By MICHAEL EBOH

With barely four days to the deadline for the recapitalisation of the remaining four rescued banks, shareholders’ funds in the banks, totaling about N75.352 billion is in danger of being eroded as the onus now rests on themto either salvage the banks and their investment or watch the banks go the way of Afribank, Spring Bank and BankPHB.

This becomes necessary, especially as from today, Monday, September 26, 2011, all the remaining rescued banks — Intercontinental Bank Plc, Oceanic Bank International Plc, FinBank Plc and Union Bank Nigeria Plc; and their respective acquirers will be holding their Extra-Ordinary General Meetings, court-ordered meetings or Annual general meetings, giving shareholders the opportunity to decide the fate of the banks and the Nigerian financial landscape in general.

Central Bank Governor, Sanusi Lamido Sanusi

It is now clear that whatever the decisions taken by shareholders of the various banks, the effect of their actions and the outcome of the eventual resolution of the banking crisis will be remembered for a long time to come.

Presently, potential combination is expected between Access Bank and Intercontinental Bank; African Capital Alliance and Union Bank; First City Monument Bank, FCMB and FinBank; and Ecobank Transnational Incorporated, ETI with Oceanic Bank.

As a pointer to what to expect at the expiration of the September 30, 2011 deadline for the banks to recapitalize, the Asset Management Company of Nigeria, AMCON, said it has set aside funds to move in and recapitalize the troubled banks, whatever the outcome of the various meetings.

Managing Director, AMCON, Mr. Mustafa Chike-Obi said in Lagos that the corporation will either inject N800 billion in the troubled banks if the banks’ deals with their proposed acquirer scales through or N1.3 trillion if the deals fail.

With this, the corporation might have provided shareholders with limited options.

Whatever the outcome of the shareholders’ meetings, it should be realized that the banking sector will no longer remain the same. It is very likely that after September 30, the acquired banks will cease to exist after a couple of months, as there will be nothing left of them anymore, thereby, reducing the number of banks in Nigeria by five, putting Equitorial Trust Bank, ETB, into consideration.

Another major consequence of the expected consolidation is the fact that there will be a shake-up in the structure of the banking sector, as some banks will move into the top tier category, both in size and balance sheet.

According to analyst at Afrinvest West Africa Limited, if the current mergers and acquisition discussions scale through, we expect Access Bank and Intercontinental Bank to pool a combined market share of 9.8 per cent, placing them in the top tier league.

Mustafa Chike-Obi, MD, AMCON

The analyst said further, “We also expect Ecobank and Oceanic Bank’s post merger combined market share to stand at 9.3 per cent, while FCMB and FinBank’s combination should translate to a market share of 4.7 per cent.

“Our analysis further shows that if these deals are consummated, the number of top tier banks will increase by two, while the combined market share of the top five banks by total assets will rise to 57.6 per cent from the current 51.2 per cent.

“While the systemic effect of this increase in concentration level remains debatable, we posit that with the current trends and challenges in global markets, it is apposite that future policy decisions focus more on increasing the level of competition within Nigeria’s banking sector.”

Another analyst, Mr. Opeyemi Agbaje, Managing Director, Resources and Trust Company Limited, expressed optimism that the crisis in the banking sector will be resolved amicably, bringing about a return to stability in the sector.

According to him, there is an imminent further reduction in the number of deposit money banks if the deals go through, as Oceanic, Intercontinental, Finbank and ETB may disappear into ETI, Access, FCMB and Sterling respectively leaving the industry with 20 banks, while Union Bank if its ACA deal goes through will continue under new leadership.

He said, “It is likely Sterling/ ETB will succeed being a voluntary transaction. For the others, there are three broad possibilities- the deals are all approved; the deals all fail or some are approved and some are rejected by shareholders.

“At this point, the shareholders have severely limited options and may most likely endorse the deals on offer. The alternative, of course, as the CBN and AMCON appear to have signalled, are more bridge banks.

“All things considered, I hope these deals are endorsed so we can return to financial sector stability. I also hope the three bridge banks are sold to private investors within 12 -18 months.”

Also speaking, Mr. David Adonri, Chief Executive Officer, Lambeth Trust and Investment Company Limited, said that should shareholders vote against the merger and acquisitions deals, AMCON is on standby to recapitalise and take possession of the banks.

As losers in the banking crisis, he advised that shareholders ensure that they forestall future mismanagement and governance failure through active engagement to consistently hold their Boards and management accountable, while he tasked financial regulators on the need to be watchful to sanction deviation from sound risk management principles.

He said, “Due to the short term trading nature of the Nigerian economy, the banking sector as core of the payment system and provider of short term credits is the most dominant feature in the economy. Fragility of the sector has serious implications. Hence, there is a sigh of relief that the crisis that threatened stability of the sector is at final stage of resolution.

“Considering the opportunity offered by the exercise for shareholders to salvage part of their investment in the intervened banks, it will be most surprising if the arrangements are not unanimously endorsed.

“Since either way, the banks will be recapitalized, it is a historic achievement that no failure occurred during this crisis. The full protection of depositors and creditors will strengthen the confidence which would have been eroded in event of failure,” Adonri added.

Also, in their analysis of the Nigerian banking sector, researchers at Afrinvest said, “We view the actions of the Central Bank of Nigeria, CBN, as well thought-out and think it will stabilise the system over the long term, having avoided a looming systemic crisis that the relative illiquidity of these banks portended.”