Dirty Banks • Inside details of how five banks were raped • Another CEO for sack in September


Sunday, August 16, 2009
The events that led to the Central Bank of Nigeria wielding the big stick and left five Nigerian banks choking on financial fish bone have been traced to years of consistent manipulation in the banking sector.


Out - Cecilia Ibru (Oceanic)




http://odili.net/news/source/2009/aug/16/510.html

Sunday Sun can authoritatively reveal that dirty business deals, short-sighted investments and lack of respect for basic banking procedures were some of the reasons the apex bank used to hang five Chief Executive Officers and their Boards, out to dry last Friday.

It all started before the word ‘de-marketing ‘ crept into our lexicon. But Nigerians certainly started noticing things were not so rosy for all the banks when strange text messages started doing the rounds in the wee hours of the day.

Investigations revealed that the axed five banks were involved in Annual Reports padding, illegal fees, unsecured loans and exceeding laid down rules on servicing single obligor were some of the financial iniquities that caught up with bank Ceos and the boards.

Though there was a limit to the powers of a Bank MD, the sacked CEOs, according to findings, still found ways to cut corners with active participation of ‘loyal’ board members to circumvent the health of their banks.


Out - Erastus Akingbola (Intercontinental)

Out - Okey Nwosu, (FinBank)

Out - Sebastian Adigwe, (Afribank)

Out - Bath Ebong, (Union)
One of such instances was a case where one of the banks gave an unsecured loan to the tune of N17bn to a notable business mogul, a practice that was against all known practices in banking in respect to a single obligor limit. ‘Granting a loan of that magnitude to a single corporate entity is not a decision the CEO could have taken alone. The gentleman’s board was also in the know. What this bank was also doing was charging illegal fees of all kinds under different names to cover their bad practices. We also discovered that 92% of this bank’s profit was made in December.’

Sunday Sun also learnt that the indicted banks also have hefty files of petitions against them at the EFCC. These petitions were about manipulation of bank reports and falsifying figures to hoodwink investors, customers and the general public.

Inundated virtually on a daily basis by torrents of complaints about the evils going on in the banking halls, the anti-graft agency swung into action and asked the various banks to furnish it with details of their Initial Public Offers (IPOs) from 2005 till date. What EFCC discovered was a can of worms, steady greed and tireless manipulation.

“The agency found that where a bank, for instance, announced that it was offering the public 100million shares, all it would make available was 70million shares while the balance of 30million are kept for the bank’s bigwigs. The 30million shares were never paid for. Because the total IPO sum was not released, the shares were oversubscribed and investors got the impression they were making good investments. Eventually they release the 30% withheld shares and sold at artificial prices, which of course other investors could not participate in because their share certificates were still being ‘processed’. Unfortunately, proceeds of these ‘evening market’ deals all ended in private pockets which is one of the factors that crashed the stock market.” Our source revealed.

The conclusions of the EFCC after its investigation were damning. The affected Bank CEOs quickly held a meeting, ran to Aso Rock and convinced the President that if the EFCC moved against them, it would spell disaster for the nation’s economy. Considering that the economy, or what was left of it was already anemic, the President was said to have agreed that any kind of surgery on the banking sector would be fatal. The banks and their handlers escaped with a slap on the wrist and told to go and sin no more.

By the time the CBN Governor, Sanusi Lamido, sacked the five CEOs and their Executive Directors on Friday, it was evident that their sins had finally found them out.

However, the fate that befell the five banks on Friday was just a starter course as the ongoing audit of the banks is set to claim another casualty in September. The new generation bank whose helmsman had had a couple of brushes with the EFCC in not too distant past has also been found to be too weak to be allowed to continue operations in the sector. Its CEO, Sunday Sun learnt, would be told to find another job when the CBN masquerade comes to town next month. The bank and its management having seen the bad writing on the wall had been driving its staff, especially those in the marketing depart

The CBN hammer fell on five money deposit banks yesterday as the apex bank sacked their boards and management and in their place appointed new managing directors to oversee their affairs.

The affected banks are Union Bank of Nigeria Plc, Afribank Plc, Intercontinental Bank Plc, Oceanic International Bank Plc and Finbank Plc.

CBN Governor, Mallam Sanusi Lamido Sanusi, who announced the take-over of the banks hinged the action on “excessively high level of non-performing loans in the five banks,” which he attributed to “poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the bank’s risk management practices.”

Sanusi appointed Mr. Johnson Aboh as the Managing Director/Chief Executive Officer of Oceanic Bank, Mr Mahmud L. Alabi, Managing Director, CEO, Intercontinental Bank; Mr. Nebolisa Arah, Managing Director/CEO, Afribank Plc; Mrs Suzanne Iroche, Managing Director/CEO, Finbank Plc and Mrs. Funke Osibodu, Managing Director/CEO, Union Bank Plc.

The CBN governor said that the banks’ percentage of non-performing loans to total loans ranged from 19 per cent to 48 per cent, adding that the five banks would need to make additional provision of N539.09 billion to take care of the bad loans.

Sanusi, who also announced a capital injection of about N400 billion by the CBN into the five banks, said the total loans portfolio of the five banks was N2,801.92 billion, with margin loans amounting to N456.28 billion, while exposure to oil and gas was N487.02 billion and aggregate non-performing loans standing at N1,143 billion, representing 40.81 per cent.

The CBN governor said the five banks accounted for a disproportionate component of the total exposure to the capital market and oil and gas, thus reflecting heavy concentration to high- risk areas relative to other banks in the industry.

On the other hand, he said the “huge provisioning requirements have led to significant capital impairment.”

Consequently, he said “ all the banks are undercapitalized for their current levels of operations and are required to increase their provisions for loan losses, which impacted negatively on their capital.”

The governor noted that one of the five banks was technically insolvent with a Capital Adequacy Ratio of (1.0 per cent), thus, a minimum capital injection of N204 billion would be required in the five banks to meet the minimum capital adequacy ratio of 10 per cent.

He said the five banks were either perennial net-takers of funds in the inter-bank market or enjoyed liquidity support from the CBN for long period of time, noting that this is a clear evidence of illiquidity. In other words, he said these banks were unable to meet their maturing obligations, as they fall due without resorting to the CBN or the inter-bank market.

“As a matter of fact, the outstanding balance on the Expanded Discount Window (EDW) of the five banks amounted to N127.85 billion by end July 2009, representing 89.81 per cent of the industry exposure to the CBN on its discount window, while their net guaranteed inter-bank takings stood at N253.30 billion as at August 02,2009. Their Liquidity Ratio ranged from 17.65 per cent to 24 per cent as at May 31, 2009. (Regulatory minimum is 25 per cent),” Sanusi lamented.

Jim Ovia must be be pissing in his pants.

This makes an interesting reading

http://www.independentngonline.com/news/tfpg/article01

More Bank MDs Face Sack
By Oguwike Nwachuku, Kingsley Ighomwenghian and Sylvester Enoghase

Bankers and chief executive of banks in Nigeria, especially the five whose Managing Directors and Chief Executives were sacked on Friday have accused the Central Bank of Nigeria (CBN), led by Sanusi Lamido Sanusi, of pursuing a northern agenda.

They spoke on a day Sunday Independent gathered that Sanusi's hammer would soon fall on more bank chiefs whose activities were said to be no better than those of the five who got the boot on Friday.

It was confirmed from an official of the Economic and Financial Crimes Commission (EFCC) Saturday night that the report Sanusi is trying to implement actually gave only two banks (names withheld) clean bill of health.

Such bank officials, who sympathise with the CEOs of the sacked five - Intercontinental Bank, Oceanic Bank International, Union Bank of Nigeria, Afribank Nigeria and Finbank, believe what happened is part of the northern script for which Sanusi was appointed into the apex bank.

"If not for the fact that he is playing out a script, how can he, within two months, have started this whole process. By now, one would expect an appointee without ulterior motives to still be settling down, not beginning his assignment by first threatening to sack bank chiefs a few days after assuming office. That threat was given vent last Friday, when the man invoked his powers under the Banks and Other Financial Institutions Act (BOFIA).

"You know that the Northerners have never been happy that none of their banks survived post-consolidation, because they did not invest. Now they want to take over the three banks (Union, Intercontinental and Oceanic) which control 39 per cent of the industry's deposit base, among others, through the back door. They are also not happy that none of their kinsmen or ilk is chief executive of the post-consolidation, aside Unity Bank, which they don't even believe in whole-heartedly," a bank chief lamented.

MD/CEOs of banks sacked with their executive directors included Sebastian Adigwe (Afribank), Okey Nwosu (Finbank), Mrs. Cecilia Ibru (Oceanic), Erastus Akingbola (Intercontinental) and Bartholomew Ebong (Union).

Sanusi announced their immediate replacement with serving and former top bank executives - John Aboh (Oceanic) and Mahmud Lai Alabi (Intercontinental), while Nebolisa Arah, founding MD/CEO of Fidelity Bank (then Fidelity Union Merchant Bank), takes charge of Afribank Nigeria. Suzanne Iroche, executive director, United Bank for Africa (UBA), was named MD/CEO of Finbank; and Funke Osibodu, former MD/CEO of Ecobank Nigeria, will now oversee Union Bank.

The new CEOs, it was further learnt at the weekend, will be surrounded by Executive Directors and Chief Financial Officers, mostly of Northern extraction, who it is also believed, would be so powerful and call the shots mostly.

This weekly was informed that in March this year when the EFCC boss, Farida Waziri, met with all Managing Directors and CEOs of banks at the Sheraton Hotel, Lagos, they were confronted with the reality on ground and most of them owned up to the unusual practices and promised to make amends based on the report the anti-graft body had on them.

"To us, we think they ignored the EFCC report and warnings, even when we confronted them with facts about what they were doing. It was based on our findings that the Sheraton parley was held in the first place and they knew our report was made available to the CBN.

"The truth is that most of them are patching up. Apart from two banks, the others are faking around, and if our report is anything to go by, more heads will roll soon and the CEOs concerned know it," the EFCC official told Sunday Independent and confirmed that though the CBN is yet to contact them on the next line of action, "the Commission will definitely come in the coming weeks."

A source close to one of the banks, while buttressing the argument that the exercise was part of the Northern agenda, in a telephone chat with our correspondent on Saturday, wondered, for example, whether the sack was not premeditated, an after-thought, and altogether funny after all, that the same CBN under Sanusi had only a few weeks ago approved the audited account of Oceanic Bank and the provisions made as required, following which the directors fixed its annual general meeting, only to wake up and suddenly realise that the bank was insolvent.

Regardless, Chris Enyinnaya, a professional banker, however pitched tent with the CBN Governor, hailing him for taking a right decision, which is part of the 10-year plan by Prof. Chukwuma Soludo under the consolidation agenda.

He accused the bank chiefs of recklessness in the pursuit of profit, while turning a blind eye to such critical area as risk.

The management of the five banks, he said, were sacked to send a strong signal to others that it would no longer be business-as-usual.

He would not however be drawn into the argument of those who see Friday's sack as part of a Northern agenda.

Lawson Omokhodion, former chief executive Liberty Bank Plc (in liquidation) also applauded the decision, which he agreed, is a bold move, as the bank chiefs were becoming reckless and in need of checks.

Gbadebo Olatokunboh, a founding member of the Nigerian Shareholders Solidarity Association (NSSA), urged the Security and Exchange Commission (SEC) and the NSE to take a cue from the regulatory decisiveness of the apex bank. Friday's action, he said in text message to our correspondent, is "positive statement with positive action by the new improved CBN".

Workers in the nation's financial institutions have also given total support to the CBN, saying the bold action will sanitise operations in the banks.

The workers also said the action will curb the mismanagement of shareholders' funds by the chief executives of banks and other financial institutions.

Speaking to Sunday Independent from the National Institute of Policy and Strategic Studies, (NIPSS) Kuru, near Jos, National President, Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), Sanni Lasisi, declared that CBN's action would give more confidence to customers on the security of their money in the banks.

Also, Acting President of Association of Senior Staff of Banks and other Financial Institutions (ASSBIFI), Olusoji Salako, has called on the Sanusi to bring to book both the internal and external auditors of the affected banks for giving false reports of the financial positions of the banks.

President, National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE), Adeleke Hassan, told Sunday Independent that the action taken by the CBN would forestall the long expected transparency in the nation's banks.

There are those who, however, disagree with the time of the CBN action, as it may have a ripple effect on the stock market, as investors may dump their shares of the affected banking stocks.

Sanusi told the press after a crucial meeting that his action had the authority of President Umaru Yar'Adua to effect the sack and accused the bank executives, of among others, overshooting their single obligor limits.

The bank chiefs were also accused of over-exposing their institutions to the stock market and energy sectors of the economy.

Sunday Independent also learnt that before the weekend's ill wind, the audited account of Intercontinental Bank had been approved and was to be released to the NSE in a matter of days, before the sudden U-turn by the CBN.

Sunday Independent had some weeks ago learnt that about N300 billion had been stashed ready for the acquisition of the banks.

The source, who craved anonymity explained that the sack was initially planned for December on the directive of Yar'Adua, who called for an extension of the timeline till year end. The sack was hurriedly carried out, following a publication in a national daily, last week, which named three Northerners who are heavily indebted to some banks. The report was said to have shocked the President who then directed that Sanusi should go ahead on a day when he was aboard a flight to Saudi Arabia for medical check.

According to the plan said to have just started unfolding, three more bank chiefs would still be removed, while another nine of the existing banks will have to merge with others, be acquired or liquidated. This will then ensure that the North takes control of eight of the 15 banks that would then be in existence.

Sunday Independent also learnt that appointing the five new chief executives, who, in the words of Sanusi, are not interim, but substantive chief executives, is part of the grandstanding of the apex bank.

On Saturday, Joseph Ajewole resumed at Intercontinental Bank as its acting Managing Director contrary to Sanusi's Friday announcement that Mahmud Lai Alabi would be in charge. It was on a day the apex bank also injected N100 billion into the institution with assurances that customers' deposits are guaranteed.

Addressing management of the bank, Ajewole emphasised that the CBN action was to ensure the safety of depositors' funds, soundness and stability of the bank while assuring all staff of the safety of their jobs.

He assured that Intercontinental Bank would remain a going concern with strong potentials that are enhanced by the new developments in the banking industry.

Osibodu also resumed office over the weekend with assurances to all stakeholders that the bank will not compromise their interests.

Sola Oni, Assistant General Manager and spokesman of NSE said the various banks would not be put on technical suspension, since there is yet no official communication on the CBN action.

qblaze:

Jim Ovia must be be pissing in his pants.

. . . . then Visafone don suffer

'a brush wt EFCC recently'

Is ds not Jim Ovia? Fingers crossed.

As 4 d northern agenda theorists , I expect nothing better from drowning men

Jarus:

'a brush wt EFCC recently'

Is ds not Jim Ovia? Fingers crossed.

As 4 d northern agenda theorists , I expect nothing better from drowning men