the case of Oceanic Bank another of the affected five banks, its total loans as at March 2009, was N 351.3 billion.

The bank had a total deposit of N 693.9 billion with a non performing loans portfolio of N 11.3 billion. Oceanic bank’s total loans to deposit ratio was 50.6 per cent indicating that about N 50.6 out of every N 100 cash deposit with it was given out as loans and its non performing loans to total loans ratio stood at 3.2 per cent also implying that the bank could not recover from its debtor about 3.2 kobo on every N1 given out as loans. The seven banks were regarded as the top tier banks in the country.

The seven banks had on their books on the average N 373.2 billion as loans, N 859.6 billion as the average deposit, average of N 18.7 billion as non performing loans, loans to deposit ratio of 49 per cent while the ratio of non performing loans to total loans had average ratio of 2.4 per cent.

Diamond Bank on its part had a total loan account of N 250.3 billion, total deposit of N 419.7 billion, non performing loans of N 4.3 billion; a loan to deposit ratio of 59.6 per cent and non performing loans to total loans of 1.7 per cent. Afribank one of the five banks which Managing Director was removed from office had a total loan portfolio of N 116.1 billion, total deposit of N 218 billion, non performing loans of N 15.9 billion loans to deposit ratio of 53.3 per cent and non performing loans to total loans ratio of 13.7


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