24 September 2018 : It is amazing how a Bank goes from acquiring a firm to getting acquired by the Central Bank in a span of three years. The eight largest Bank of Nigeria got blotted like grease from oily food, after CBN announced the takeover of the Bank on Friday. Sadly, this isn't their first offence, earlier in July 2016, CBN had sacked their CEO, Chairman and 10 other directors fueled by the Bank’s consistent breach of cash and liquidity ratios.

Now, the sob story for its shareholders starts: A bridge Bank called Polaris has been licensed as the commercial Bank and will now manage the assets of the Bank. Consequently, the shares of the Bank has been suspended indefinitely from the NSE. In essence this means that the shareholder’s shares which traded at 77 Kobo per share will descend to zero once the suspension is lifted.

On Friday, the lender’s shareholders were basking in glory as the Bank’s market capitalization closed at N 10.6 billion, a 4.05% increase in its share price, thus reporting a positive YTD of 54%. But post trading hours, CBN and Nigeria Deposit Insurance Corporation set up the Bridge Bank turning that glory into hellfire.

In the past, when the Bridge Banks; Enterprise Bank Limited, Keystone Bank Limited and MainStreet Bank Limited were formed by acquiring the assets of Spring Bank, Bank PHB and AfriBank respectievly. The shareholdings of these three former banks became obscure. When the Bridge Banks returned to profitability and became laudable enough to be bought off by investors, the new buyers gave the former shareholders zilch, as the funds were used to settle existing liabilities of the Bank.

Ofcourse, this story has to have some humor also, So, the bridge is being done by AMCON, through the capitalization of N 786 billion to return the lender to financial soundness, But AMCON needs a lifeboat in their sinking Titanic just as much as Skye does.

AMCON’s 2017 financial report boasts of a negative book value of N 3.95 trillion with mere N 882 billion assets. We will leave you to do the math of how a firm with a negative equity of N 3.95 trillion will save a Bank with a negative equity of N 730 billion( As of July’17). If this doesn't defy economic wisdom I don't know what does. If AMCON decided to do this all by itself, its liabilities will shoot up to N 5.5 trillion while its negative equity to skyrocket to N 4.7 trillion. Although, fortunately for AMCON, CBN has got its back, so all this mechanics can work out without protests from any external creditor. 

The silver lining is that the depositors have been assured by CBN that their funds are safe as they are covered by NDIC and CBN, and the lender in question has no outstanding local or foreign bonds.

The reason the lender is in this position is the impairment of loans to the tune of N 529 billion coupled with transactions in suspense to the tune of N 280 billion, relating to the balance sheet  and profit loss manipulations from 2006to 2016 and direct and fraudulent cash withdrawals by individuals. The amount is linked to about N 29.5 billion spent in acquiring Mainstream Bank ( financed by free funds of N 80 billion and the balance of N 46 billion funded with N 15 billion of depositors funds)  coupled with a purchase price of N 126 billion, along with the manipulation of Bank accounts and about N 7 billion being disbursed to individuals and corporations without proper process.

Former CFO admitted that the Bank operates two account books, when in order  to disguise the N6 billion capital shortfall, deposits were suppressed and netted off against assets. The GMD would periodically transfer some funds to Abuja, to people aiding the acquisition of the Mainstream Bank. The CFO dint back out from slinging mud on some prominent senators, in the act of lobbying and doctoring figures.

In addition to all this it is an impeachment for the CBN to sanction the acquisition of Mainstream Bank by Skye Bank despite knowing that the latter is in dire capital restrain. 

Reporting for EasyKobo on Monday , 24 September 2018 in Lagos, Nigeria