Bank groups emerge from Nigeria consolidation

LAGOS – Twenty-one new banking groups have emerged from a forced consolidation process in Nigeria, 11 weeks before a deadline for new capital requirements takes effect, banking sources and officials said on Friday.

Another four independent banks will meet the minimum capital requirements and are expected to go it alone, while 20 banks do not currently meet the guidelines and will have to cease banking on January 1 unless they find new capital before then. In an effort to strengthen the weak and overcrowded sector, the central bank announced in July 2004 a 12-fold increase in minimum capital requirements to 25 billion naira, to be achieved by December 31 2005.The latest list of 21 new groups consists of 65 formerly independent banks which have joined or intend to join forces to meet the requirements.The list changes constantly as some previously announced mergers have failed and others have been established.Three of the new groups – Access Bank, Intercontinental bank and UBA – have formally concluded their mergers, while a fourth, First Inland Bank, is on the verge of holding the shareholder meetings required by law to ratify the merger.Other new groups are required to formalise their mergers by the end of October, although the deadline for the new capital base is still December 31.The 20 banks that do not currently meet the new rules will have to cease banking from January 1 unless they find merger partners or capital before then.Some of these banks are in talks and may yet meet the deadline, bankers said.Banks have raised 241 billion naira from the local bourse through equity issues since July 2004, and 6,7 billion naira was injected from abroad through the capital market.The central bank last month instructed banks that no more equity issues will be allowed.The bank also directed that funds raised through the offers should be lodged in a central bank escrow account to safeguard the interest of investors.Directors of at least three banks are under investigation for fraud and have had their passports seized by law enforcement officials.The central bank last week assumed control of Allstates Trust Bank after it stopped paying depositors’ money, and the bank is expected to be recapitalised within the next few days.Nigeria had 89 banks at the beginning of the consolidation process in July last year, including two small commercial institutions that were already bankrupt.-Nampa-ReutersIn an effort to strengthen the weak and overcrowded sector, the central bank announced in July 2004 a 12-fold increase in minimum capital requirements to 25 billion naira, to be achieved by December 31 2005.The latest list of 21 new groups consists of 65 formerly independent banks which have joined or intend to join forces to meet the requirements.The list changes constantly as some previously announced mergers have failed and others have been established.Three of the new groups – Access Bank, Intercontinental bank and UBA – have formally concluded their mergers, while a fourth, First Inland Bank, is on the verge of holding the shareholder meetings required by law to ratify the merger.Other new groups are required to formalise their mergers by the end of October, although the deadline for the new capital base is still December 31.The 20 banks that do not currently meet the new rules will have to cease banking from January 1 unless they find merger partners or capital before then.Some of these banks are in talks and may yet meet the deadline, bankers said.Banks have raised 241 billion naira from the local bourse through equity issues since July 2004, and 6,7 billion naira was injected from abroad through the capital market.The central bank last month instructed banks that no more equity issues will be allowed.The bank also directed that funds raised through the offers should be lodged in a central bank escrow account to safeguard the interest of investors.Directors of at least three banks are under investigation for fraud and have had their passports seized by law enforcement officials.The central bank last week assumed control of Allstates Trust Bank after it stopped paying depositors’ money, and the bank is expected to be recapitalised within the next few days.Nigeria had 89 banks at the beginning of the consolidation process in July last year, including two small commercial institutions that were already bankrupt.-Nampa-Reuters