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Troubled banks lose N1.3trn as CBN fixes 2-yr tenure for mgts

By Omoh Gabriel & Babajide Komolafe
LAGOS—The caretak-er management of the eight rescued banks are to manage them for two years. The two-year tenure was announced by the Central Bank of Nigeria, CBN, after the Bankers’ Committee meeting in Enugu, yesterday.
Meanwhile, six of the eight rescued banks by the apex bank have declared a total loss of N 1.3123 trillion while N 1.3493 trillion was recorded as provisions for bad debts, thus sending shock waves into the financial sector of the economy.

CBN, in a statement, explained the loss in the troubled banks, thus: “Following more detailed investigations, the new management of these banks found the situation in a number of the affected banks to be worse than had been originally thought.

‘’A number of issues only came to light after the CBN had put in place new management teams who, therefore, had access to greater and more up to date information. As a result of these findings, the banks had to make provisions over and above the CBN’s initial recommendations”.

The affected banks, Vanguard learnt, must publish their audited account as at March 2009 and the unaudited as at September between weekend and today.

Results released by six of the banks that have complied with CBN’s directive show that Intercontinental Bank has the highest provision and loss figure.

However, bankers are raising issues with the result, they argued that the assets of most of the banks have not been valued at current market prices and that some questionable items were posted to the books of these banks to paint a gloomy picture.

They stressed that these are institutions whose loss positions pre-August 14 was lower than N36 billion and that is for the big ones.

It was learnt that some senior and older bankers as well as the interim managing directors/chief executive officers had appealed to the CBN management not to go the full hog in the publication of the accounts because deposits will fly out heavily and further decimate the banks but this was not acceded to by the apex bank.

Some argued that the troubled banks were asked to provide for loans outside the prudential guidelines. It was also learnt that the standard being applied to the eight rescued bank in terms of loan provisioning is different from the one applied to the 14 allowed to stand.

CBN’s view on banks

CBN, however, said: “In line with the Central Bank of Nigeria’s new disclosure standards which are central to the bank’s ongoing banking sector reforms, all deposit money banks, DMBs, in Nigeria have announced financial results for the third quarter 2009 in line with  clearly defined and transparent reporting requirements.

“All Nigerian banks have now reported their results according to these stringent standards for corporate governance, transparency and disclosure.

‘’As expected, the third quarter earnings announcements for a number of banks have included a level of provisions that have led to reported losses, reflecting the true position of the lending portfolios.

This has been particularly evident in the nine banks assessed to be in a ‘grave situation’ following the outcome of the combined CBN/NDIC examination.

There are two key reasons for the current reported losses:

“Following more detailed investigations, the new management of these banks found the situation in a number of the affected banks to be worse than had been originally thought. A number of issues only came to light after the CBN had put in place new management teams who, therefore, had access to greater and more up to date information.

‘’As a result of these findings, the banks had to make provisions over and above the CBN’s initial recommendations. Nigerian banks, like other banks in countries around the world, have faced a very challenging operating environment this year.

“However, CBN is confident that the worst is now behind us.  The current management teams of the affected banks have made significant progress towards restoring stability in their operations and continue to work diligently to ensure that sustainable, long-term solutions are implemented with a view to building a solid platform for future growth,” it added.


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