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Unity Bank, Wema Bank, Others “Potentially Challenged”—Report

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Unity Bank, Wema Bank, Others "Potentially Challenged"—Report

Unity Bank, Wema Bank, Others "Potentially Challenged"—Report

By Modupe Gbadeyanka

All seems not to be too well with second tier banks in Nigeria, including Unity Bank, which has reportedly been in talks with investors since October.

According to a report by Bloomberg, analysts at Exotix Partners LLP, Jumai Mohammed and Ronak Gadhia said in a note last month that, “We view the Tier 2 banks as potentially challenged” because they seem unable “to weather asset-quality deterioration storms.”

Bloomberg said in its report published today titled ‘Nigeria Bank Divide Widens as Cash Shortage Chokes Small Lenders’ that  small-and-medium sized lenders like Wema Bank Plc dropped plans last month to raise Dollar loans to rather sell Naira debt locally in smaller tranches.

Unity Bank Plc, which missed a February 28 central bank deadline to recapitalize, has been in talks with investors since October, while Diamond Bank Plc started negotiations to sell businesses and issue debt over a year ago.

The report quoted an analyst at Afrinvest West Africa Ltd, Omotola Abimbola, as saying “The gap between the Tier 1 and Tier 2 banks has been widening in profitability and balance-sheet size,” expressing fears that, “In the next one or two years, we will probably see the trend extending further.”

Below is Bloomberg’s report:

The divide between the haves and the have-nots among Nigerian banks is widening.

The country’s biggest lender is so flush with cash it plans to repay $400 million of bonds when they become due in November 2018 rather than raising additional debt, while the next two largest banks sold international bonds for the first time since 2014.

At the other end of the scale, smaller lenders are scrapping plans to raise dollar loans and struggling to find investors to raise capital.

Top tier banks in Africa’s most-populous nation and biggest oil producer are rallying after the central bank in April opened a foreign-exchange trading window, easing a crippling currency shortage that contributed to the worst economic contraction in 25 years.

Smaller banks are lagging behind as they battle rising levels of non-performing loans and capital buffers near regulatory minimums.

“The gap between the Tier 1 and Tier 2 banks has been widening in profitability and balance-sheet size,” said Omotola Abimbola, an analyst at Afrinvest West Africa Ltd. “In the next one or two years we will probably see the trend extending further.”

United Bank for Africa Plc, the third-biggest lender by market value, raised $500 million in its first Eurobond sale on June 1 at yields below initial guidance.

This followed an equivalent issue a week earlier by Zenith Bank Plc in a deal that was four times oversubscribed. Guaranty Trust Bank Plc, Nigeria’s largest lender, said this month it has no plans to sell Eurobonds because it’s setting aside funds to repay existing debt.

‘Potentially Challenged’

By contrast, small- and-medium sized lenders like Wema Bank Plc dropped plans last month to raise dollar loans to rather sell naira debt locally in smaller tranches. Unity Bank Plc, which missed a Feb. 28 central bank deadline to recapitalize, has been in talks with investors since October, while Diamond Bank Plc started negotiations to sell businesses and issue debt over a year ago.

“We view the Tier 2 banks as potentially challenged,” Exotix Partners LLP analysts Jumai Mohammed and Ronak Gadhia said in a note last month. The lenders seem unable “to weather asset-quality deterioration storms.”

Still, the five-year dollar bonds didn’t come cheap. Lagos-based United Bank for Africa settled on a coupon, or interest paid twice annually, of 7.75 percent. That’s the highest of at least 10 sales of $500 million by emerging-market banks this year from Turkey, Kuwait, Bahrain, South Korea and China. Zenith will pay 7.375 percent on the securities it placed, compared with 6.25 percent on five-year notes sold in April 2014.

Even so, more lenders will issue Eurobonds because they need dollars to offer loans in the U.S. currency or to repay debt, said Lekan Olabode, an analyst at Vetiva Capital Management Ltd. in Lagos. Lome, Togo-based Ecobank Transnational Inc. plans to sell a $400 million, 5-year convertible bond this month, which will be used to refinance debt and provide short-term bridge funding for non-performing loans at its Nigerian unit, its biggest business.

Margin Impact

Access Bank Plc has $350 million of bonds due in July, while Fidelity Bank Plc has to repay $300 million next May. “Any Eurobond issuance from the Tier 2 names will come in relatively more expensive — impacting margins,” Olabode said.

Some banks may use share-price gains to sell equity, although most trade at less than book value, making a rights offering expensive, he said. Local debt also comes at a price, with yields on 5-year government bonds at 16.3 percent.

The Nigerian Stock Exchange Banking Index has advanced 44 percent this year, with United Bank for Africa soaring 99 percent to its highest since January 2014, while Access Bank has climbed 83 percent to a four-year high. Wema has gained less than 2 percent and Skye Bank Plc and Union Bank of Nigeria Plc are up about 10 percent in 2017.

Union Bank, in which former Barclays Plc Chief Executive Officer Bob Diamond’s Atlas Mara Ltd. owns 31 percent, said in November it will sell as much as 50 billion naira ($156 million) in a rights issue. The sale is still scheduled to happen by the end of this quarter, spokeswoman Ogochukwu Ekezie-Ekaidem said on June 8.

Sterling Bank, which announced plans to raise 65 billion naira in Tier 2 capital last July, managed to raise 7.9 billion naira in 2016 at 16.5 percent, according to Chief Financial Officer Abubakar Suleiman. “We don’t think the market conditions are OK to raise it now, so we are waiting,’’ he said.

Without enough capital to back new business and write loans, small lenders risk falling further behind as Nigeria’s economy recovers from last year’s 1.6 percent contraction. The International Monetary Fund forecasts Nigeria will expand 0.8 percent this year as the oil price improves.

“Big banks have a pricing advantage,” said Olabode. “That makes a big difference in size and capacity to do business.”

Additional Information from Bloomberg

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

Banking

ICPC Arrests Sterling Bank Managers for Hoarding N258m New Notes

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Sterling Bank managers N258m

By Aduragbemi Omiyale

Two Sterling Bank managers in Abuja have been apprehended by the Independent Corrupt Practices and Other Related Offences Commission (ICPC).

A statement from the ICPC disclosed that its operatives arrested the Regional and Service Managers of the financial institution last Friday for hoarding N258 million in the bank’s vault.

The new Naira notes were given to Sterling Bank by the Central Bank of Nigeria (CBN) to disbursement to customers to ease the tension caused by Naira scarcity.

“As part of ongoing efforts at ensuring that commercial banks comply with the CBN’s directive on the distribution of the redesigned Naira notes, operatives of the Independent Corrupt Practices and Other Related Offences Commission (ICPC) last Friday discovered the sum of N258 million stashed in the vault of Sterling Bank in Abuja.

“This discovery followed one of the commission’s operations at ensuring that commercial banks and other interest groups do not flout the apex bank’s directive.

“When the ICPC monitoring team visited the bank and discovered the stashed new Naira notes in the bank’s vault, it was informed that the cash was the remnant of what the CBN had given the bank for onward distribution to its branches.

“The team, however, found out that only the sum of N5 million each was distributed to their various branches.

“Both the Regional and Service Managers were arrested and later granted administrative bail while the investigation continues,” the statement issued by the spokesperson of the ICPC, Mrs Azuka Ogugua, stated.

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Banking

Wema Bank Gives Nigerians Option to Buy New Samsung Diamond Series on Credit

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ALAT new Samsung Diamond Series

By Aduragbemi Omiyale

Nigerians intending to purchase the new Samsung Diamond Series phones but are short of funds can now fulfil their fantasy through Wema Bank Plc.

The financial institution, through its digital banking arm, Wema by ALAT, has partnered with the South Korean manufacturing giant, Samsung Electric Industries, to sell smartphones to customers in Nigeria.

According to the Chief Digital Officer of Wema Bank, Mr Olusegun Adeniyi, prospective buyers can make a partial payment or buy on credit for any of the models in the series.

“This partnership between ALAT and Samsung will simplify the acquisition of high-end gadgets, provide customers with multiple payment options, and simplify logistics,” he stated.

“Our current and prospective customers who desire to own any of the models of the new Samsung Diamond Series phones can pre-order their choice on ALAT.

“They can also choose their preferred pick-up locations, and their orders will be delivered to their preferred destination,” he explained.

Additionally, Mr Adeniyi encouraged prospective buyers to take advantage of the partnership’s partial payment and credit options.

“Customers can either make full payment or pay a 30 per cent equity contribution from their selected account, after which the devices can be picked up at the preferred locations selected on their Pre-Order Forms.

“Individuals who wish to buy on credit can do so through the device loan feature on ALAT.” The banker added.

The bank noted that while customers will be notified by email or phone call through one of their contact agents when their order is delivered to their preferred locations, those who want to track the status of their orders can do so via telephone at 07000PURPLE or 08039003700, or via WhatsApp chat at 09044411010.

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Banking

Naira Scarcity: CIBN Urges Customers to Stop Attacks on Banking Facilities

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attacks on banking facilities

By Aduragbemi Omiyale

The professional body for bankers in the country, the Chartered Institute of Bankers of Nigeria (CIBN), has appealed to citizens of the nation to be patient and remain calm over the hardship caused by the scarcity of new Naira notes in the financial system.

The Central Bank of Nigeria (CBN) changed the N200, N500, and N1,000 denominations and asked residents of the country to return the old currency notes.

Since the apex bank extended the deadline of the currency swap on January 29, 2023, to February 10, 2023, Nigerians have been made to spend almost the whole day withdrawing about N20,000, and in some cases, ATMs are unable to dispense cash to customers, fanning outrage among the people, who are already frustrated by the effect of the Naira redesign policy.

Their anger further rose after reports of security officials arresting bank managers who hoarded the new notes and failed to load their ATM terminals for customers to withdraw cash, resulting in attacks on banking facilities.

Worried by this, the CIBN issued a statement on Tuesday to appeal to the banking public to exercise patience, promising that efforts are being made by stakeholders to address the issue.

In the statement signed by the Registrar/Chief Executive of CIBN, Mr Akin Morakinyo, the group expressed sympathy “with the banking public on the difficulties encountered in accessing the new Naira notes which heightened tension and, in some cases, provoked acts of violence at different customer touchpoints.”

“Whilst we understand the plight of bank customers, we passionately appeal for calm and understanding as the regulator, the Central Bank of Nigeria (CBN), and the operators, the banks, are working assiduously to bring the situation under control.

“Relevant stakeholders within the ecosystem are being engaged with a view to addressing the unintended consequences of the laudable Naira redesign policy.

“To this end, we beseech the general public to eschew any act capable of exacerbating the current situation and exercise restraint while we enjoin all our members to carry on their duties with utmost professionalism and diligence.

“The Chartered Institute of Bankers of Nigeria, the umbrella professional body for banks and bankers, is confident that this phase will pass with the cooperation of all and sundry, and our country Nigeria will come out of this stronger,” it further said.

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