Beleaguered Fortis Microfinance Bank, informed investors on Tuesday, that it is in talks with its financiers to restructure its loans and working with experts to turnaround the bank.
Highlights of the press release
In a press release issued on the website of the Nigerian Stock Exchange, the bank said it was negotiating with its foreign lenders to give it a “respite” by restructuring its existing facilities. The bank also said it was close to engaging a “reputable firm of turnaround experts working in concert with a revitalized Management team to quickly restore the Bank on the path of sustainability and profitability, through the adoption of a revised business model and rejigging of the existing Five-Year Strategic Plan.”
Apart from loan restructuring and turnaround, the bank also suggested that it could be considering downsizing its workforce in a bid to run a slimmer operation.
“Fortis is currently engaged in a far-reaching house cleaning exercise which at the end will culminate in the emergence of a leaner, healthier bank set apart by a renewed emphasis on professionalism and adherence to international best ethical standards.”
A litany of controversies
Fortis‘ problems probably started earlier, but it was exacerbated when the Nigerian Stock Exchange suspended the shares of trading due to failure to submit its 2016 audited accounts. The Bank complained that the delay was due to the CBN, which required that banks submit their accounts for prior approval before results are filed at the exchange.
The suspension was lifted, but by then, depositors had enough.There was a panic rush to withdraw funds from the bank, leaving it in dire straights and unable to pay everyone. Just as it was about resolving its issues, the results released by the bank unearthed “accounting anomalies” leading regulators to go investigate prior results.
The bank was also reported to the owing lenders as much as N7.5 billion in on lending facilities and is reportedly facing difficulties meeting the payment obligations. Directors of the bank were also made to relinquish real estate assets worth about N640 million in exchange for shares.
Poor financial health
A look at the bank’s 2017 9 month’s interim results shows a bank close to serious financial constraints. With a customer deposit of about N7.9 billion, it only had cash of about N440 million in its bank accounts. That’s less than 10% of its total deposits and compares to the N18 billion it had as at December 2016. A cash balance like that is not enough to meet depositors claims.
The implication is that the bank may struggle to pay its depositors until it finds a way to get its borrowers to pay back loans. The bank has over N11 billion in loans paid out and another N9.5 billion in accounts receivable (cash expected from its business partners). It also has another N600 million in bank guarantee owed to it by Heritage Bank.
Fortis Microfinance Bank was granted a national license in 2015 but operates mainly in Abuja. That the bank is still alive today is perhaps due to the strategy deployed by the CBN since 2015, that ensures banks are continually bailed out to avoid insolvency. Some Depositors, particularly cooperatives, spoken to by Nairametrics complain that they have had their cash trapped in the bank since last year and have not been able to access it.