CBN Softpedals On Banks' Takeover, Meets Shareholders


, As Skye Bank Names Durosinmi-Etti As Akinfeminwa's Successor
By Enitar Ugwu and Onyedika Agbedo

THERE are indications that the initial plans of the Central Bank of Nigeria (CBN) to outrightly takeover the rescued commercial banks may have collapsed, as the apex bank intends to open discussions with key shareholders of the affected banks on the way out.

The affected banks are Oceanic, Intercontinental, Union, PHB, Afribank, Finbank and Spring.

Meanwhile, following the recent CBN policy directive stipulating a 10-year maximum tenure for banks' chief executives, the Board of Directors of Skye Bank has appointed Mr. Kehinde Durosinmi-Etti as successor to Mr. Akinsola Akinfemiwa, the out-going chief executive of the bank.

Akinfemiwa is one of those caught by the policy directive, having already spent 10 years as GMD/CEO of Legacy Prudent Bank and Skye Bank cumulatively.

The apex bank had planned to hand over the rescued banks to some preferred core local or foreign investors on a wholesale acquisition basis.

But sources close to the financial advisers appointed by CBN to re-examine the policy hinted The Guardian at the weekend that the initially preferred investors had been foot-dragging on the Expression Of Interest (EOI) since September last year when CBN approached them, a development that might have forced the apex bank to throw it open by appointing the advisers late last year and mandating them to scout for investors.

The advisers are Deutsche Bank, StanbicIBTC, and Chapelhill & Denham.

They had returned to the CBN with an avalanche of problems militating against positive response from hundreds of investor-call letters already sent out.

The major problem cited was inadequate legal backing for any such acquisition and safety of the investments, against the background of the legal controversy surrounding CBN's intervention in the affected banks.

This development may have made the CBN hold back on its plan to publish last month the guideline on acquisition of the banks, as its governor, Mallam Sanusi Lamido Sanusi, had promised late last year.

Close observers of the new developments say this may have necessitated the use of the Economic and Financial Crimes Commission (EFCC) and other agencies to force the original owners of the banks to back down on their tough stance against a forceful takeover of their bank by either the CBN or any investor appointed by it.

It was generally believed that due process was not followed in the intervention, which raised legal roadblock against new investor confidence.

However, sources close to the apex bank hinted that the CBN has initiated dialogue with the original owners of the banks to find a common ground for a resolution of the seeming logjam.

A meeting with some of the directors was held two weeks ago in Abuja, but no immediate agreement was reached. The most problematic among the banks are Intercontinental and Oceanic.

But it was also learnt that the apex bank is holding some other options close to its chest in the event that the owners refuse to toe its line.

The most likely options, according to insiders, are either liquidation or nationalization. But it is believed that liquidation would be more favoured, since public opinion has consistently been against nationalisation.

However, even the liquidation option was also said to be ''toxic,' since it will lead to some other serious consequences for the entire economy.

It was gathered that a third option- recapitalisation by the owners- have also run into serious problem, as the owners are now arguing that CBN's intervention has worsened the financial health of their banks, making recapitalisation a near impossibility, a situation that also made acquisition a difficult option even without legal huddles.

CBN is believed to be back to the drawing board on other options to save the situation.

Durosinmi-Etti will assume office on August 1, 2010. A seasoned banker with many years of cognate banking experience, he started his banking career in 1987 and rose to become the managing director of legacy EIB.

He is currently the Deputy Managing Director of the bank, a position he has held since January 2006, when Skye Bank began operations.

The Board also approved the appointment of Timothy Oguntayo as Deputy Managing Director designate. Oguntayo is presently an Executive Director in the bank, and has over 28 years of banking experience spanning Corporate Finance, Credit and Risk Management, Corporate Banking, Investment Banking, Project finance and commercial banking.



IT'S WELL< EVEN INSIDE THE WELL

Sanusi's latest book entitled 'How to ruin a nations banking system in 7 days' is in a bookshop near you.

Utomi faults CBN’s action on BankPHB ….Launches two books
National News Feb 7, 2010 BY Michael eboh

Professor Pat Utomi has faulted the actions of the Central Bank of  Nigeria (CBN) on BankPHB, disclosing that the situation in the bank was not as grave as the CBN painted it.

Speaking during the Centre for Values and Leadership’s (CVL) Seventh Annual lecture, with the theme, ‘African Rising’ and launch of two books, written by Professor Utomi and Kola Olutimehin, in Lagos, Friday, Utomi stated that the current crisis faced by the bank was as a result of the way the apex bank handled the issue, especially in its making of the announcement.

He said, “The bank was not in a disaster shape before the CBN action. But when the noise started, naturally, it will lead to a run on any institution. But what is important now is that we get out of this situation and that is what all of us have committed our energy to doing.

“I was assured by the new managing director that the bank was not playing in the Expanded Discount Window. I think there was one occasion or something. During that whole period, there is none that I know of and the MD has assured me that nothing has happened since.

“The bank was not acting recklessly in the window, maybe, only on one or two occasions that I know of.

“But I don’t want to quarrel with the CBN because I want the whole system to recover. At a point, BankPHB was cleared. The first set of people who came went back, the bank was okay, and they were asked to return to the bank. They now claim that they have amnesia, that they forgot some of what they saw.

“There were some people whose loans were considered completely bad in BankPHB, were considered okay in some other banks, so you wonder.

“The position that I am in, presently, is to allow everything to move forward. We obviously saw people respond in ways that I would not have responded”.

Nigeria Not Affected By Recession, Says Finance Minister

Utomi Faults CBN Over Bank PHB Exposure
By Marcel Mbamalu

CONTRARY to claims in some quarters that the country suffered under the weight of the global economic recession in 2009, Minister of State for Finance, Remi Babalola, at the weekend said Nigeria was not actually affected by the malaise.

Babalola, who attended launch of Professsor Pat Utomi's book, Business Angel As Missionary, last Friday at the Nigeria Institute of International Affairs, NIIA, Lagos, in his 'personal capacity, said his involvement in revenue allocation as a Minister, rather showed that virtually all levels of government - Federal, State, and Local Government - including Ministerial Departments and Agencies (MDAs), actually got much more than what they budgeted in 2009.

According to the Minister, who disclosed the current administration of President Yar'Adua met a savings of over $20 billion, which has now risen to about $67 billion, said it would be illogical to argue that set goals were not met because of decline in revenue, as Nigeria's situation responded differently to the global crisis, especially in the area of revenue generation and allocation. He attributed the problem to issues of leadership and attitude. "There was no economic recession in Nigeria. Every tier of government got more than it budgeted. When this government came in, there was a saving of about $20 billion; the savings is now close to $67 billion," he said.

Babalola, who described himself as "a student of Professor Pat Utomi," blamed the litany of woes that has befallen the country on corruption, as well as faulty policy formulation and implementation. According to him, Corruption is a sign-off of leadership deficit in every facet of national life. "The greatest challenge is unemployment, and it is complicating the issue of poverty."

Describing the current period in national history as 'interesting, Babalola noted that the desired change in attitude would only be achieved with critical mass of people getting involved in the public space. "We need more than just a dye in the bowl. These are interesting times, especially in the last few days. But with people like Utomi, we are sure to get out of the woods sooner or later. Government will be ready to create a space for people to express themselves," he said.

At the boook launch, Utomi, a professor of Entrepreneurship and Political Economics, picked holes in a statement credited to the CBN-appointed Managing Director of Bank PHB, Mr. Cyril Chukwuma, suggesting that the bank under the management of the sacked leadership, had played heavily in the Expanded Discount Window (EDW), one of the alleged reasons for which the apex bank sanctioned the bank.

Utomi's reaction came as the Minister of State for Finance, Mr. Remi Babalola, said the three tiers of government, including Ministerial Departments and Agencies (MDAs), recorded improved revenue in 2009 despite recession.

Speaking to The Guardian shortly after the launch of his new book, The Business Angel as a Missionary, in which he faulted the manner in which the central bank reacted to the issues in the banking sector, Utomi said that, except for one or two occasions, the bank did not use the EDW.

His words: "I was assured by the MD that the bank did not trade in the Expanded Discount Window at all. I think there was only one occasion. In fact, during that whole period, it is only one I know of. The bank did not recklessly play in the Window, as speculated."

On the veracity of CBN's intervention in Bank PHB, Utomi said: "We obviously saw people respond in ways that I will definitely not have done it if I were in that position. I think more problems were created by the news than the situation on ground as at the time of CBN intervention. Now, that this intervention (from the CBN) has taken place, let's rebuild this vibrant institution."

The public commentator, who hinted that he would be quitting once the bank recovers from the bank recovers from the shock caused by the current negative publicity, said he had on several occasions opted to be out of the Board of the bank for so may years but was, each time asked to stay for some time more. "I'm stretched too thin; I'm not the type of director who will be there from morning till night. So, once we are able to get the bank back on track, I will move on," he said.

The new chief executive of the bank, had reportedly said that a month before September 30, 2009, (Before CBN intervention) Bank PHB "had shown heavy involvement in he market (EDW)," a claim Utomi debunked in strongest terms.

The truth will come out one day . . . . . , . . and we will all ask what was the point of the hoopla??


Those were the words of Donald Duke below on this same issue

As someone who does business now, how do you think the crisis in the banking sector has affected the economy?


Banking, finance and the economy are based on perceptions. The US is the biggest debtor in the world but there is a perception that it has tremendous capacity so despite their huge debts, China and the rest of the world are falling over to loan them money because they are banking on the resourcefulness of the country. A couple of months back, 12 Nigerian banks featured among the list of one thousand largest banks in the world. It was all based on perception. I support what Sanusi has done but I think it could have been done differently. You don’t create a panic in your economy. There are LC transactions originating from Nigerian banks and certified by a prime U.S. bank still not being accepted internationally.

There are more cash transactions now because Letters of Credit are not being accepted. So the protection the letter of credit affords you is lost. But certainly the banks had gone overboard from the facts we have today but, we should have done it mindful of the larger impact it could have on the economy. We also erred in not protecting our stock market. Virtually everyone was in the stock market then and when there are a mass of people under a roof protect the house. One thing that gives us confidence in our nation is wealth and government ought to strive to secure this. But when we do nothing about it and when it crashes it has a ripple effect. An immediate effect of the crash was a run on bank stocks because a lot of them had dwindled and after that a housing crisis and housing prices crashed. Assets that were created over the years now amount to nothing. So all of us in the country are losers because wealth has devalued.

Government cannot sit back and wash its hands away from these institutions because even though the stock market is private it’s a measure of public wealth and confidence in the economy.
It is all about jobs and people. The banks are also laying-off people and there are social consequences. If one is laid off from a bank he’d probably have to move homes and relocate his kids from school. Lifestyles change and it has a ripple effect. That is why western governments provide social security. Criminality has a bearing with unemployment.”

You know when people talk about how the system has been cleaned up as opposed to the dodgy accounting we have in the past I ask whether Sanusi has so far gone into the Banks to count how much money they have in vault?. And how much they don't have?

The auditing process was still based on balance sheets provided by these banks. If any smart bank has issues they will simply get another smart accountant to balance up their books before CBN comes and CBN auditors will find nothing except for some little new losses here and there which the banks will admit to save face.


So whats the point of all the noise. The erosion of confidence which Sanusi has created will take us another 5 - 10 years to restore so whats the point?