Massive withdrawals by customers are currently ongoing in some weak and unstable banks in Nigeria following the unexpected revocation of the license of Heritage Bank Limited by the Central Bank of Nigeria (CBN), a reliable source has revealed to InsideBusinessNG.
The source revealed that depositors in some weak banks in Nigeria have since the announcement of the failure of Heritage Bank on Monday by the Apex bank, moved their funds to strong banks operating in Nigeria so as not to be caught unawares by another bank failure and the attendant revocation of banks’ licenses.
The CBN on Tuesday was forced to release a statement of not revoking the licenses of three additional banks namely, Unity Bank Plc, Keystone and Polaris following its regulatory action against Heritage Bank Plc.
Ag. Director of Corporate Communications, CBN, Hakama Sidi Ali, said, “The CBN unequivocally states that these allegations are false and intended to trigger panic in the financial system.
“The Nigerian financial system remains safe, sound, and resilient. Our banks have begun submitting implementation plans for the Banking Sector Recapitalisation Programme in compliance with the CBN Circular reviewing the minimum capital requirements for Commercial, Merchant, and Non-Interest Banks (CMNIBs). The CBN is currently reviewing these plans”, she said in a statement.
“In addition to enhancing buffers to withstand economic shocks, this proactive measure by the CBN to require CMNIBs to recapitalise will result in increased capital for Nigeria’s banks, enabling them to provide much-needed credit to critical sectors of the economy. This will increase the financial system’s contribution to the growth and development of a $1 trillion Nigerian economy.
“The CBN would like to reassure all stakeholders of its unwavering commitment to ensuring the financial system’s stability. Our financial system remains on a solid footing, and the CBN will continue to take all necessary steps to maintain its safety and soundness.”
According to a report, Heritage Bank’s 2021 audited (but qualified) Statement of Accounts and Annual Report revealed that its net interest income (that is the interest income less interest expense) was negative. A net interest income measures the viability of a bank and is a major source of income for a bank.
It is the difference between what a bank earns as interest on loans and what it pays to depositors as interest on their deposits.
Heritage Bank paid out more to its depositors (mostly interbank lenders and CBN) than its earnings. This is largely because the bank’s non-performing loan (NPL) ratio was 81.2 per cent.
In addition, the bank’s operating expenses were also higher than its interest income, and, in the 2021 financial year, the bank recorded a loss of N82.928 billion and an accumulated loss of N459 billion, the largest loss by any bank in this country in the last 30 years. Heritage Bank’s shareholders’ funds were -N230 billion (Negative N230 billion).
Analysts said Heritage Bank was dead with 81.2 per cent Non-Performing Loan, N459 accumulated losses, and a Negative Shareholders’ fund of N230 billion.
The vice President of Highcap Securities Limited, David Adnori lauded the steps taken so far by CBN, calling on Nigeria Deposit Insurance Corporation (NDIC) to be transparent in settling depositors.
The corporation on Monday said the payment of depositors in the recently liquidated Heritage Bank will commence before the end of the week.
The Managing Director of NDIC, Bello Hassan, who disclosed at a briefing on the liquidation of Heritage Bank, said the total bank deposits in the Bank stand at N650 billion while its loan portfolio stands at over N700 billion.
He stated that the NDIC looks forward to ensuring the loan repayment within the next six months.
