AMCON brings down losses by 70% to N700bn - jetlinking

Nigeria’s state-owned bad bank, the Asset Management Corporation (AMCON), may report up to N700 billion ($4.3 billion) in losses for its 2012 audited results, down from N2.37 trillion ($15 billion) it reported in 2011. The results, according to documents seen by BusinessDay, are awaiting the Central Bank of Nigeria’s (CBN) ratification.

The reported loss, which is less than the loss for 2011, is a sign that AMCON may be in the early stages of breaking even as the prices of assets it acquired come off their depressed values.

“The N2.37 trillion in losses for 2011 came as neither a shock nor surprise,” said Mustapha Chike-Obi, managing director of AMCON, in an interview at a euro money conference on capital market development held in Lagos, yesterday. “We have a sinking fund to address this.”

AMCON recently increased the amount Nigerian banks need to contribute to its sinking fund to 0.5 percent of total assets this year, from 0.3 percent.

AMCON activities are broken down to two broad areas of (1) acquisition of non-performing loans (NPL), “where it is not losing money”, and (2) its bank recapitalisation efforts, “where it is losing some money”, according to Chike-Obi.

The bad bank, set up in 2010 after a debt crisis that threatened the collapse of the country’s banking industry, spent N5.6 trillion ($35.2 billion) in 2011 to stabilise the financial industry.

AMCON acquired NPLs worth an estimated N3.3 trillion and injected capital of N1.566 trillion into five banks. It also acquired three bridge banks for N765 billion.

The banking sector has recovered sharply after the banking crisis, with strong earnings drawing investors back to Nigerian shares following the correction in the stock market that wiped 60 percent off their value in 2008.

The NSE Banking Index, which tracks Nigeria’s 10 biggest banks by market value, has gained 7.4 percent year to date after a loss of 32 percent in 2011. The main NSE all-share index is up 31.7 percent this year.

Fifteen commercial banks that released half-year results reported a 17 percent increase in net income for the period, as the cumulative after-tax profits of the banks grew to N285.01 billion in the first half of 2013.

Nigeria, with a population of around 165 million, also has the largest banking sector in SSA (excluding South Africa) with total assets of around $136 billion as of December 2012.

The AMCON chief executive said it also expects to conclude the privatisation of the three banks it nationalised after the crisis by mid-2014.

“We must make sure that the public interest is satisfied, and that the banks are sold in a transparent process. Investors must know what they are buying. We also have regulators to satisfy such as the CBN, Nigerian Stock Exchange (NSE), and SEC, before we conclude the sale,” he said.

AMCON also plans to retire about a third of its $35 billion of bonds and refinance the rest by 2014. Under the arrangement, the CBN will invest in a N3.6 trillion ($22 billion) bond that AMCON will issue in December to refinance the bank’s “entire exposure” at an interest rate of about 6 percent over a 10-year period, making the central bank the sole creditor to AMCON.

“There will be no external holder of AMCON bonds after 2014,” Chike-Obi said.