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Crisis Hit Heritage Bank As CBN Announces New Capital Base



Heritage Bank

The liquidity shortfall crisis that has bedeviled Heritage Bank for years is set to hit it’s crescendo with the new capital base requirements for banks announced by the Central Bank of Nigeria (CBN) on Thursday, March 28, reports Lukmon Akintola.

Panic is the order of the day at Heritage Bank, as industry stakeholders have concluded that the deposit bank is set to be either merged, sold or have it’s licence downgraded by Nigeria’s apex financial institution.

This follows new minimum capital base requirements announced by the CBN for banks in the country.

In a statement by the apex bank, the CBN raised the minimum capital base for commercial banks with international authorisation by 900 per cent to N500 billion from N50 billion, while commercial banks with national authorisation is now 200 Billion, representing 700 per cent increase from N25 billion.

For commercial banks with regional authorization, the new capital base requirement has been raised to N50 billion, representing 400 per cent increase from N10 billion.

Acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali who confirmed the new capital base requirements said the new minimum capital for merchant banks would be N50 Billion, while the new requirements for non-interest banks with national and regional authorisations are N20 Billion and N10 Billion, respectively.

A circular signed by the Director, Financial Policy and Regulation Department, Mr. Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks emphasized that all banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026

The banks are also required to submit an implementation plan clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved no later than April 30, 2024.

While several industry stakeholders have termed the new requirements an uphill task for even the most buoyant financial institutions, as the top five banks in Nigeria namely Access Bank, FirstBank, GTBank, UBA and Zenith Bank are believed to have a shortfall of N1.5trn, it is a case of a nail in the coffin for Heritage Bank whose continuos search for investors has been a futility.

Prior to now, Heritage Bank has been on the brink of a crisis, with the deposit bank struggling to render services to its depositors.

Depositors have severally recounted how they had gone to the bank to make withdrawals, but were told that they were out of cash. The bank has also been trailed by a mobile application crisis with several customers complaining that it is a norm to find the bank’s application out of order. Some customers have even alleged a deliberate effort to ensure the application named “Octopus” does not work due to a shortfall in funds to facilitate such transactions.

Amidst all of these is the major problem getting fresh funds injected into the bank. Since the retirement of Ifie Sekibo, the founding Managing Director and Chief Executive Officer (MD/CEO) of the bank, Heritage Bank has struggled to attract investors.

A financial sector stakeholder who spoke on the condition of anonymity noted that Heritage Bank’s biggest problem is it’s high indebtedness. He added that the bank has loans or debt obligations to fulfill and this is weighing down.

According to him, “The bank needs an injection of funds. If you inject N600 billion into the opera­tions of the bank today, it will not be enough. How many investors will be ready to pump close to a trillion naira into the bank.

“The bank is highly indebted and no serious investor will want to do business with an ailing bank,” he concluded.

Indeed, another source at the bank who spoke in confidence with, noted that there have been prospective investors who were interested in injecting new funds into the bank, however, they all retract their interest after check­ing the books.

Heritage Bank has no doubt been suffering as a business. In the fourth quarter of 2023, the company incurred a pre-tax loss of $10.0 million on the sale of investment securities.

With the option of injecting fresh equity capital looking out of place for Heritage Bank, a Mergers and Acquisitions (M&As) or downgrade of license authorisation appears the only option for this once promising financial institution.

CBN said all banks are required to submit an implementation plan (clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved with their timelines) no later than April 30, 2024.


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