Nigerian banks eye stakes in local banks

NIGERIAN banks are on the verge of snapping significant shareholding in local banks through deals being facilitated by Pivot Financial Services.


Pivot Services is owned by former Trust Bank owner  William Nyemba, who started his banking venture in Nigeria.

Analysts said the coming of Nigerian banks would greatly improve capitalisation of the local financial sector. Nigerian banks are some of the most heavily capitalised in Africa.
Sources close to the deal said  a listed bank, believed to be NMB, will be “heavily capitalised from the amount of money that the Nigerians intend to invest in the bank”.
Insiders also said the amount involved would enable the bank to lend money to other banks mostly indigenous ones.
“If NMB lends money to other financial institutions that are not heavily capitalised at a large scale it might subject the banks to being acquired or merging with it,” a market analyst said.
“In the face of current market conditions, it is appropriate for shareholders to further capitalise their banks,” a banker said.
Most banks in the country are grappling for lifelines as the first deadline for the new capital requirements looms, amid speculation South African investors are also waiting to seize key assets in the sector.
According to information to hand, some banks were likely to resort to private placements, under which they would court new investors to inject new cash to prop up the banking institutions, as they race towards the Reserve Bank deadline. Zimbabwe currently has 28 banking institutions, 15 of which are commercial banks.
Sources said during the first quarter of the year shareholders of NMB approved a capital raising exercise for an undisclosed amount of money through a combination of equity and equity-related instruments or bringing an international investor.
NMB recently told shareholders at an AGM that deposits at the bank stood at US$10 in May and the bank had advanced 50% of these deposits to customers as loans.
A prospective investor Ecobank Nigeria this week boosted its capital base by about US$300 million following an injection of capital from its Togo based parent company, Ecobank Transnational Incorporated (ETI), even as its gross earnings for the financial year 2008 jumped by 68,62%.
The infusion of capital, at a time of considerable turmoil in the market, demonstrates the strength of the Ecobank Group.
It also reflects ETI’s commitment to support its subsidiaries, and its confidence in the Nigerian market. Ecobank Nigeria is part of the Ecobank Group, which currently operates in 27 countries across Africa. Ecobank Nigeria accounts for approximately 40% of the Ecobank Group.
The coming in of Nigerian banks to boost the bank’s capitalisation comes at a time when Reserve Bank Governor Gideon Gono this week slammed some banks for allegedly holding on to millions of United States dollars instead of lending the money out to credible businesses.
Gono said by the end of May some banks were sitting on US$600 million in deposits and that banks with as much as US$190 million had only lent out US$2 million.
Gono said the issue of banks refusing to lend money was of major concern during his weekly meetings with Finance Minister Tendai Biti.
He said while he was under pressure to crack the whip on such banks, and believed that the errant banks should carry out self-introspection to assess their relevance in the national economic matrix.
“These banks need to look at themselves and see whether they are still relevant in the economy.
We do not want to direct banks on what to do with their funds because we want banks to be free to utilise their funds the way they see fit,” he said.
He commended TN financial services and POSB for having responded to the call by gold miners for funds to purchase gold.
“POSB is one of the smallest banks in the country while TN Bank is the last born in terms of our banks because it has been less than a year since we issued them with a licence but they are leading in this initiative yet there are some banks that have been operating in the country for more than a 100 years that are still to come to the table,” said Gono. –– Staff Writer.