The Central Bank of Nigeria, CBN, yesterday gave three commercial banks until June 2016 to recapitalise after they failed to hit a minimum capital adequacy rate of 10 per cent.
Thourgh the CBN did not name the banks but said they were from the group of 14 deposited money banks that have licenses to operate as regional and national lenders, with respective capital bases of N10 billion and N25 billion.
Data from the CBN website said it was monitoring the three banks’ recapitalisation plans, and that 10 others with international status met the 15 per cent minimum capital rate for that category of bank at the end of June.
The recapitalisation schedule, contained in a report dated October 30, only came to light on Friday, November 20, 2015. When National Mirror on Saturday contacted a CBN’s official for clarification, he said he also watched it on television.
Last week, the CBN told commercial banks to double provisions on performing loans to two per cent to build adequate buffers against unexpected losses, as liquidity ratios fall. It said lower revenues for government and oil companies due to plunging crude prices have led to unsecured exposures for banks that are likely to increase credit risk and loan losses.
Ratings agency Moody’s said this week it expected non-performing loans to rise above five per cent but remain below 10 per cent over the next two years as the weaker naira increases the risk of dollar loans and suppresses bank capital.
According to the CBN, the non-performing loans in the banking sector rose to 4.65 per cent at the end of June due to a fall in asset quality following a devaluation of the naira and amid rising inflation.
Stanbic IBTC last week said it had doubled its non-performing loan ratio to 8.8 per cent and it plans to raise fresh funds. Pan-African bank Ecobank and Skye Bank have both suspended plans to raise fresh equity owing to weak market conditions and slower loan growth.
Wema Bank, which suspended plans partly because of the naira weakness, said on Thursday it would resume a share sale next year and has started a process to raise $100 million worth of naira bonds after getting approval to switch from a regional to a national bank.
The CBN had on March 24, this year directed some systemically important banks considered too big to fail, that are short of capital to submit recapitalization plans to it by June 13, 2015. The CBN letter suggest that a few undisclosed banks do not meet the minimum capital adequacy ratio of 10 per cent and 15 per cent for regional/national and international banks, respectively, under Basel II.
These banks have been given three months, till June 13, 2015, to submit recapitalisation plans and till 30 June 2016 to implement same. The letter also affirms CBN’s willingness to support the banks in their bid to raise the required capital.
The CBN last year classified eight Nigerian banks First Bank of Nigeria Limited (FirstBank), Zenith Bank Plc, Guaranty Trust Bank Plc (GTBank), United Bank for Africa Plc (UBA), Access Bank, Ecobank Nigeria Plc, Diamond Bank Plc and Skye Bank Plc as systemically important financial institutions (SIFIs) and imposed on them a new set of rules, requiring them to maintain a minimum capital adequacy ratio of 16 per cent.
So far, Diamond Bank has successfully issued $200.0m Eurobond at 9.0, Zenith Bank $500.0 million Eurobond at 6.5 per cent & Access $400million Eurobond: 9.5 per cent and also received N40.0bn multilateral loan.
According to capital market sources in the bid to meet the CBN new capital requirement for systemically important bank, Diamond Bank completed capital raising of N50.4 billion through a rights issue at N5.80 to prop up its Tier-1 capital in 2014.
Unity Bank last year raised N19.23 billion in a share sale to existing shareholders to bolster its capital position as the central bank implements stricter international regulations. The mid-tier lender sold 38.45 billion shares at 0.50 naira
