Members of the minority investor community have expressed support for the Central Bank of Nigeria’s approval of the merger of Unity Bank Plc with Providus Bank.
On Tuesday, the CBN confirmed in a statement signed by its acting Director of Corporate Communications, Hakama Sidi, that the merger of Providus Bank and Unity Bank had been approved, citing Section 42 (2) of the CBN Act, 2007.
The apex bank also announced the approval of N700 billion in support of the proposed bank merger.
But earlier in June, the apex revoked the licence of Heritage Bank and said the Nigerian Deposit Insurance Corporation was its liquidator.
Commenting on the development, the National Coordinator of the Independent Shareholders Association of Nigeria, Moses Igbrude stated that, while the top bank’s move may be viewed as controversial, it was in the best interests of banks.
“The merger of Unity Bank/Providus Bank and the liquidating of Heritage Bank by the CBN remain a matter of controversy depending on the line of division one is looking at. The two cases here are different scenarios.
“The case of Heritage Bank is a systemic failure that led to the withdrawal of its operating licence by CBN. The latter is a merger by the managers of the two banks before the CBN gave them backing and financial support of N700bn. They know they have issues, and they also know they will not be able to cross the hurdle of recapitalisation and choose to combine their businesses through a merger.
“Were Heritage Bank managers ready or willing to let go and take this option of merger or business combination? As an investor, I believe saving an investment is better than liquidating it, especially when it is a Plc because doing so will bring more value in the long term than the entity being non-existent,” ISAN said.
Igbrude also praised the CBN for supporting the merger, calling it a good signal and “a clear indication to the market; foreign and domestic that the regulator is ready to support and assist similar moves in the industry to have a successful recapitalization at the end of the exercise.”
“My advice to both parties is that they should be sincere, transparent and open in all of their transactions to avoid doubts or misgivings at the end of the day.
“The CBN must make sure the whole process is properly monitored and thoroughly supervised to avoid unforeseen circumstances that could lead to systemic failure after the exercise.”
In her address, the National Coordinator of the Pragmatic Shareholders Association of Nigeria, Mrs Bisi Bakare maintained that there was no basis for comparing the two institutions, Unity Bank and the defunct Heritage Bank.
She said, “Comparing Heritage Bank with Unity Bank is like comparing orange with apple because both are fruits. They don’t match. Unity Bank is a quoted company with a significant governance structure. Also, if you look at the challenges faced by Unity Bank, it didn’t start now, it started from the previous recapitalisation exercise, so it is a legacy issue.
“Some people might say it is because of the personalities connected to the bank but I’m not sure that is the case. You cannot compare the two banks. Besides, every year, Unity Bank informs shareholders about what is going on in the bank. For me, I do not see anything bad in the move by CBN.
“The reason for the move is best known to the CBN. They have all the data to make the decision. We are looking in from outside but CBN knows what’s happening with the banks. They know why they spared Unity Bank and liquidated Heritage Bank.”
The immediate past National Coordinator of the Independent Shareholders Association of Nigeria, Tony Omojola expressed similar comments to Bakare, stating Unity Bank could not have been treated the same as the defunct Heritage Bank.
“The fact remains that Unity Bank cannot be treated exactly the way Heritage Bank was treated. Unity Bank certainly has most of the symptoms of a failed bank. But the fact that they have a willing suitor in Providus Bank also makes another difference from Heritage Bank. To collapse another bank within a 90-day of the first one might not be good for this economy and could speak unfavourably about the supervision of CBN.
“Sometimes a political consideration might be necessary in coming to conclusions in this fragile economy. Let’s wish the new bank success in their business,” he said.
Meanwhile, the President of the Noble Shareholders’ Solidarity Association, Mathew Akinlade, said Unity Bank was being treated as a sacred cow by the regulator.
“I think the approval of the merger between Providus Bank and Unity Bank by the CBN was just to rescue Unity Bank from liquidation. Unity Bank appears to me as a sacred cow that must be saved! I believe that if the same treatment was applied to Heritage Bank, it would have been saved. Going forward, CBN has to apply equity and fairness in their decision-making process,” he said.
However, the Chairman of the Ibadan Shareholders Zone, Eric Akinduro praised the central bank for the move, saying it helped to stabilize the financial sector.
“CBN said there is no Nigerian bank currently facing a precarious situation like Heritage Bank which was recently liquidated. CBN has done the needful as a regulator and looking at available yardstick used to rescue Unity Bank is quite within the purview of law.
“Heritage Bank’s financial position is quite heavy with bad loans. However, Unity Bank’s loan portfolio is healthier than Heritage’s.”
