CBN Governor, Lamido Sanusi
Corporation of Nigeria settles down to the task of buying over the toxic assets of Deposit Money Banks, its Managing Director, Mr. Mustapha Chike-Obi, tells YEMI KOLAPO about the progress made so far in the quest to sanitise the money market.
The Asset Management Corporation of Nigeria has concluded arrangements to purchase the non-performing loans of 17 rescued and non-rescued banks, the Managing Director of the corporation, Mr. Mustapha Chike-Obi, has said.
He said that in addition to the banks rescued by the Central Bank of Nigeria last year, ”12 non-intervened banks are selling their bad loans to AMCON”.
The AMCON MD, who disclosed these to our correspondent in a telephone interview on Sunday, noted that the corporation and the 17 banks, whose cases had been considered, had agreed on the loans to be bought and their valuation.
Though he declined to mention specific banks, he said none of the banks in question had complained of unfair valuation, noting that the fact that the ”non-intervened” banks had also indicated interest in the loan purchase deals was a clear indication that AMCON‘s valuation was fair.
”Right now, we have concluded deals with 17 banks; we have agreed on the loans to be purchased, and not one of the banks has complained of unfair valuation. For the rescued banks, we will capitalise them to zero level,” Chike-Obi said.
In line with AMCON‘s loan purchase strategy, the 17 banks must have submitted requests to sell their toxic loans, along with all the valuations of non-performing loans on their books, to the corporation, before the loan purchase agreements were sealed.
Ten out of the 24 banks in the country had failed the CBN‘s stress test last year, after their balance sheets had reportedly been badly damaged by huge non-performing loans.
The banks include Intercontinental Bank Plc, Oceanic Bank International Plc, Union Bank of Nigeria Plc, Afribank Plc and Spring Bank Plc.
Others are Bank PHB Plc, Finbank Plc, Unity Bank Plc, Wema Bank Plc and Equitorial Trust Bank.
Chike-Obi said, ”The non-intervened banks don‘t have to sell any loan to AMCON, but they are doing so because they choose to do so. That shows that the valuation is fair and the process is beneficial. All of the 14 non-intervened banks, except two, are selling loans to AMCON. That tells you that nobody is being short-changed.
”For the intervened banks that have to sell their loans, we still have to give them the capital to get them to zero. That should tell you that our valuation must be fair. Even after buying their toxic assets, they still require capitalisation of over N1.5tn.”
He noted that the rescued banks mainly had corporate governance, liquidity and asset quality problems, adding that ”what AMCON can do is to take away the non-performing loans and give them the chance of a new beginning, so that they can start making new loans”.
”We‘re going to buy their non-performing loans by the end of this year, and we will capitalise them to a level of zero capital. They will have new investors, who can bring in new capital and those things will happen very quickly,” the managing director said.
He, however, pointed out that valuation of the bad loans would be uniform across board, insisting that there would be no preferential treatment.
He had said at a meeting with bank chiefs in Lagos, that AMCON would, as from the first quarter of 2011, absorb about N500bn of banks‘ NPLs that resulted from margin loans.
Margin loans are facilities granted by banks to stock broking firms to purchase shares in the stock market.
In line with the agreed valuation methodology, non-performing loans, backed by shares of listed companies, are to be valued ”at an implied premium of approximately 60 per cent on the 60-day average of recent prices.” Unsecured loans are to be purchased at five per cent of their original value, and not the book value.
On shareholders‘ fate after AMCON‘s rescue mission, Chike-Obi told our correspondent, ”We are all trying to save the system, and in saving the system, we are going to give strong value back to the shareholders. They must understand that the situation is bad and we are only trying to salvage it.
”However, not a single shareholders‘ association has contacted AMCON for discussions and we are partners with them. We need to tell them that this is a rescue operation.”
He said before the end of next year, Nigerian banks would have emerged from the crisis stronger and healthier, adding that this would eventually impact positively on the nation’s economy.
AMCON had, at its first board meeting, approved the purchase of all margin loans in the banking sector, including the total non-performing loans of rescued banks, noting that the total loans to be purchased were in excess of N2.2tn.
For non-performing loans backed by other perfected collateral, the corporation said it would accept the most current estimate of the loan value supplied by the institution.
It added that the estimate must be based on the current market analysis of the collateral and a written guarantee of good faith by the institution.
”Additionally, there must be a post-transaction adjustment agreement that allows AMCON to independently value the loans as at the transaction date,” the corporation had said.
The AMCON MD had identified three categories of bank debtors.
”The first are those that have simply fallen into bad times and need help in restructuring their loans. The second are those that have genuine misunderstandings with their banks. And the third category are those that are simply recalcitrant and do not want to pay,” he said.
Source:http://www.punchng.com/
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