10 Nigerian banks close to distress –Report

The failure of more than 10 banks to pass a stress test conducted by an international rating agency, Arqaam Capital, has sent a disturbing sign of possibility of some banks in country going under distress.

This is contained in the agency’s latest report on the Nigerian Banking System.

Though it refused to go into detail in naming the affected banks, it however stated that seven of the 10 had remained undercapitalised to about $3.21 billion, with one in its worst state where urgent bailout is needed.

But the international rating agency in the test, revealed that the seven undercapitalised banks had some deficits that could be more than is found in loan and financial obligations.

“Unity Bank and Skye Bank are close to being insolvent, while lenders, FBN Holdings Plc and Sterling Bank Plc, will need a dilutive capital hike,” the report stated.

It further said Nigeria’s banking industry was experiencing a full-blown financial crisis as failed fiscal and monetary policies had led to a credit crunch.

However, the CBN, in its June 2016 Financial Stability Report, stated that the huge exposure of banks to the oil and gas sector has led to some banks running some losses and recording high profile of toxic loans.

Read also: CBN LOANS TO BANKS: Falana wants Soludo, Sanusi probed

Some of the banks affected by the oil sector exposure included: First Bank of Nigeria, Unity Bank Plc, Diamond Bank Plc, Skye Bank Plc, FCMB Group Plc, Sterling Bank Plc and Fidelity Bank Plc, the apex bank stated.

The CBN analysis said, “If international oil market continued to generate concerns especially regarding the capacity of the obligors to meet their obligations by the end of second quarter of 2016, loans to the oil and gas sector would have constituted about 28.77 per cent of the total gross loan portfolio of the banking sector.

Spokesman for First Bank, Mr. Babatunde Lasaki, said, his bank is not undercapitalised.

“We are still within the industry regulatory threshold. This is their opinion. Our position has been published in our half-year report; it is not the one from an investment bank or a speculative report. Our Q3 report will soon be published”, he stated.

Also, Diamond Bank, media manager, Ikechukwu Mike Omeife, said, “Our capital-adequacy ratio and non-performing loans are within the statutory requirements.”

But the fear is still being expressed that some banks may go under if no solution is found to the issue of their toxic loans, which CBN has recently frowned at owing to its rise in volume.

By Emma Eke….

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