Some market watchers have expressed hope that the Central Bank of Nigeria would return banks with dissolved boards and management to their owners before the recapitalisation exercise goes further.
The analysts stated that, in separate chats with The PUNCH.
Banks have submitted their recapitalisation plans and some have commenced the execution of these plans.
On January 10, the CBN announced the dissolution of the boards and management of three banks; Union Bank, Keystone Bank, and Polaris Bank.
In the statement signed by the acting Director of Corporate Communications, Sidi Ali, the apex bank stated that the action “became necessary due to the non-compliance of these banks and their respective boards with the provisions of Section 12(c), (f), (g), (h) of Banks and Other Financial Institutions Act, 2020”.
“The bank’s infractions vary from regulatory non-compliance, corporate governance failure, disregarding the conditions under which their licenses were granted, and involvement in activities that pose a threat to financial stability, among others.
“The CBN assures the public of the safety and security of depositors’ funds and remains resolute in fulfilling its mandate to uphold a safe, sound, and robust financial system in Nigeria. Our Banking system remains strong and resilient,” it noted.
Thereafter, the CBN appointed new managing directors and executive directors to oversee the operations of the affected banks.
The first female Chief Executive Officer of the Standard Chartered Bank in Sierra Leone, Yetunde Oni, was appointed as the CEO of Union Bank, while Mannir Ubali Ringim was selected as the executive director of the bank.
For Keystone Bank, Hassan Imam was appointed as its CEO, while Chioma Mang was named an executive director.
CBN appointed Lawal Akintola as the CEO of Polaris Bank and Chris Ofikulu as its executive director.
Since the dissolution and appointment of the board, the CBN had announced a fresh recapitalisation exercise for banks and disclosed that had started to submit their recapitalisation plans.
Speaking on the situation, a former President of the Chartered Institute of Bankers of Nigeria and Professor of Economics, Segun Ajibola, posited that the apex bank would surely have a plan and timelines for the achievement of those plans for the current management of the affected banks.
“When there are regulatory interventions and remedial actions, they usually have their timetables, which may not be known to you and me. The plan may be that the interim board would have some mandates with some timelines.
“On paper, they may be asked to be there for a specific time frame, one year or such. They will try and complete all the assignments and render their reports. Then, the authorities will move further. We do not know the specific mandates and the timelines.”
The don also expressed hope that the CBN would come up with tangible steps before the recapitalisation exercise goes further.
“I’m very hopeful that something would be done before the recapitalisation exercise goes far so that they would be able to reposition themselves to attract the much-needed capital. These banks have owners who would want to keep those banks on.
“Let’s believe that they would be able to reposition themselves through any of the options announced by the CBN; raising sufficient capital, going into mergers and acquisition and change in licence,” he averred.
A source at Polaris Bank, who spoke on the condition of anonymity because he did not have the authorisation to talk publicly, told The PUNCH that the lender had already commenced work on its recapitalisation plan.
The source said, “The fresh capital raise is something that is being looked at. Immediately, we have a board that will be presented. Also, we still have our financial position as of December 2022, the way we are configured, if we need additional capital for us to be able to retain our current licence, it means we will need additional N150bn, which is not difficult for us to be able to raise.
“In the worst-case scenario; there are different options: one is to raise additional capital or to become a regional bank. So, without doing anything at all, we qualify as a regional bank because our current capital, which is the share capital and share premium is about N50bn. Any way we look at it, the bank will still be able to meet up with the capitalization,” he asserted.
Polaris Bank is owned by Strategic Capital Investment Limited and Ponglomerape Limited.
In 2022, the bank reported N121.31bn in gross earnings, as its profit after tax declined to N9.93bn from N15.63bn in the previous year.
Loans to customers and deposits from customers also rose in 2022 to N309.06bn and N1.14tn, respectively.
Based on the new CBN capital requirement, Polaris Bank’s capital base as of 2022 stood at N50.43bn (share capital plus share premium).
As a commercial bank with national authorisation, Polaris Bank would need to raise about N150bn to meet the new capital requirement if it is not considering a licence change.
One former deputy governor at the CBN, who preferred not to be named, mentioned that the banks with dissolved boards might not need to play catch-up if the recapitalization process has made significant progress before their boards were reconstituted.
He said, “There was a reason for the dissolution of the boards and I believe when CBN did that, they also put management in charge to ensure that whatever they found that was not good enough would have been remedied. I believe the remedial action is currently happening in these institutions and before long, they are going to be off the hook, returned to the owners and increase their capital base if that is what they want to do.
“Nobody knows the timelines and the mandate given to them. It is between them and those institutions. I think they know what the timeline is and what they are doing. I can assure you that the central bank is doing this to ensure that there is stability in the system as a whole.”