A
stress test conducted by a Dubai-based international investment bank, Arqaam
Capital, has indicated that seven Nigerian banks are undercapitalised to the
tune of N1tn ($3.2bn).
It
also reported that two other banks were close to being insolvent.
The
investment bank said the Nigeria’s banking industry “is experiencing a
full-blown financial crisis” as failed fiscal and monetary policies had led to
a credit crunch.
The
stress test identified the undercapitalised banks as First Bank of Nigeria,
Unity Bank Plc, Diamond Bank Plc, Skye Bank Plc, FCMB Group Plc, Sterling Bank
Plc and Fidelity Bank Plc.
In
an emailed note on Monday, analysts at the investment bank and brokerage, Jaap
Meijer and Tarek Sleiman, said capital adequacy ratios in Nigerian banks were
set to worsen because of the depreciation of the naira and huge non-performing
loans, Bloomberg
reported.
“Our
acid test reveals seven undercapitalised banks” with a deficit of as much as
N1tn ($3.2bn) in the financial system,” Meijer and Sleiman said.
“Unity
Bank and Skye Bank are close to being insolvent, while lenders, FBN Holdings
Plc and Sterling Bank Plc, will need a dilutive capital hike,” they added.
The
affected banks reacted to the report on Monday, saying there was no iota of
truth in the report.
The
spokesman for First Bank, Mr. Babatunde Lasaki, said, “First Bank is not
undercapitalised. We are still within the industry regulatory threshold. This
is their opinion. Our position has been published in our half-year report; it
is not the one from an investment bank or a speculative report. Our Q3 report
will soon be published.”
Also
reacting, a spokesman for Diamond Bank, Ikechukwu Mike Omeife, said, “Our bank
is strong. Our capital-adequacy ratio and non-performing loans are within the
statutory requirements.”
A
top source at the Unity Bank said the bank was still meeting its obligations.
The
source, who did not want to be quoted, said, “Our financial position has been
enhanced. We have just moved our head office to Lagos in order to be closer to
the market and retail market. All these strategic investment decisions have
shored up market confidence in the bank.”
Similarly,
a top official of Skye Bank, who spoke on condition of anonymity, said the bank
was not close to being insolvent.
The
source said the Central Bank of Nigeria had issued a statement, stating that
the bank was not distressed.
To
create a capital buffer, Sterling Bank is planning to issue a N27bn bond and
“if the interest rate looks better, we will do it this year,” the Sterling Bank
Chief Financial Officer, Abubakar Suleiman, told Bloomberg.
The
spokesman for FCMB, Mr. Diran Olojo, could not comment immediately.
Fidelity
Bank did not give any response on the development.
Source:The
Punch
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Business