The Central Bank of Nigeria and AMCON have announced the completion of the sale of shares in Polaris Bank to Strategic Capital Investment Limited (SCIL).
The CBN confirmed this in a press release on its website on Thursday, October 20, 2002. “The Central Bank of Nigeria (CBN) and the Asset Management Company of Nigeria (AMCON) are pleased to announce the completion of a Share Purchase Agreement (SPA) for the acquisition of 100% of the equity in Polaris Bank (‘Polaris’ or ‘the Bank’) by Strategic Capital Investment Limited (‘SCIL’). “ It announced.
The apex bank claimed SCIL has paid the upfront of N50 billion and in accepting the terms will repay fully the sum of N1.305 trillion being the consideration bonds injected by the CBN.
Whilst, the bank was sold for N50 billion, the repayment of N1.3 trillion means the bank will have to pay Polaris Bank about N52 billion a year in redeeming the bonds raised by AMCON. For the bank to repay the loans they will have to generate profits above N60 billion.
From denials to confirmation
The confirmation of the sale of the bank to Strategic Capital Investment Limited is happening after denials by Polaris Bank that a sale was being consummated by the apex bank and AMCON. Just this August, Polaris Bank issued a statement denying any sale and characterizing it as “speculative”.
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“Our attention has been drawn to an online report on the purported sale of Polaris Bank Limited. This publication is speculative, deliberately intended to create panic and should be disregarded by the banking public.” Polaris.
The latest confirmation by the central bank puts to question the trust value of the management of the bank who, by denying an ongoing transaction, may have led its depositors to believe there was not going to be a sale.
The NDIC also alluded to a denial of the sale of the bank claiming that all Nigerian Banks were healthy.
“All banks that are operating within the country are sound in as much as their licences have not been revoked. If there is a problem, the regulator that issues the licence will be the one to revoke the licence. In as much as the licence is not revoked, you’re free to continue to bank with the institution; it means it is safe.”
In addition to the controversy surrounding the denials, the House of Reps also directed that the CBN halt the sale of the bank insisting that it has to be transparent and competitive.
“The suspension will subsist until the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), and the Asset Management Corporation of Nigeria (AMCON) have concluded all processes for the open, transparent, and competitive bid process.”
Polaris has been operating as a bridge bank since 2018 when the Central Bank of Nigeria intervened to revoke the licence of the former Skye Bank Plc and established Polaris Bank to assume its assets and certain liabilities.
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The CBN also stated that SCIL has paid an upfront consideration of N50 billion to acquire 100% of the equity of Polaris Bank and “has accepted the terms of the agreement which include the full repayment of the sum of N1.305 trillion being the consideration bonds injected. The CBN thus received an immediate return for the value it has created in Polaris Bank during the stabilisation period, as well as ensuring that all funds originally provided to support the intervention are recovered.”
What the sale means
Whilst, the bank was sold for N50 billion, the repayment of N1.3 trillion means the bank will have to pay Polaris Bank about N52 billion a year in redeeming the bonds raised by AMCON.
For the bank to repay the loans they will have to generate profits above N60 billion over the next 25 years, or whatever is left of the bank’s tenure.
Nairametrics analysis suggests the play by the owners may have to explore an equity raise, sale of assets, issuing more bonds, and from its profits.
Another option might be for the owners to go through a merger with a much bigger bank.
“This sale marks the completion of a landmark intervention in a strategic institution in the Nigerian banking sector by the CBN and AMCON. We commend the outgoing board and management for their vital role since the bridge bank was established; in stabilising the Bank’s operations, its balance sheet and implementing strong governance structures to address the issues that led to the intervention. This process has provided the CBN with an unprecedented opportunity to recover its intervention funds in full and promote financial stability and inclusive growth. We wish SCIL well as they implement growth plans to build the bank from the strong foundations that have been established.”
Polaris Bank 2021 Results
The bank reported a profit of N28 billion in the Covid year of 2020, however, profits fell to N19.4 billion on gross earnings of about N105 billion.
The bank’s total assets are about N1.3 trillion with loans and advances of about N260 billion.
The bank’s deposit liability is about N1 trillion in deposits from customers.
The bank also reported a net asset of N102 billion at the end of 2021.
Polaris also has retained earnings of N12.9 billion
However, findings by Nairametrics also revealed that in 2020 it had a sum of N848 billion in “reorganization reserve” however, in 2021 the reserve collapsed against the share premium of N873.4 billion appearing to have cleaned out the shareholder’s funds.