Recapitalisation:Unity Bank looks at six options

Written by Duncan Thursday, 22 October 2009

Unity Bank Plc is planning to raise between N50 billion and N70 billion in order to shore up its capital base as required by the Central Bank of Nigeria (CBN), its Managing Director Falalu Bello said in Abuja yesterday.

CBN earlier this month gave Unity Bank up till June next year to recapitalise.

Bello, who was speaking when he visited the corporate Head Office of Media Trust, publishers of the Trust newspaper titles, said the bank was considering six options to meet its recapitalisation requirement. The options are public offer, rights issue, asset-stripping, debenture, sell of shares in subsidiaries and merger. But Bello said merger would be the last option.

He said in the recent CBN examination that swept away some bank chief executives, Unity Bank was found to have adequate liquidity ratio and good corporate governance, adding that this was an indication of the bank’s prudence and integrity.

Bello said during the regulatory examination, Unity Bank was found wanting only in terms of capital adequacy, which he partly attributed to huge bad debts inherited from the nine legacy banks that merged in the 2005 consolidation exercise.

He denied insinuations that CBN last year gave the bank N75 billion to keep it in business. “We did not receive any N75 billion from any Soludo or any CBN,” he said.

Bello also denied allegations that the bank never published its accounts, saying the 2006 and 2007 accounts were published while the bank was waiting for approval of its 2008 accounts before publishing them.

On the recapitalisation of the bank, Falalu said, “When you are given a target that you must meet, all options are on the table.”

He said merger with any bank will be a last resort because the bank has overcome its greatest challenges of integrating the nine legacy banks and so it would not be a good idea to go through yet another integration. “Why should we sweat out for four years to create an institution and then go back to another one?”

On the planned rights issue, he said, “We have a technical problem which we are going to solve. Government cannot buy our shares today and substantial part of our shareholders is from government.

“We are going round to sensitise them and asking them to renounce their holding in favour of their indigenes and to help us market the capital raising. In addition to that we are even going to the market.

“The third option that we are considering is that we have fixed assets that we acquired. Some of them we don’t need. So, the third option is the disposal of assets that we don’t require. We have assets from the nine banks that merged valued at N23 billion and we don’t need all the assets. We will sell some of them or use them to secure the debenture that we are going to raise.

“The fourth option that we have is our subsidiaries. I am not saying that we are going to sell them but if it comes to survival definitely it is on the table…. Also we have an approval from our board to raise N40 billion debenture even before the CBN examination.”

 “But, if at the end of the day all these don’t succeed to the extend we believe they will, we fall to another position. We have five plans and I am sure that one of the five will succeed. God willing, we will overcome this problem of capital which is our only problem”, he said.

He said: “We are not excluding any option and if all these five options fail, the only one that is remaining is merger. We will consider merger with banks that we can go to bed with. At the end of the day if that is the option that will make us survive we will swallow it.”