By Peter Egwuatu & Michael Eboh
Operators in the capital market have thrown their weight behind the Central Bank of Nigeria over the bill proposed by the CBN to establish Asset Management Company (AMC ) saying if the bill before the National Assembly is rejected it will cause more woes and calamity for the troubled banks.
Stockbrokers who spoke to Vanguard emphasised that what most operators in the financial service industry especially, the stockbrokers are agitating for is that the bill be amended to favour all parties involved in the toxic assets of the troubled banks.
â€œWe are not canvassing for total rejection of the AMC. It is a good bail out option. It is not the complete solution to bail out the troubled banks but just a means to an endâ€ a broker said.
According to the broker who spoke on condition of anonymity, â€œWe have made our demand to the National Assembly and the CBN. We would be there to express our concern on the areas that needed to be amended during the public hearing. It is our belief that the bill will be passed with some amendment.â€
Mr.Tunde Adeyemi, Managing Director, DHTL Capital Limited, said â€œThe rejection of the AMC bill in its entirety will be a big blow to the financial system.
The rejection of the bill by the National Assembly will only compound the woes of these troubled banks, even though, it cannot solveÂ the needed financial recovery and stability required to lift the current economic crisis which was aggravated byÂ the current CBN Governorâ€™s actions. So it is our belief as stockbrokers that the National Assembly will scrutinise the bill and be able to address the grey areas that would make the AMC realise its objective.â€
When asked if the troubled banks will be able to pay dividend given the present situation of their debt portfolio, Adeyemi said, â€œIn fact it is unwise for both the troubled and not yet declared troubled banks to declare any form of dividend for now or else they need to be seriously probed.
The financial system needs stability and it is not a time to start declaring dividend, but to plough back the excess fund, if any, into the business and take up the opportunities available and to block all the previous holes created in each institutions.
â€œMy opinion is that it will be irresponsible for any of the troubled banks to pay any form of dividend, where they are still struggling to meet overhead and incessant non- performing risky asset. Also, for the â€˜yet to be declared troubled banksâ€™ it will be irrational for them to declared any dividend or mouth watering dividends.â€
Commenting on the implication if AMC bill is rejected by National Assembly and what will happen to toxic assets of 10 troubled banks and if they fail to declare dividend, Mr. David Adonri, General Manager, Lambeth Trust and Investment Limited said, â€œWe understand that the AMC bill has gone through the second reading in the Senate this week while the House of Representative has passed the bill following the prompt submission of the financial compendium by CBN.
If in spite of these the bill is not passed, toxic assets will continue to pose serious danger to banksâ€™ solvency and hamper their ability to resume extension of adequate credit to the economy.
Recovery of the troubled banks can also be truncated if the life-line from sale of their toxic assets does not materialise. Failure to declare dividends by the banks may not have any material effect on their shares as investors already know that they will not make profit in their year ended 31st December 2009.â€
Mr.Chinenyem Anyanwu, Managing Director, Dependable Securities Limited, said, â€œOn the issue of the troubled banks and declaration of dividends, I am not sure any wise investor is expecting much from the troubled banks, the banks that had problem.
â€œIf anyone is buying them with the hope of getting dividend this year, that person is not being realistic,Â because there is a hang on them, and then there are still under scrutiny.
â€œI do not expect any one who buys their shares to hope to make dividend from them, but it is possible to make capital gain, people are making capital gain on them, buying cheap, selling high, buying low, selling high, that I say is a more realistic probability