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Sale of Mainstreet, Enterprise Banks in Final Lap

By on August 18, 2014

As the Asset Management Corporation of Nigeria (AMCON) restated its resolve to unveil successful bidders for two of the bridged banks-Mainstreet and Enterprise Banks on September 15, financial analysts believed sticking to the timetable this time will add credibility to the entire process, and provide the needed template for the sale of Keystone Bank, the third bank in the category, reports Festus Akanbi

Business as usual
As at last Tuesday when our reporter visited No 51/55 Afribank Plaza, Broad Street headquarters of Mainstreet Bank Limited, it was business as usual for security personnel manning the lobby as well as a handful of the bank’s staff making their way into the 19-floor building.
Even transactions in the headquarters branch of the bank on Broad Street and few others in different locations in Lagos, as  witnessed by the reporter, were devoid of anxiety and confusion usually associated with the operations of institutions ready to change ownership.
However, the reality is while different categories of the bank’s staff were dispensing their services with calmness, members of the board of the bank may have begun to prepare their hand over notes preparatory to the September 15 deadline set aside by the Asset Management Corporation of Nigeria (AMCON) for the transfer of ownership of the bank to new investors.
The corporation had, earlier in the year, set the September 15 deadline for the completion of the processes leading to the emergence of new investors for the bank. When contacted last week, Managing Director, AMCON, Mr. Mustafa Chike-Obi, confirmed that the corporation would meet the target set for itself on the choice of new investors for Mainstreet Bank.

The Processes
AMCON had appointed Barclays Africa Group Limited and Afrinvest as financial advisers for the divestment of its shareholding in Mainstreet Bank Limited, while Messrs Banwo and Ighodalo were picked as legal advisers on the divestment.
Mainstreet Bank as at December 31, 2013, had nine subsidiaries; and a distribution network made up of 201 branches, nine cash centres and 200 Automated Teller Machines.
According to AMCON’s Head of Corporate Communications, Strategy and Research, Mr. Kayode Lambo, not less than 25 investors have submitted Expressions of Interest (EOIs) on the bank and the list included both local and foreign banks as well as investment groups.
The planned sale of the bank had, earlier in the year, encountered some hitches when a company that had dealings with the legacy Afribank Plc- Intangis Holdings Limited- had launched a legal battle at the International Court of Arbitration (ICA).
Intangis had recently claimed breach of agreement tagged “Confidential and Non-Circumvention Agreement,” which it reached with Afribank, a development that may have stalled the divestment plans of AMCON from Mainstreet Bank.
The said agreement had held that Afribank would not enter into discussions or negotiations with any potential investor in relation to acquisition of a portfolio of non-performing loans and that of a minority stake in its share capital.
In its reaction, AMCON, which dismissed the dust raised by Intangis protest, explained the latter was pursuing a frivolous claim, as it was not party to any agreement with Intangis given the fact that Mainstreet did not exist at the time the agreement was reached.
According to AMCON, with apparent lack of capacity of Afribank to recapitalise before the September 2011 deadline given to it by the Central Bank of Nigeria (CBN), its licence was revoked and the Nigerian Deposit Insurance Corporation (NDIC), pursuant to its enabling Act (section 39), in collaboration with the Central Bank of Nigeria (CBN), executed a Purchase and Assumption Agreement, which allowed Mainstreet Bank to purchase assets and assume certain liabilities of Afribank, while AMCON subscribed to the shares of the emerged bank.
It also pointed out that the agreement in question had expired since November 2, 2011, and there was no subsisting or existing contract, which AMCON can be said to be breaching or inducing its breach.

A Profitable Bank
Meanwhile, in terms of profitability, Mainstreet Bank Limited has consolidated its return to profitability as it recorded a profit before tax of N13.2 billion in its group financial performance for the year ended December 31, 2013.
The bank’s chairman, Gambo Ahmed, had described the result as the outcome of strategies put in place in the last two years to build confidence, optimise costs, and improve operational efficiency and customer service delivery.
The bank’s published financial result shows growth in all key financial indices. Gross earnings grew to a new high of N49.6 billion in 2013. The growth was largely driven by increased interest income as the bank significantly grew its loan portfolio by 63 per cent from N34.9 billion in 2012, to N57 billion in 2013.
Despite the significant growth in risk assets, the non-performing loan ratio (NPL ratio) remained low at 3.66 per cent, well below the five per cent regulatory limit. The bank’s operational efficiency strategy yielded a 26.6 per cent growth in net interest margin.
“We have achieved this result in spite of the socio-economic challenges and increased competition in the Nigerian banking industry. The result clearly reaffirms that the bank is on the right track of becoming a top-tier bank,” explained the bank’s chairman.
“We are particularly encouraged by year-on-year growth in our customers’ deposit which shows their increasing confidence in the Mainstreet Brand,” Ahmed said.
On the several initiatives the bank put in place to bring efficiency in the bank’s operations, managing director of the bank, Ms Faith Tuedor-Matthews, noted: “Within the period under review, we successfully migrated to the latest version of Finacle core banking application, which has significantly improved our ability to deliver service to our customers and introduce innovative products and services. In addition, we have also automated many basic banking services such as account opening, funds transfer, card and cheque production etc., which has ensured that customers’ requests across the bank’s over 200 branches are promptly delivered in a standardised and predictable manner.”

Like Mainstreet, Like Enterprise
The banking public also expects AMCON to finalise arrangements on the sale of Enterprise Bank Limited, after a couple of extension of deadlines.
AMCON commenced the sale of Enterprise Bank on September 22, 2013 last year when it formally invited interested buyers to express interests in acquiring its 100 per cent stake in the bank.
The invitation by AMCON prompted interests from some Nigerian banks namely Diamond Bank Plc, Fidelity Bank Plc, Sterling Bank Plc, Stanbic IBTC Bank Plc, Standard Chartered Bank, Skye Bank, Heritage Bank Limited and other investment groups.
Others include investors like Taunus Holdings, Sahara Energy, Obat Oil and about 12 private equity firms backed by experienced bankers as well as financial and investment analysts.
Citigroup Global Markets Limited and Vetiva Capital Management Limited are the financial and legal advisers for the sale of Enterprise Bank.
The process leading to the sale of the bank also had its fair share of controversy with recent speculations attributing the delay in the sale of the bank to a purported directive by CBN to halt the process. According to reports which had been effectively repudiated by AMCON, some top CBN officials allegedly believed that the result of the final bids submitted by AMCON to the CBN governor was interrupted to favour a particular local bank with strong ties with a former governor of a South Eastern state.
But in a reaction, AMCON said it wanted the public to know that after the advisers (Messrs Citibank and Vetiva), who it employed, had concluded their work, AMCON’s management and board would consider the result before the approved buyers are officially sent to the CBN.
“It is therefore premature for the report to say that AMCON interfered with the process, as the process is still on-going and no names have yet been officially sent to the AMCON board for consideration,” the statement said.
“AMCON has not interfered in any way in the process that is still entirely in the hands of the advisers.
“When the advisers present their final report, which we expect within the next two weeks, regulatory approval will be required and sought,” a statement from the corporation had explained.
When THISDAY sought the corporation’s position on the privatisation of Enterprise Bank, last week, Chike-Obi was confident that the corporation would meet the September 15 time frame it set for itself.
So, as the banking public, including staff, depositors, contractors and regulatory authorities wait for the unveiling of new investors for both Mainstreet and Enterprise Banks, banking sector analysts say the template for these process will help in a great measure in the sale of the third nationalised bank-Keystone Bank Limited.

 

[This Day]