By Omoh Gabriel, Business Editor

Two years into the Central Bank of Nigeria’s intervention in eight ailing banks in the country, signs are that no improvement has been recorded in the rescued banks as their financial situation have not improved.

 This has put at risk the deposit of N3.06 trillion in the eight banks which is a source of worry to the CBN management that should the eight banks go under, the economy will not be able to absorb the loss nor is the Federal Government in any position to pay depositors.

The Nigeria Deposit Insurance Corporation has provision for protecting small depositors and can only pay a maximum of N250,000 per depositor.

Figures obtained from the Central Bank show that in 2009 when the current CBN governor assumed office, the total deposit base of the 24 banks in the country was N10 trillion while the deposit in the eight rescued banks stood at N3.069 trillion which is 30.7 per cent of the total deposit. As at December 2010, the total deposit base of Nigeria banks was N10.837 trillion and the eight rescued banks had a total of N3.058 trillion at risk.

The Central Bank of Nigeria, CBN, headquaters, Abuja

A break down of the deposit the eight banks are saddled with showed that as at December 2010, Intercontinental Bank despite the travail, had a total deposit base of N617.733 billion as against the N511.576 billion it had in 2009, an increase of N106.15 billion.

Closely following in the deposit at risk is Oceanic Bank which total deposit at the end of 2010 amounted to N630.227 billion. Compared to the previous year’s deposit of N542.787 billion, this amounted to a deposit increase of N87.43 billion.

According to the CBN figures, in the case of Union Bank, its total deposit base as at the end of last year was N616.076 billion as against the previous year’s deposit base of N797.913 billion. This in fact showed a decrease in deposit liability of N181.83 billion.

According to CBN data, closely following in the deposit at risk is BankPHB which at the end of 2010 had a deposit liability of N348.707 billion as against the N447.540 billion it had in 2009 when Sanusi’s management took over the bank. This showed a loss of deposit of N98.83 billion. In reaction to its continued loss of deposit and ever rising cost, the management of BankPHB last week panicked and  sent an SOS letter to a select members of staff capturing the critical situation of the bank and in some of these other rescued banks.

The letter with the subject: Interbank/CBN dependence on bank funding, drew top management attention to “the escalating level of the bank’s interbank/CBN-dependence for funding our operations, and the urgent need to tackle the situation with a multi-pronged solution.”

The letter written by the bank’s treasurer on March 16, 2011 stated: “As at mid-month, interbank takings stand at N133 billion and this does not include CBN SLF (Standing lending facility) of N35 billion.”

The bank’s treasurer listed issues facing the bank to include persistent negative clearing, loss of deposits and the fact that “70 per cent (N187 billion) of total treasury assets (N246 billion) is held for now in an illiquid AMCON Bond.”

It noted: “I wish to bring to your attention our escalating level of interbank/CBN dependence for funding our operations, and the urgent need to tackle the situation with a multi-pronged solution immediately. As at mid-month, inter-bank takings stand at N133 billion, and this does not include CBN standing lending facility, SLF of N35 billion. “Issues” raised by this include persistent negative clearing, loss of deposit and 70 per cent (N187 billion) of total treasury assets (N264 billion) is held for now in an illiquid AMCON Bond.

“Implications and actions plan” would mean “to step up deposit mobilisation bank-wise, significantly, possibly taking a hit on cost (a new rate sheet has been advised), intensify the efforts at a bank-wide retention strategy for Federation Account Allocation Committee, FAAC, and other flows. We may need to avoid/slow down on rollovers of loans/facilities and insist that clients pay down for now, we may also have to slow down on any fresh disbursements of loans.

This puts the bank in a conundrum, given the low loan/deposit ratio. This is a very dangerous trend and is an issue that deserves topmost priority.

 “Please let us think about strategies to fight this threat that is upon us. Send your comments to – who will be attending ALCO on Monday, March 21, on my behalf to enable him discuss with the other members extensively. I have copied the regional managers in Lagos and West as well as Abuja as they make up nearly 80 per cent of our business.”

Other rescued banks which deposit is at risk are Afribank N304.320 billion, Finbank N209.118 billion, and Equitorial Trust Bank N133.948 billion.

Analysts familiar with the banking system say that most of the rescued banks were heading for loss if they were not sold or recapitalised soon. One of them stated: “Basically, they have sold all the assets on their books. 

 This is coming on the heels of the Central Bank saying it has not approved any Memorandum of Understanding, MoU, signed between management of the rescued banks and prospective core investors.