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BANKING AND FINANCE

Shareholders Worry Over Investments In Nationalised Banks

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With revocation of the Skye Bank Plc operating licence by the Central Bank of Nigeria (CBN), the shareholders of the bank are worried over their investments.

CBN had announced the establishment of a bridge bank, Polaris Bank, to take over activities of the now defunct Skye Bank.

Last week, the defunct Skye Bank shares gained 14.93 per cent from  67 kobo to close at 77 kobo. Year-to-date, the stock gained 54 per cent and was one of the best performing banking stocks on the NSE.

The Nigerian Stock Exchange (NSE) has placed the shares of Skye Bank on suspension following the CBN revoking the banking license of Skye Bank and in exercise of the powers of the Exchange pursuant to the rules on suspension of trading in listed securities, Rulebook of the Exchange.

The nationalisation of banks listed on the NSE was first witnessed in 2011 when the Central Bank of Nigeria (CBN) in conjunction with Nigeria Deposit Insurance Corporation (NDIC) nationalised three banks namely Bank PHB, Afribank and Spring Bank. These banks were renamed as Keystone Bank, Mainstreet Bank and Enterprise Bank respectively and were generally referred to as ‘Bridge Banks’.

In an attempt to take out bad money out of the system in the wake of the financial crisis of 2008, when many banks had their balance sheets affected by both falling oil price and downturn in equity; the CBN called for a recapitalisation of the banks, which the affected three banks were unable to do and led to their takeover.

The apex bank on July 4, 2016 took regulatory action on Skye Bank. This action led to the resignation of the chairman, all non-executive directors on the board as well as the managing director, deputy managing director, and the two longest serving executive directors on the management team.

However, result of examinations and forensic audit of the bank have revealed that Skye Bank requires urgent recapitalisation as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN.

The shareholders of the bank have been unable to recapitalise it. The apex bank has established a bridge bank, Polarise Bank, to assume assets and liabilities of Skye Bank.

This will enable AMCON to capitalise the Bridge Bank and begin the process of sourcing investors to buy out AMCON.

Analysts are of the view that lessons from the experience of the nationalisation of Bank PHB, Spring Bank and Afribank in 2011 has shown that the shareholders of these banks tend to lose completely when such regulatory action is taken.

They stated that with the revocation of Skye Bank operating licence, it is expected that events will turn out just as recorded with the three nationalised banks.





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