It gets worse. Within a few days of the Central Bank pumping N420 billion into five insolvent banks whose senior executives were fired last week, the banks have been found to have even less value than previously claimed.
The worst of the banks, Oceanic, will have to provision for another N142 billion to clean up its books, according to an analysis done for the CBN. Only last Friday, the CBN announced that it was pumping N120 billion into the tottering bank.
Also facing additional write downs is Intercontinental, which received N100 billion just a few days ago but will have to wipe off an additional N117 billion from its balance sheet.
And Afribank, which has seen about 40 percent of its N390 billion loan book turn toxic, needs to provision for an extra N118 billion. Union and Finbank also would require massive new writedowns, though their specific amounts were not immediately available last night.
It also was not immediately clear how much extra cash from taxpayers the banks will need to stabilise.
“The capital they have does not address all their liquidity issues,” a senior CBN official told NEXT yesterday. “They can come back to the CBN to ask for more, or they can go to the capital markets. What we’ve done is to absorb some of the losses that will be provisioned.”
Officials have been stunned by how badly the banks’ assets have deteriorated, and no one can tell for sure how much money would eventually be needed to clean up the banking mess. CBN officials had estimated N1 trillion, but say off the record that it could take twice as much.
News of the deteriorating condition of the banks emerged as the CBN released the names of the country’s worst deadbeat debtors, those who borrowed from the banks but would not pay back. The list contains the names of a broad array of members of Nigeria’s moneyed class, their fronts and accomplices, and, in one case, even their nanny.
The publication created something of a political earthquake in the country, with the biggest of big men scrambling to explain themselves.
The five banks against whom CBN have acted collectively account for more than 40 percent of the banking sector’s non-performing loans. Oceanic , according to the Central Bank, is in such bad shape that it has a capital adequacy ratio of only 3.8 percent, instead of the required minimum of 10 percent. The bank’s liquidity ratio is worse, at minus 26 percent, instead of the industry minimum of 25 percent. The bank also owes the Central Bank, through the Expanded Discount Window, the sum of ₦95 billion.
Cecelia Ibru, its flambouyant managing director pushed out last week by the CBN, is reportedly on the lam. Anti-graft agents are looking for her.
A senior executive of the bank, who also declined to be named, said that Oceanic Bank staff have chosen to remain optimistic.
“What will they do? There’s continuity… Sanusi (Lamido) has given us an assurance that the banks will not fail, so it doesn’t matter who is on the seat. Continuity is the game. The CBN themselves have said no government agency should move their money out of the banks. That is something, at least,” he said.
Business as usual
The source said that the banks could do nothing about public perception, however, he said that there was no reason to panic. “There is nothing any bank could do about that. It is bound to happen. If you had money in a troubled bank would you sit down and allow it lie fallow? But I am telling you, in the next one or two weeks, it is business as usual.”