Access Bank Plc and Ecobank Nigeria Plc, two leading banks that respectively acquired Intercontinental Bank Plc and Oceanic Bank International Plc have discovered contingent liabilities of about N24 billion apiece on the books of the legacy banks that they took over and would have to be written down.
Consequently, Access Bank and Ecobank are said to have brought this to the Asset Management Company of Nigeria as a result of the discovery of additional non-performing loans (NPLs) which did not show up during their due diligence of the banks, pre-acquisition.
Having acquired Intercontinental and Oceanic banks, both Access and Ecobank undertook a post-acquisition audit which showed that there were additional non-performing loans that have to be written down and sold to AMCON.
Confirming this development over the weekend, a source in Access Bank said they have brought the issue of the N24 billion hole to the attention of AMCON and that both the Central Bank of Nigeria and AMCON were aware of the development.
He said AMCON has committed in principle to take over the legacy non-performing loans discovered on the books of Intercontinental Bank.
When asked if the NPLs have impacted the capital adequacy ratio of the enlarged Access Bank, he said, "No, this has not and will not impact it because AMCON, before the recapitalisation of the troubled banks, had committed to bringing their negative assets value to zero, so any further discovery of non-performing loans will be treated likewise by AMCON."
He added that owing to Access Bank's profitability and its current capital adequacy ratio of about 22 per cent, it has the capacity to absorb any write downs.
On the issue of if AMCON decides to issue new bonds to absorb the N24 billion NPLs assumed by Access Bank on whether this will affect the bank's shareholding structure, he said it will not.
He explained that the shareholders of the old Access Bank had only gone into the business combination with Intercontinental Bank on the condition that AMCON would bring its negative capital to zero, so if there are further discoveries for instance, of this N24 billion, AMCON would have to absorb it.
Officials of Ecobank neither confirmed nor denied the story when contacted at the weekend, but a source said it is not unlikely that the bank was in discussions with AMCON over additional NPLs discovered on the books of the legacy Oceanic Bank.
One official said since the transaction was handled by the bank's parent company, Ecobank Transnational, the resolution of the issue with AMCON was likely to be championed by ETI, and not Ecobank Nigeria.
THISDAY investigation of the four banks which took over the banks, in which the CBN intervened in 2009, further showed that Access Bank and Ecobank might not be the only banks that have made discoveries of additional contingent liabilities that would have to be written down.
It is suspected that First Monument Bank Plc and Sterling Bank Plc may have made similar discoveries as Access and Ecobank.