Abuja — Experts are yet to accord Nigerian banks a clean bill of health. A magazine had categorised the 24 banks into three: The healthy, the not too healthy and the unhealthy. Already some banks are collapsing into each other. But there are fears that some may close shop outright.

Coming after the 2005 consolidation, this has further created an insight as to the banks whose books are already in the red. Daily Trust tracked banks that have declared their 'impressive' results for the first quarter of 2009. Some are yet to do so, while others might have adopted the much touted December uniform year end.

It was reported that top bankers are not comfortable with the December deadline for uniform year end, full disclosure of exposures to the nation's capital market in the face of the global financial downturn and adaptation of the International Financial Reporting Standards.

It would be recalled that in its annual report and statement of accounts published late last year, the Nigeria Insurance Deposit Corporation (NDIC) had said that only four banks were sound.

"Out of the 24 banks in the industry as at the end of 2007, four were rated sound," it said.

It said in the same report that there were 1,553 reported cases of attempted fraud and forgeries involving over N10 billion in 2007.

Daily Trust can report that some banks are already into merger talks, while stronger banks have been buying into smaller ones as witnessed recently between Bank PHB/Spring Bank and Skye Bank/Wema, while Stanbic and IBTC had solemnized their marriage soon after the 2005 recapitalisation exercise. The merger plan between First Bank Nigeria Plc and Eco Transnational Incorporated (ETI) that will, according to them, create the strongest pan - African bank in the continent, has reached its peak and may soon materialise, Daily Trust learnt.

Earlier there were speculations about the merger plans between Unity Bank/ETI as well as Sterling Bank/ETI.

Managing Director of FinBank Mr. Okey Nwosu had confirmed to Daily Trust in March that a new phase of consolidation was in the offing. Nwosu, who said the move was to enhance efficiency and profitability in the banking industry, did not name the banks in the merger talks but said his bank is not among them.

He said: "Yes, discussions have started going on among the industry operators on merger and acquisitions. This type of merger we are likely to see this time around may not be regulatory authority driven but it makes sense because it will lead to more profit and efficiency in the sector."

Nwosu said the current merger plans may not need to be regulator-induced because the banks were conscious of the need to survive the current economic meltdown.

"This is the time institutions come together for greater efficiency and this has started happening in the US. In Nigeria, I see greater opportunity for mergers and acquisitions in the banking sector and it will happen soon," he said.

The speculation about the health of the country's banks is coming as the European Central Bank (ECB) warned that the crisis facing its banking sector is not over. This is despite government efforts to support the banks in Europe.

It said there was "no room for complacency" and banks would have to write off billions more dollars of bad debts in the next 18 months. These could amount to a further $283bn by the end of 2010, it said.

But the CBN under Governor Chukwuma Soludo had said that the country's banks were not in the red and that they were strong enough to withstand any shock arising from the global economic meltdown.

Nevertheless, top economists including Finance Minister Mansur Muhtar, believe that Nigeria was not after all insulated from financial occurrences around the world.

Inspite of the scepticism by Nigerians of the good ratings of the banks by local and international rating agencies, three Nigerian banks made the Forbes list this year. They are: First Bank of Nigeria Plc, United Bank for Africa and Intercontinental Bank. First Bank was ranked 1,375; UBA and Intercontinental were ranked 1,560 and 1,798 respectively. But big-league rankings haven't stopped banks around the world from going under. The rankings and awards are now being questioned.

Also, in its 2009 bank rating reports, Augusto and co, a local rating agency said 10 banks are the biggest in Nigeria.

They are: Zenith Bank, UBA, First Bank, Oceanic Bank, Bank PHB, Access Bank, GTB, Skye Bank and Union Bank. But Fitch ratings had earlier in 2007 ranked Intercontinental Bank as the biggest Bank in the country.

Like others, a local agency, Invest Magazine which is a subsidiary of Eli Business Support Services Limited also followed suit with almost the same set of banks.

Experts are cautioning about ratings without due diligence. For instance they point to high-ranking foreign banks which were well rated before the global financial crisis but later went under.

For instance, Bear Stearns was taken over by JPMorgan Chase; Lehman Brothers by US Government/Barclays Bank; AIG Investment Bank by US Government/Barclays Bank; Washington Mutual by JPMorgan Chase; Merril Lynch by Bank of America; Wachovia taken over by Wells Fargo and HBOS acquired by UK Government/Lloyds TSB. Up to the collapse of these bank they were rated by top international rating agencies.

The new Central Bank Governor Sanusi Lamido Sanusi had also raised such fears during a book launch in Lagos recently.

Mr. Sanusi said: "For instance as at the last count, the banking sub-sector still accounted for about 65% of the capital market capitalization of the Nigerian Stock Exchange (NSE), about 90% of the financial system assets domiciled in the sector, while the private sector credit of about N8.12 trillion as at February 2009, was more than the combined spending by the three tiers of government.

In 2009, the federal and state governments are expected to borrow about N1.6 trillion, the bulk of which will be coming from the banking sector.

The non-deficit amount of the 2009 federal government budget segment is less than the banks' total capital, meaning that, the entire budget cannot bail out or recapitalize the banks in the event of a crisis in the sector. I therefore call on all of us here present, operators and media practitioners to assist in protecting this vital sector."

This exposure that produced toxic assets and stiff competition may be the harbingers for early consolidation in the banking sector, industry watchers say.

But if a bank fails, what would happen? Would the CBN be ready to bail it out? This, though is a nut for the new CBN Governor to crack. However, former CBN Governor Chukwuma Soludo had warned that the apex bank would not bail out any bank in the event of failure.

He said: "You can't do it the way America is doing it. Whatever America do, you still keep your reserves with them. Some people can afford stimulus package, others cannot do it. We leave in an asymmetric world. There are things we cannot afford to do simply because we can't do it."

The USA government had provided about $800 billion stimulus to bail-out its economy because of the current global economic crunch. Japan and few other countries did the same too.

Experts have advised Nigeria to bail-out banks whose exposure to the capital market was put at N784 billion but government says there is no need for that.

But Soludo said the 2009 budget is a kind of stimulus package "unprecedented in history." Nigeria budgeted N3.1 trillion for the 2009 fiscal year.

In the interim, no one can ascertain banks' toxic portfolio and risks as most of them have their books in the lockers. But the consensus is that more banks would still be collapsing into each other until the country's financial sector finds its feet.

Industry watchers say what Mr. Sanusi can do therefore is to move swiftly to unlock these books in order to reassure the public of the health of Nigerian banks.