Reports reaching Nairametrics from Bloomberg wires indicates that Nigerian Banking Industry is experiencing what it termed a “full blown financial crisis”.
The report blames “failed fiscal and monetary policies” as the reason for the credit crunch currently being experienced in the Financial Sector.
Bloomberg didn’t just stop there. They also went on to name Unity Bank Plc and Skye Bank Plc as banks that “are close to being insolvent”.
FBN Holdings Plc and Sterling Bank Plc on the other hand it claims “will need a dilutive capital hike.”
Information reaching Nairametrics suggest the Bloomberg report was shaped by interview granted to fund managers/analysts located outside the country. Bloomberg have often been criticized for running “very negative stories” about the Nigerian economy.
However, very few will doubt these latest reports on particularly Skye Bank and Unity Bank. Skye Bank for example, as seen its share price drop by over 60% this year alone and has failed to recapitalize in about 6 months since the CBN sacked the former board. Analysts still ponder on how bad the rot is within the bank.
Unity Bank on the other hand has been trying to raise capital for over two years now and saw its capital restructuring move back fire in cataclysmic fashion. Unity Bank restructured its shares by canceling most of it mathematically taking its share price from 50 kobo to N5. The move created to value as the valuation remained the same since it was only the shares outstanding that reduced. However, the share price has nosedived since then and now trades at a 71 kobo wiping out 85% of its market value.
The analysts also point to “acid test” conducted on these banks which suggest that most of them are under capitalized by as much as N1 trillion.
The report identified FBN as the most under capitalized lender with Unity, Diamond Bank Plc, Skye, FCMB Group Plc, Sterling and Fidelity Bank Plc also showing deficits if they were to fully provide for non-performing loans.
This is a damning report for the beleaguered banking sector under the “able” leadership of the current CBN Governor, Godwin Emefiele. Investors are eagerly awaiting 3rd quarter reports for most commercial banks and will be looking closely at their respective capital adequacy rations. Interim reports released earlier in the year, showed most banks relied on notional profits from FX valuations to remain profitable.
FBN, Skye, Sterling Stanbic IBTC Holdings Plc, Unity and Ecobank Transnational Inc were all rated a sell in the Bloomberg article while, Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc are rated buy. The article made no mention of Guaranty Trust Bank or Access Bank.