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NSE suspends trading in five banks' shares
August 18, 2009

ANOTHER blow was dealt the five embattled banks as the Nigerian Stock Exchange (NSE), yesterday, placed full suspension on their shares for two weeks. The action of the capital market regulator came three days after the chief executive officers of the banks were sacked last Friday by the Central Bank of Nigeria (CBN) for exposing the outfits to bad debts.

The banks are Union Bank of Nigeria Plc, Intercontinental Bank Plc, and Afribank Nigeria Plc. Others affected by the decision, which takes effect from yesterday to August 28, 2009 are Oceanic Bank Plc and FinBank Plc.

NSE's Director-General, Prof. Ndi Okereke-Onyuike, explained yesterday that the resolve to suspend the five banks was taken in collaboration with the CBN and Security and Exchange Commission (SEC).

Okereke-Onyiuke said at the end of the two weeks, the three regulators would meet to review the situation and determine whether to continue with full or settle for technical suspension.

She said that with full suspension there would be no trading in the shares of the banks while technical suspension allows trading "without movement of price."

Referring to a letter from the CBN to the NSE titled: "Banking sector reforms: Full suspension of five listed banks," Okereke-Onyuike said the various agencies were working as a team in the interest of all stakeholders and the national economy.

According to her, NSE was authorised to make the announcement because the banks were quoted.

Accompanied by the President of Chartered Institute of Stockbrokers (CIS), Mr. Dipo Williams, Chairperson of Association of Stockbroking House (ASHON), Alhaji Rasheed Yusuf, the NSE boss insisted that the suspension was not in bad faith.

Experts, who spoke with The Guardian on the matter yesterday, explained that with the full suspension, the impact on the capital market would be minimal.

The sack of the helmsmen of the five quoted banks by the CBN on Friday led to panic selling of the banks' shares as volume of traded equities in the banking sub-sector dropped marginally.

At the close of transactions on Friday, the volume of traded equities in the banking sub-sector closed lower as investors staked a total of N1.42 billion on 184.3 million shares, 15.5 per cent lower than the preceding day's volume of 218.1 million shares valued at N1.64 billion.

With the affected banks enjoying varying transactions from investors, their share prices suffered depreciations as they fell from the preceding day's share prices.

For instance, Union Bank of Nigeria Plc lost 36 kobo to close at N12.60 per share followed by Intercontinental Bank Plc with 36 kobo to close at N6.93 per share, while Afribank Nigeria Plc shed 27 kobo to close at N5.22 per share.

Similarly, Oceanic Bank Plc and FinBank Plc both shed 26 kobo and eight kobo to close at N4.94 and N1.55 in that order.

With these losses and earlier ones suffered by other banks last week, the NSE Banking Index dropped by 5.8 per cent to close at 389.75 points.

The CBN Governor, Sanusi Lamido Sanusi, on Friday announced the removal of the Chief Executive Officers of Intercontinental Bank Plc, Mr. Erastus Akingbola; Sebastine Adigwe of AfriBank, Okey Nwosu of Finbank Plc; Cecilia Ibru of Oceanic Bank of Nigeria Plc and Barth Ebong of Union Bank Plc.

They were replaced by John Aboh for Oceanic Bank Plc, Mahmud Alabi (Intercontinental Bank Plc,) Nebolisa Arah (Afribank Plc,) Suzanne Iroche (Finbank Plc), while Funke Osibodu takes over at Union Bank.

Sanusi attributed their removal to excessively high level of non-performing loans in the five banks, which he linked to poor corporate governance practices, lax credit administration processes and the bank's credit risk management practices.

He said it was evident that the five banks accounted for a disproportionate component of the total exposure to capital market and oil and gas, thus reflecting heavy concentration to other banks in the industry.

On Akingbola as the second vice president of the NSE, Okereke-Onyuike said he was elected in his private capacity, adding that except there was a criminal case against him, he would retain his position in the NSE council.

It was learnt yesterday that law enforcement agents, who took vantage positions in the head offices of the said banks to avoid asset stripping or tampering with official documents were yet to make any arrest of any official or debtors.

President Umaru Musa Yar'Adua on Sunday asked security agencies to assist the CBN to bring the debtors to book.

A source at the apex bank said no one would be picked up until the CBN establishes a link between the individuals and the mismanagement of the banks' funds.

He said the CBN would want to know, among other things, how some of them, both bankers and debtors, came about the funds they used in buying yatches, private jets and choice property within and abroad.

In fact, he stressed that the lifestyles of some of these people need to be investigated.

"It is when we have done all these, if a case is established against any one of them, then relevant law enforcement agencies can prosecute, but right now, the government is making sure that all those involved are watched closely," he revealed.

To the debtors, Sanusi had warned that "the CBN and all government agencies are united in their commitment to support the recovery efforts of the banks, stressing that "debtors who do not pay shall have their names published in national newspapers in due course and we will solicit the support of law enforcement agencies in recovery."

The Senate yesterday described the sack of chief executives of the five banks by the CBN as nationalistic and patriotic.

Chairman of the Senate Committee on Information, Ayogu Eze, told journalists in Abuja that the Upper House would back the CBN governor, Dr. Sanusi Lamido Sanusi, on his sack of the bank chiefs if it found that the reasons behind the action were genuine.

Eze said: "The action is nationalistic and the Senate supports him. The Senate believes that he (Sanusi) has acted in the best interest of the country and this is to further consolidate on the gains of the last administration."

On claims that extraneous factors informed the CBN's big stick, Eze said: "If we see that the reasons are genuine, we are going to back him.

Also, the House of Representatives has endorsed the CBN's move to clean up the system.

It said the apex bank had taken the bull by wielding the big stick against the banks' chiefs.

Fielding questions from reporters at the Presidential Wing of the Murtala Muhammed Airport, Lagos yesterday, the Speaker, Dimeji Bankole, urged Nigerians to wait till the full result of the CBN audit, adding that "it is a push in the right direction and there should be no need for panic whatsoever. This is part of the job of the CBN."

He disagreed with claims that it has become a recurring decimal, noting that the CBN used its regulatory power, "and if that was the situation, we should back them seriously and not criticise them but at the same time make sure that fundamental rights of those banks as well or even the personalities are not thrown down the drain. It is a process and I am happy it is happening."

The Guardian Newspaper, Tuesday August 18, 2009

 

 

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