RE CAPITALISATON OF BANKS

[mallamt]

The recapitalisation of banks in nigeria culminates at the end of the year, the projected number of banks that will be left standing in nigeria is about 21.  I have not noticed any northern bank in the 21 does anyone have any information on how area banks are doing in the exercise? or will there no more be any arewa based bank after the exercise? I think this tells  us something, I remember when I was growing up BON (bank of the north) was the bank to work for and also have an account with in the north, I heard alot of arewa business men and northern governments ran the bank down collecting loans etc and not paying back or any proper paper work and to compound the problem of BON I heard most of the middle belt states in the bank protested staff profile of the bank they were not listened to and the states went ahead to set up their own banks in the process gradually have been reducing their business with BON.  So where are we in the north with this bank recapitalisation story? any arewa banks emerging from the north at all?

[alhaji_aminu]

Great topic mallamt.

I think the objective of the recapitalisation exercise was to enlarge the shareholding base of Nigerian banks, increase liquidity and also give them sufficient funds to finance the massive projects needed for Nigeria to develop. If this is the case, then we must not be looking for a bank to emerge which will have a distinct Northern coloration.

Prove me if I am wrong, but Northerns don't know how to efficiently run banks. So, the best way out is for the Northern based banks to merge with other outfits in Lagos and watch as events unfold.

Alternatively, they could do what Intercity ( managed well I must add) did-forming a conglomerate with Tropical Commercial, First Interstate and Pacific banks as members). This will enable the bank scale the hurdle and also give it enough exposure in the Lagos market where First Interstate and pacific are based.

On BON, the latest information I have is that it will merge with NUB and New Africa Merchant bank (NAMB is an affiliate of BON). Also, the governors of the northern states have have agreed to remit =N= 250m monthly for 4 months (starting in august I think and already raised =N= 4.75b to reach 19b at completion) to help re capitalise the bank.

I particularly think BON will FAIL even after the recapitalisation exercise IF it is not privatised. The simple truth is, government officials draw excessive sums of money because they think it is "their" bank. Not only that, but some people of dubious character using political connections get outrageous loan deals which they ultimately fail to repay (Intercity and Inland banks are very good examples of the rewards of privatisation. Infact, the sum total of their PAT last year was roughly the same as BON. They were able to do this with a workforce that is less than 1/4 that of BON).

As Mohammed Haruna said in the Daily Trust of Sept 23rd 2003, Equally indefensible, was the total loan exposure of the bank, which stood at 50 billion Naira by the time Bulama had to leave. Out of this, the northern state governments, as owners and the most credit worthy debtors of the bank, owned no more than 10 billion. Meaning the rest was lent to individuals, many of them of dubious credit worthiness. That essentially sums up what is wrong with the bank.

For BON to reclaim its past glory, it needs to shed (more like purge) its very unproductive workforce, close its unprofitable branches, and appoint smart and charismatic leaders.

Will this be done? Only time will tell.

PS: It has been established that 50% of all mergers end up in failure. So we should expect to see a big implosion right after the first quarter of 2006!

Muhammad

[neozizo]

Prove me if I am wrong, but Northerns don't know how to efficiently run banks. So, the best way out is for the Northern based banks to merge with other outfits in Lagos and watch as events unfold.

I can't prove you wrong but i strongly believe that there is a very relevant need for a core northern bank for some reasons,one is the need to establish an Islamic bank(as i'm sure you are aware the "Lagos based banks" are laregely capitalist oriented and have no plans for the provision Islamic banking services) another is that as the Nigerian economy/government is being gradually transformed from public to private sector controlled, as a result private finanacial institutions(by extension their handlers) would have a very strong influence on running of  the affairs of the country in the not too far future and without a core-nothern bank, the region is going to seriouly lose out in protecting some of its interests.

Also,this disastrous trend of lacking a regional mega bank will result in loss of wealth, jobs, access to banking services and credit to northern businesses and interests banks that will be in tune with our social, geographical and cultural needs.Aftreall,these are largely some of the reasons that drove the establishment of BON by he Late Sardauna and co.A commercialised BON will definately discard some of these objectives in search of more profitable specialized markets and policies.

Agreed that we have a track record of bad mangement in banking,but i dare say that this largely applies to BON and other northern-states owned banks(run by old-school crowd) as other banks that are privately owned but run by notherners have/are doing well,even the lagos based banks have alot of competent key personnel of nothern extraction.
I believe these set of competent proffessionals as well as new breed of well trained people are abundant in Northern Nigeria and if given the chance will run a bank that will be very capable of competing favourably with any bank anywhere in the world.

And, alhaji_aminu,if we failed in the past with BON who says we can't learn from our mistakes and do beter in future?

[alhaji_aminu]

Salam

Thanks Zizo for offering your very well made points. You agreed with me in the first half your reply, which is, this trend towards privatisation is  good and unstoppable.

I would wish you ended their but you did not and this is what I think of the other half of your posts.

1) About the Islamic bank: There is currently an outfit called (JAIZ International ) being promoted by very wealthy, competent and industrious Muslims like Umaru Muttalab, Aminu Dantata, Chief Lababidi, Dr Adegbite and so-on. Their aim is to create a full fledged islamic bank offering intrerestless loans to Muslims and no-muslims alike. They have actually received an AIP (agreement in principle) from the CBN and then later raised money through a private offer which was handsomely oversubscribed. Unfortunately, this recapitalisation effort has clogged their progress as the money raised earlier is less than the 25b requirement.

I heard Dr Mutallab on BBC say that they will, God willing, go back to the drawing board and recapitalise the bank with support from the Islamic Development bank. The way I see, the bank will come on stream sometimes next year.

I should add that my father is a technical consultant to the project; I guess that accounts for my enthusiasm and high hopes for the project.
Now that is that.

[alhaji_aminu]

To continue, I would say that I totally disagree with you where you said, Also, this disastrous trend of lacking a regional mega bank will result in loss of wealth, jobs, access to banking services and credit to northern businesses and interests banks that will be in tune with our social, geographical and cultural needs.Aftreall,these are largely some of the reasons that drove the establishment of BON by he Late Sardauna and co.A commercialised BON will definately discard some of these objectives in search of more profitable specialized markets and policies..
The question is, where can such a bank be found in the NOrth today? BON is CERTAINLY NOT it. BON is distressed, unproductive, and barely functioning. It doesn't achieve the noble goals you outline above!

Lastly, I think the point I tried to make was that what Nigeria needs are good banks whether or not they are owned by Northerners. Infact, no good bank will discriminate against a large segment of the nation simply because they are from the North or Muslims. First Bank doesn't, Union Bank doesn't; I can't even think of any that does.

I understand people's fears about letting a legacy of sardauna melt away. But the simple fact is that in 21st century shape-up or move-out corporate environment, what counts first is profits, second profits and finally more profits.
Nostalgia is a luxury for politicians and politics, in business, its a no no

That's why Intercity and Inland bank, both state owned banks and still with Northern bases, do much better than the ailing 'giant'. If only management will realise soon enough to save us all the humiliation.

I call again, PRIVATISE BON NOW!!!

[kitkat]

I call again, PRIVATISE BON NOW!!!

Actually the bailout package b CBN was given on condition that all the States have to divest, in other words BON will have to be privatised after recapitalisation. At the moment BON and the old NUB are merging and tropical may join them as the original arrangement with the other group appears to have fallen apart. There were six banks in the group with 3 opting out and tropical doesnt look like it can raise the 7 Billion required by each group member thru an IPO b4 the merger and time is fast running out.

Nobody seems to know whats going on with Habib Bank. A merger with the new Jaiz bank perharps??

Come next year there will be 28 odd banks with 25 to 50 Billion to lend, in an almost comatose economy. Most of them raised the money thru IPOs so they have thousands of shareholders who will be demanding the returns promised in the glitzy campaigns to raise funds. The problem is what to do with that idle cash since big ticket borrowers will be few and far between, and theyll probably be naming their price in terms of interest rates. Add the anticipated N900 Billion expected to be realsied from the contributory pension and the future becomes even bleaker for the cut throat banking we used to see.

GTbank is already reaching out to its old customers with an offer to lend money to trusted clients without insisting on collateral. Just self recognition, in essence begging people to come and borrow.

I wonder what the new BON will do???

[alhaji_aminu]

Salam

You really hit the nail at the head Kitkat. Nima abinda nake gani is, most of those 'ill fit' mergers and acquistions will fall apart before one could say SOLUDO. I mean, corporate culture din bankuna a Nigeria is so different and their outlook so varied that jama'ar da suka sayi hannun jari through the many IPO's will be sorely shocked when the true market values of the firms are known.

If I many ask, shin ta yaya 'contributory pension scheme' zai yi affecting banking in nigeria negatively? In fact, the area I think where most banks will have a tough time is if CBN completely hands off the skewed and hopelessly corrupt forex auctions. It is no secret that alot of those 2 branch banks in Lagos are only living off 'round tripping' the nigerian masses.

It is sad to hear that the MOU Tropical signed with Intercity is falling apart. If indeed this is the case, then how do banks like Intercity, Interstate and Pacific expect to scale the hurdle alone or as a group?

I should end by saying that I agree totally with CBN's conditions for granting BON that very generous forebearance. I am also totally convinced that if Inland and Intercity can make it after being privatised, then BON has no reason not to- that is, be privatised and be profitable.


M(one)!

[kitkat]

I just read that the tropical group merger is going ahead, albeit without 2 original members of the group and with tropical being the least capitalised, and therefore the least influential member of the group.

I didnt say the new pension scheme wiil negatively impact banking, in fact it will be a good thing since the nigerian money market will experience the injection of stable long term funds for the 1st time.

What will happen is that the market will be awash with cheap long term funds, so instead of banks employing pretty young girls and unleashing them unto the streets with impossible deposit targets, they will be looking for big ticket borrowers to balance the risk asset side of their balance sheet.

The down side is they might resort to round tripping and black market forex deals to survive and since they have excess naira we better brace ourrselves for a massive depreciation of our already battered naira.

[neozizo]

1) About the Islamic bank: There is currently an outfit called (JAIZ International ) being promoted by very wealthy, competent and industrious Muslims like Umaru Muttalab, Aminu Dantata, Chief Lababidi, Dr Adegbite and so-on.....................
I should add that my father is a technical consultant to the project; I guess that accounts for my enthusiasm and high hopes for the project. sometimes next year.

I am  very enthusiastic about the JAI'Z bank also.
I would like to point out to you that this development helps to underscore my point about the Lagos Banks axes's unwillingness or disintrest in the needs of  the Northeren region and the need for regional bank.
As you are very well aware the list of personalities involved in this noble project mainly includes non-Lagos Bankers(with Muttalab being an exception)
 

I understand people's fears about letting a legacy of sardauna melt away. But the simple fact is that in 21st century shape-up or move-out corporate environment, what counts first is profits, second profits and finally more profits.
Nostalgia is a luxury for politicians and politics, in business, its a no no

This is exactly what i am afraid of,Alh Aminu,when coporations put profit first before everything else.
In Nigeria where there are more poor people than rich,basic services like telecoms,transpotation, power and banking would be beyond the reach of the majority poor as corporations will tend to concentrate on the minority rich where they will be certain of making good returns on their bussinesses.

I give you an example with Zenith Bank.You will agree with me that this is undoubtly currently one of the best banks in Nigeria .They are very reliable and have very good services and products.But alas most Nigerians cannot benefit by patronizing the bank as they tend to discorage small bussinesses and individuals from banking with them.Imagine,their minimum Initial deposit for a savings account is N50,000....even their security guards tend to discrimnate people based on the way you are dressed when you visit the bank.They don't have branches in rural areas

But I guess polticians,who always have the intrests of the common people(or at least in theory)as their priorty will seem nostalgic to you if they insist on keeping the original objectives the basis of the establishment of public (which are now gradually transformed into private/commercial) institutions.I think all-out privatisation in third world counties is a BAD idea

[Maqari]

Mr. Zizo, Some really wise points you raised there.

[neozizo]

Still on the anti-people capitalist policies of theObasanjo administration.

Mal. Nasir el-Rufa'i was quoted as saying something to the effect that the bane of Nigeria's economic and political problems lies with the mentality of nigerians which considers government to be a kind of charity,he went on to say that government should not be expected to provide everything for its citizens but rather what would redeem Nigeria was if the private sector was given freehold to come in and allowed to provide all the services needed by the citizens and government was only left  the function of a regulation.

In contrast to this capitalist ideology the president of senegal,Abdoulaye Wade,while addressing participants at the world summit on internet society in Tunis said"The problem of Africa is so large and complex that the private sector alone cannot provide solution"

[ummita]

Well, 2 move 4ward & onwards is wat ppl need 2 do. I think Ja'iz has paved a way 4ward. Am sure it will offer an outstandin service. I got me a share deal too! Once Jaiz is up n runnin in full force I c no reason y a Moslem shud nt use their bankin services. Infact we shudnt worry bout d geographical location of Arewa banks or where its position lies within this recapitalisation, rather wat EVERY MUSLIM UMMAH needs globally is a legitimate service knowin dat wateva halal dey've deposited or taken out remains halal & free from Usury/Riba/Interest!

Well Mallamt, I may b digressin ur topic a lil bit. However I do nt think we shud worry bout d changes in d way (ie: BON) is financed becus as we all know most bankin strategies r based on d injection of capital through debt or equity which contains interest! Wat I wud rather focus on is encouragin d acknowledgement & acceptance of islamic bankin by all muslim individuals not only northerners but in every part of 9ja so long the muslim ummah is nt far from reach. A bank, b it situated in d north, south, east or west; (a bank is a bank) dey lend, tyk & keep........choosing a bank based on choice preference of location is nt important but dat it shud operate in accordance wit islamic principles. On d whole, wat d Arewaz need is 4 finacialists 2 put on their thinkin caps & try 2 implement a system of banking activity which is consistent wit Islamic law principles & guided by Islamic economics in all banking institutions rendered 2wards d targeted group! Unless ppl r havin one of those privimitive ideas bout  "we r d inhabitants of this region & therefore we shud b in charge"!

[bakangizo]

Latest is that BON is (or has ) merged with Omega Bank. The new bank is to be known as NorthOmega Bank. On purely sentimental view, one feels sad that one of the two last surviving legacies of Sardauna, the other being NNDC, is gone. But the issue I feel goes beyond northernization as such. Merging with a bank like Omega, which is essentially a western/Yoruba bank, may not bode well for northern interest in the end. Be that as it may, I think  in today's financial world, regional/tribal affiliation should  not take precedence over professionalism and organizational success.

[neozizo]

Wat I wud rather focus on is encouragin d acknowledgement & acceptance of islamic bankin by all muslim individuals not only northerners but in every part of 9ja so long the muslim ummah is nt far from reach.

Yeah, i agree that ALL muslims from whatever part of the country should support and help actualize the establishment of Islamic Bank,but seeing that Northern part is majoriy muslim,it only makes sense (and is by far easier) for it to spear-head this move dont you think?.

On d whole, wat d Arewaz need is 4 finacialists 2 put on their thinkin caps & try 2 implement a system of banking activity which is consistent wit Islamic law principles & guided by Islamic economics in all banking institutions rendered 2wards d targeted group!

Er.... i think the'v done that and come with the conclusion that one of the surest,fastest and easeist ways to establish a system of banking suited to the needs of muslims is to own a bank that is wholly owned by muslims having common intrests and objectives and commanding full control of running of the bank in order  to implement these goals unhindered.......hence the move to establish Ja'iz Bank from scratch (it wud have seemed financially expedient to accuire or merge with an already existing bank but as you are aware this route was not taken)

Unless ppl r havin one of those privimitive ideas bout "we r d inhabitants of this region & therefore we shud b in charge"!

I'm sure this way of thinking may seem primitive to you but obviously to think otherwise is sheer naivty(keeping in mind the the politics and mechanisms of the Nigerian set up).
Besides there are people who think the ideas laid down by America's founding fathers centuries ago are primitive,but do you think it  possible for america to be a great nation today if the had  dismissed these ideas as

Please go through previous posts,the point is not "geographical location of Arewa banks or where its position lies within this recapitalisation" the issue is the actual ownership of the banks.A bank could be located anywhere but it is the ownership that must be in line with the actualisation of our needs as  muslims and AREWA people.

Latest is that BON is (or has ) merged with Omega Bank. The new bank is to be known as NorthOmega Bank. On purely sentimental view, one feels sad that one of the two last surviving legacies of Sardauna, the other being NNDC, is gone. But the issue I feel goes beyond northernization as such. Merging with a bank like Omega, which is essentially a western/Yoruba bank, may not bode well for northern interest in the end. Be that as it may, I think in today's financial world, regional/tribal affiliation should not take precedence over professionalism and organizational success.

I agree with you completly but i'd point out the establishment of BON by the late Srdauna (ALLAH ya ji kanshi yayimishirahama) was not soley financial.

[neozizo]

.About the Islamic bank: There is currently an outfit called (JAIZ International ) being promoted by very wealthy, competent and industrious Muslims like Umaru Muttalab, Aminu Dantata, Chief Lababidi, Dr Adegbite and so-on. Their aim is to create a full fledged islamic bank offering intrerestless loans to Muslims and no-muslims alike. They have actually received an AIP (agreement in principle) from the CBN and then later raised money through a private offer which was handsomely oversubscribed. Unfortunately, this recapitalisation effort has clogged their progress as the money raised earlier is less than the 25b requirement.

........I should add that my father is a technical consultant to the project; I guess that accounts for my enthusiasm and high hopes for the project.
Now that is that.

Salaam alhaji,pls what is the latest on JAIZ.Id be very grateful if u can fill me in.