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Rumour Of CBN Planning To Revoke Unity Bank Licence Scares Investors

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Unity Bank

There was a massive dumping of Unity Bank Plc shares at the stock exchange on Tuesday and this was fuelled by a rumour that the Central Bank of Nigeria (CBN) was planning to revoke the operating licence of the lender.

In 2018, the central bank revoked the licence of Skye Bank Plc and nationalised it to Polaris Bank and when this action was taken, some observers said Unity Bank should have also suffered this fate because its fundamentals were shaky too.

According to investigations by Business Post, shareholders of the defunct Skye Bank are yet to be compensated despite assurances that they will get something from their investment in the bank.

Fears of not falling into the same boat as shareholders of Skye Bank may have spurred those in Unity Bank to offload their stakes in the company yesterday at the Nigerian Stock Exchange (NSE).

An analysis of the day’s trading showed that shares of the company witnessed an unusual activity on Tuesday as shareholders quickly dumped the stocks, causing it to depreciate by 3.57 per cent or 2 kobo to trade at 54 kobo per unit.

It was observed that a total of 977,176 units of the stocks were traded during the session, in contrast to the previous day’s 3,203 units.

A while ago, it was reported by BusinessLive that the CBN was considering seizing the licence of the bank because it has failed to meet regulatory benchmarks four years after a major plunge in its finances.

Quoting sources which have not been independently verified by Business Post,the platform claimed the regulator was worried about the poor performance of the bank and may wield the big stick on the lender led by Mrs Oluwatomi Somefun so as to safeguard depositors’ funds.

“If the CBN makes good its plans, and it can secure the consent of President Mohammadu Buhari, the bank would be handed over to the Asset Management Corporation of Nigeria (AMCON) and a bridge bank would be formally created in consultation with the Nigerian Deposit Insurance Corporation (NDIC) to assume the ownership of the assets, all deposit liabilities and some other liabilities of the bank,” one of the sources was quoted as saying.

Recall that in its 2019 financial statements, the auditors of Unity Bank, KPMG, warned that, “A material uncertainty exists that may cast significant doubt about the bank’s ability to continue as a going concern.”

This red flag was raised because the auditors drew attention to “Note 35 of the financial statements, which indicates that as at 31 December 2019, the bank’s total liabilities exceeded its total assets by N279 billion the bank did not meet the required minimum Capital Adequacy Ratio (CAR) of 10 per cent for a national bank.”

Business Post observed that in the 2019 accounting year, the total assets of Unity Bank stood at N293.1 billion, while its total liabilities stood at 571.9 billion, which is a major trouble.

This means that if Unity Bank stops operating, the total value of its assets is not enough to pay back its liabilities, including customer deposits of N257.7 billion, borrowings of N183.3 billion, liabilities due to other banks valued at N108.2 billion and others.

It was said that this development is making the CBN to ponder revoking the licence of the bank to avert an impending calamity.

However, according to reports, the CBN is under a huge pressure not to seize the licence of Unity Bank because of influential people on its board, including its chairman, Mr Aminu Babangida, son of former Nigerian military president, General Ibrahim Babangida and Ms Oluwafunsho Abiodun Obasanjo, daughter of former President Olusegun Obasanjo.

How the central bank will go about this issue remains cloudy to observers and this might be the reason for the offloading of the company’s shares by investors.

In November 2018, the board of Unity Bank said it was in discussions with prospective investors, who are interested in putting their money into the bank with a view to recapitalising it.

The board said this then after earlier in the year, its widely-reported proposed deal with a US-based private equity company, Milost Global, for a possible injection of $1 billion into the bank, did not materialise.

Source: Business Post

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