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Tag: AMCON

  • How AMCON saved banks in 2010, by Sanusi

    How AMCON saved banks in 2010, by Sanusi

    The Asset Management Corporation of Nigeria (AMCOM) acquired N5.7 trillion bank debts when it was established three years ago, Central Bank of Nigeria (CBN) Governor Lamido Sanusi has said.

    The debts came from long years of insider abuses, bad loans and declaration of false profits by some banks, Sanusi said at the 50th anniversary at the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos.

    He said AMCON bonds held by banks would be retired in 2015, adding that N1 trillion of the bonds will be retired by December 31, this year.

    Another N1.1 trillion would be retired next year, he said, adding that none of the banks will hold the corporation’s bonds beyond 2015. CBN, he said, held N3.6 billion of the bonds.

    According to him, the CBN has so far achieved its monetary policy objectives, based on the level of stability in the economy and financial services sector.

    The bank under his leadership, he said, had achieved exchange rate stability, banking sector stability and achieve single digit inflation target.

    He said the CBN ensured that throughout the resolution of the banking crises, no depositor lost money. Corporate governance and risk management issues that threatened the financial system, he said, had been addressed, adding that banks now understand and are aware that there are consequences in crossing certain lines.

    On November 19, investors wrote to AMCON, seeking to know how the N1 trillion bonds will be retired.

    AMCON’s Chief Executive Officer, Mustafa Chike-Obi said such decision would guide CBN’s liquidity management plans in the coming months.

    Meanwhile, a report by Renaissance Capital (RenCap), an investment and research firm, titled: Nigerian Banks: Killing Me Softly” said most lenders that invested in the bonds would face challenging earnings this year.

    “We believe this will remain a challenging year for Access given the nature of its balance sheet (large exposure to illiquid AMCON bonds). We think 2014 should be a year of stronger growth for Access, as most of the AMCON debt matures at the end of this year and will be redeemed for either cash or t-bills – giving Access the opportunity to earn better returns on its assets,” the report said.

    The report also said tougher regulation by the CBN would make it difficult for banks to deliver improved earnings.

    “We think it will become harder for some of the banks to deliver returns in excess of their cost of equity – especially some of the smaller banks,” it said.

     

  • Banks mull cut in contributions to Sinking Fund

    Banks mull cut in contributions to Sinking Fund

    Deposit Money Banks(DMBs) are working be-hind the scenes to ensure that the Asset Management Corporation of Nigeria (AMCON) Banking Sector Resolution Cost Fund (Sinking Fund) levy is slashed, The Nation has learnt.

    The Central Bank of Nigeria (CBN), banks and AMCON established the fund to absorb the cost of banking crises. The banks have been contributing 0.3 per cent of their total assets to it since 2010, but the levy was raised to 0.5 per cent earlier in the year. The contributions represent about three to four per cent increase in banks’ total operating costs.

    The CBN contributes N50 billion yearly to the fund which stands at N500 billion after this year’s remittances were credited in September.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke, said in a report titled: ‘Nigerian banking league – The fate of small players,’there is a likelihood of renegotiation of this levy in the near term, as banks continue to effectively use their assets to ameliorate their rising cost-to-income ratio (CIR).

    He said banks’ rising CIR was, particularly, obvious in Access Bank and Ecobank Transnational Incorporated (ETI) among the tier-1 (bigger) banks as at September. Union Bank had the highest CIR in the tier-2 (smaller) banks while Diamond Bank was the only tier-2 bank that reported a significant decline.

    He said a further review revealed that the average CIR increased from 57.3 per cent in June to 64.8 per cent in September, highlighting the impact of the recent policies, including hike in the levy from 0.3 per cent to 0.5 per cent.

    “This presents the need for banks to come up with more innovative way of taming costs especially through the use of technology. In addition, the payment of the 0.5 per cent AMCON levy will constitute further pressure on the banks earnings, due to the increasing rate of the absolute amount in fees paid to the AMCON sinking fund,” he said.

    He explained that on a regional basis, a peer comparison among African countries revealed that Nigerian banks have a higher average CIR of 64.8 per cent while Middle and East African countries reported an average 42.97 per cent CIR.

    “This highlights the ‘uphill climb’ the industry might encounter with the consistent liquidity tightening policies. The dilemma, however, is how the CBN can continue to maintain its price stability objective and equally ease liquidity required to stimulate growth in 2014,” he said.

    According to Renaissance Capital (RenCap), an investment and research firm, the levy’s collection may worsen the liquidity condition in the sector. Its Associate, Africa Equity International Sales, Akintola, Akinbamidele, said the levy is placing additional pressure on more illiquid banks.

    The AMCON was setup to revive and stabilise Nigeria’s banking industry through the purchase of non-performing loans (NPLs) from banks.

    AMCON Chief Executive Officer, Mustafa Chilke-Obi said the corporation has so far acquired over 10,000 NPLs.

     

  • AMCON declares N822b loss

    AMCON declares N822b loss

    The Asset Management Corporation of Nigeria (AMCON) has declared a loss of N822.9 billion for the year ended December 2012.

    AMCON’s Managing Director/CEO Mustafa Chike-Obi, who broke the news yesterday at a media briefing in Lagos, attributed the loss to provisions made for impaired assets and discount on bonds issued to finance its operations.

    The corporation’s total outstanding debt stands at N5.7 trillion, out of which N3.6 trillion is held as bond by the Central Bank of Nigeria (CBN). About N1.7 trillion of the bonds would be redeemed by December 31, 2013.

    Chike-Obi said all holders of the bonds were expected by November 19, to indicate whether they would accept cash or Treasury-Bills in place of the bonds, on maturity. “The choice will be made on November 19 for bond holders to decide whether to take cash, or T-bills,” he said.

    The AMCON boss said the classification of the loss showed that the Corporation spent N544.8 billion to purchase non-performing loans (NPLs) from banks. The balance of N278.1 billion was used on recapitalisation of banks.

    Chike-Obi explained that the losses are expected to be defrayed through recoveries from its assets, with additional cover provided by the Banking Sector Resolution Cost Fund (Sinking Fund) provided by the Central Bank of Nigeria (CBN) and deposit money banks (DMBs). He put the value of the Sinking Fund warehoused at the CBN at over N500 billion.

    He said the three bridged banks–Mainstreet, Enterprise and Keystone–acquired and recapitalised by AMCON are worth N100 billion, adding that the initial plan was to conclude their sale by 2014, but the exercise could extend to 2015.

    He said there are over 10,000 bad loans under the AMCON’s management, adding that selling the three banks does not represent a major flank of the Corporation’s duty.

    “We will sell the banks. We have over 10,000 loans that we are pursuing. Selling the banks will not distract us from doing our job. Selling the banks is not the only thing we do and it is not occupying much of our time, and will not determine what the corporation does on daily basis, either now or in the future,” he said.

    Chike-Obi said AMCON is not following up on which company has bided for Enterprise Bank, adding that it is only the financial advisers that have such privilege information.

    “Nobody in AMCON knows who the bidders are. Nobody in AMCON knows how many the bidders are, or who will be shortlisted. It is only when they (the advisers –Citi Bank and Vetiva Capital) have looked at all of these people that they decide who and who are qualified,” he said.

    Chike-Obi said AMCON does not know how long it would take for the financial advisers to submit the list of qualified or shortlisted bidders, because such would depend on the number involved.

    “We don’t know how long it will take for the successful bidders to be known. If there are 100 people who are interested, it will take a longer time than if there were only five people. They have to look at everybody to know who they are, who are behind them, where they got their money from, and if they have the capacity to run a bank. We hope we will conclude it by the end of 2014, it may extend to 2015,” he said.

    He said everybody that is qualified in running a bank requires approval from the Central Bank of Nigeria (CBN) and its requirement is that such persons must be fit and proper to run a bank.

  • Tinapa crawls to life on AMCON’s back

    Tinapa crawls to life on AMCON’s back

    It must have been a difficult decision for Cross River State Governor Liyel Imoke. His predecessor and friend, Donald Duke, had a dream of turning the state to the tourism hub of sub-Saharan Africa. It was a dream Imoke bought into while he was a senator. So, when he took over from Duke, he continued the Tinapa dream from where his friend of many years left it.

    Six years down the line, however, Imoke realised that the burden was too much for the state to bear. So, he turned the business and leisure resort over to the Asset Management Corporation of Nigeria (AMCON). What forced Imoke to take this painful decision are banks’ debts Tinapa has accumulated over the years. The debts to various banks are put at N18.5 billion. No thanks to bottlenecks that have ensured the project remains unprofitable. With this, the government has given 85 per cent of Tinapa’s shares to the corporation. AMCON is expected to inject about N29 billion to revive business activities in Tinapa before inviting investors to take over majority shares in the outfit.

    The Managing Director/Chief Executive Officer, AMCON, Mr. Mustapha Chike-Obi, said: “The strategy is to find an operator for Tinapa immediately. We will advertise for an operator very soon, inject capital into the facility and allow the operator to run it for some years. After Tinapa has been made profitable, we will privatise it just like we are doing to the three bridged banks we took over. So it is the same strategy we used for the banks that we are using for Tinapa.”

    The Speaker of the Cross River House of Assembly, Mr. Larry Odeh, believes the move to privatise the Tinapa is in the best interest of the state, adding that it will stimulate growth of the economy of the state.

    But some of Odeh’s colleagues believe there are issues to be sorted out before the giant edifice is turned over to private hands. A member representing Ikom 1 Constituency in the assembly, Mr. Agbiji Agbiji, said the contributions of local government areas in the state to the project must not be allowed to go down the drain.

    He said: “The LGAs have invested; so is the state government and they want to know the cost of ceding ownership to AMCON and other details of the Memorandum of Understanding.”

    Another member, Mr. Jake Enyia, toed a similar line, saying: “We should not just pass it because it will amount to legislative rascality; we need to put things straight because when I was chairman of council, I contributed N180m, so also other council areas.”

    But, how did Tinapa get into this mess? The $600 million worth Tinapa Business and Leisure Resort has not had it smooth since it was inaugurated six years ago. The 265 hectares empire’s ground-breaking ceremony was performed in Adiabo, on the outskirts of Calabar, in 2005. And on August 15, 2006, the Federal Government declared the Tinapa Business and Leisure Resort a Free Trade Zone pursuant to the provisions of Section 1(1) of the Nigeria Export Processing Zones Act No. 63 of 1992. Investors saw this declaration as the tonic needed to realise Duke’s vision. The excitement was palpable.

  • ‘Banks creating businesses for AMCON’

    The poor risk management structures in many banks have made it easy for them to create businesses for the Asset Management Corporation of Nigeria (AMCON), Managing Director, Financial Institutions Training Centre (FITC), Lucy Newman, has said.

    Speaking at a training for banks’directors in Lagos, she said there is need for the lenders to upgrade their risk management structures, to reduce the volume of loans being sold to the corporation.

    Banks are expected to retain a maximum of five per cent of their non-performing loans (NPLs), and sale the balance to AMCON.

    So far, the corporation has acquired over 10,000 NPLs worth N3.5 trillion. Before its formation, NPLs ratio in the industry was over 35 per cent.

    However, the International Monetary Fund (IMF) in its last year’s Article IV Consultation advised the Federal Government that the corporation be stopped to curb moral hazard and fiscal risks.

    The IMF Executive Directors “recommended winding down the operations of the asset management company to curb moral hazard and fiscal risks. Directors welcomed the Central Bank of Nigeria’s (CBN’s) commitment to address supervisory and regulatory gaps identified in the Financial Stability Assessment Update, particularly the need to strengthen cross-border supervision and the regime against money laundering and terrorism financing,” the article said.

    But Bismark Rewane, Managing Director, Financial Derivatives Company Limited, said AMCON was set up to revive and stabilise industry through the purchase of NPLs.

    “As at December 31, 2011 the NPL ratio had fallen to five per cent, enabling the banks to focus on lending. In addition, AMCON injected fresh capital into eight Nigerian banks, five of which have entered into successful mergers. As a result of the recapitalisation of banks, it currently owns Mainstreet Bank, Enterprise Bank and Keystone Bank. The establishment of AMCON has also averted a potential financial disaster,” he said.

    Rewane said apart from the resolution of manifested risks and toxic assets roughly estimated at $25.2 billion, AMCON was also considered an essential part of the institutional framework for preventing and developing early response to isolated pockets of risks that could easily become contagious or viral.

    He said the question of a moral hazard arises, if the defaulting operators pay a less than punitive price which encourages deviant behaviour in the future.

    He said the price at which AMCON is purchasing toxic assets is so punitive that no rationale banker or operator will sell assets to it except as a last resort, adding that stigma of being an AMCON client in the domestic and international business community is both a fiscal and social burden.

  • Banks threatened as AMCON begins levy collection

    Banks threatened as AMCON begins levy collection

    Banks may face hard times as the Asset Management Corporation of Nigeria (AMCON) begins to collect the mandatory 0.5 per cent levy from them.

    The sinking fund levy is 0.5 per cent of banks’ total assets. It is in line with the regulatory requirement setting up the corporation. The fee was increased from 0.3 per cent to 0.5 per cent earlier in the year. The rate hike represents about three to four per cent increase in total operating costs.

    According to Renaissance Capital (RenCap), an investment and research firm, the levy’s collection may worsen the liquidity condition in the sector.

    Its Associate, Africa Equity International Sales, Akintola, Akinbamidele, said: “AMCON may be looking to collect its annual levies from the banks. To date, the banks have been providing for these, but the cash has not been collected. It now looks as if these funds could be removed from the banking system, placing additional pressure on more illiquid banks.”

    He said the liquidity crunch that saw the Nigeria Interbank Offered Rate (NIBOR) climbing to 60 per cent on September 18, was caused by the delayed impact of the increase in the Cash Reserve Requirement (CRR) for public sector deposits to 50 per cent. The policy was introduced August 7. The CRR is a portion of banks’ deposits kept with the CBN and was at 12 per cent before the present hike.

    “On our estimates, that raised the blended CRR for the average Nigerian bank to 17 per cent versus Kenyans at 5.25 per cent and Ghanaians at nine per cent,” he said.

    He said efficient and liquid banks, such as, GTBank could adapt and have good balance sheets, while the best in class liquid banks, with high Cash Adequacy Ratios (CAR) like Zenith, United Bank for Africa (UBA) may emerge net placers on the interbank market.

    Data obtained from the Financial Market Association of Nigeria (FMDA), showed that as a result of these restrictions, NIBOR call (overnight) tenor rose 3,225 basis points to 60 per cent on September 18. The rate was at 44 per cent on September 16, from 28 per cent the previous day. The NIBOR was at average of 14 per cent before the CRR hike took effect, FMDA said.

    Analysts at Afrinvest West Africa Plc, equally expressed concerns over both policies, saying there will be ‘unavoidable impact’ of the new 50 per cent CRR on majority of the banks going forward. The CRR policy, they said, implies significant increase in the banks’ cost of funds, a tensed pressure on the Net Income Margin (NIM) as a larger proportion of the deposits will now be held in CBN’s coffers as reserves.

    Afrinvest said the affected banks might have to sell down on investment securities to call back the 38 per cent, and also consequently, may re-navigate their deposits mobilisation strategies, re-price risk assets in line with their “cautious” lending strategy and adjust business models.

    Also to affect banks’ profitability is the implementation of the revised guide to bank charges. The CBN said bank customers will from 2016, begin to enjoy free Commission on Turnover (COT) on all their transactions. The policy took effect on April 1, has seen the COT gradually drop to N3 per mille this year. It will be N2 per mille in 2014; N1 per mille in 2015 and zero per cent per mille in 2016.

    Banks have also agreed to put a stop to all charges associated with the use of Automated Teller Machines (ATMs). The agreement was the highpoint of a meeting between the Bankers Committee made up of Chief Executive Officers of Deposit Money Banks, directors and top officials of the CBN and Nigeria Deposit Insurance Corporation. Before now, account holders had been made to pay a flat rate of N100 per withdrawal any time they used other banks’ ATMs.

    Managing Director, Afrinvest West Africa Plc, Ike Chioke said the banking industry is now confronted with the reality of declining fee incomes, mobile money and dollar denominated capital sourcing.

    He predicted that the era of “real banking” appears to be gradually re-emerging as traditional sources of high income/profitability continue to come under threat from increased competition and tighter regulation. He predicted that in the next five years, outlook on yields and fee income remains downwards, necessitating the need for banks to focus on lending to the real sector. Also, banks are expected to develop and grow the depth of their core retail banking businesses to retain and amplify cheap deposits.

     

  • SEC, AMCON at war over N20b fees

    SEC, AMCON at war over N20b fees

    • Reps task CBN on interest rates

    A bill to amend some sections of the Asset Management Corporation of Nigeria (AMCON) by the Hon. Jones Onyeriere-headed House of Representatives Committee on Banking and Currency, sparked legal fireworks between AMCON and the Securities and Exchange Commission (SEC), in Abuja.

    Yesterday’s public hearing on the bill brought conflicting positions canvassed by both parties.

    Onyeriere, said the key component of the amendment bill relates to the setting up of a Sinking Fund or Resolution Cost Fund. “ It basically obligates banks to contribute annually, an amount equivalent to 50 basis points of their total assets to the Fund and the Central Bank of Nigeria (CBN) to contribute N50 Billion to the Fund.”

    He said the obligations arising from the proposed amendments have already been agreed to and embodied in a written agreement between apex bank and the commercial banks. “What this bill therefore seeks to do is to codify the obligations of both the CBN and the banks and to give the previous agreement between parties the force of law.”

    The CBN, Nigerian Deposit Insurance Corporation (NDIC), Chartered Institute of Bankers and all the banks in attendance, including Keystone Bank, Stanbic IBTC, Heritage Bank. aligned with the position of the House to amend sections 2, 16(5), 34(1)-(2), 35, 46(2) 48, 60, 61 and 62 of the AMCON Act of 2010,

    But the Securities and Exchange Commission said it was not comfortable with the request of AMCON for an exemption from paying regulatory fees to it.

    The legal Adviser to AMCON, Muyiwa Balogun, told the Committee that complying with section 309 of the Investment and Securities Act (ISA) means registering and paying huge fees.

    The fees, according to the lawyer, would be over N20 billion. Besides, he posited that the red tapes of such regulation would hamper its activities, which he argued are in the interest of Nigeria. He said organisations such as the AMCON should be exempted from the law.

  • AMCON not taking over Wema Bank’

    AMCON not taking over Wema Bank’

    The Asset Management Corporation of Nigeria (AMCON) yesterday said it will not have any impact on Wema Bank’s normal business operations.

    In a three-paragraph statement by the corporation in Lagos, it reiterated that it was established primarily “to help revive and stabilise the Nigerian economy by effectively resolving the non-performing loan assets in the Nigerian banking sector”.

    AMCON said it had not taken over ownership of Wema Bank.

  • ‘AMCON not taking over Wema Bank’

    The Asset management Corporation of Nigeria (AMCON) on Wednesday dismissed as false, claims that it had taken over ownership of Wema Bank.

    Head, Corporate Affairs, AMCON, Mr Kayode Lambo said the corporation does not have any impact on Wema Bank’s normal business.

    AMCON he said was established to help revive and stabilise the Nigerian economy by effectively resolving the non-performing loan assets in the Nigerian banking sector.

  • ‘AMCON has not taken over WEMA Bank’

    The Asset Management Corporation of Nigeria (AMCON) has not taken over WEMA Bank, the Deputy Managing Director, Moruf Oseni, has said.

    He told The Nation that the management of the bank is intact, adding that there’s no takeover of any kind by AMCON.

    Oseni revealed that WEMA Bank has recapitalised to the tune of N40 billion, stressing that what AMCON has in the bank was just an investment and did not amount to a takeover.