SEC axe Nationalized banks

By Agency Reporter

The recent decision by the Security and Exchange Commission to suspended trading on the shares of Afribank , Spring Bank and Bank PHB , following the nationalization of the three lenders and the subsequent delisting of these banks have left many investors funds down the drain. The Nigeria Stock Exchange said it became necessary following their nationalization by the Central Bank of Nigeria (CBN).

Investors’ funds totaling N29.68 billion went down the drain, as the Nigerian Stock Exchange, NSE, delisted the shares of the three nationalized banks — Afribank Nigeria Plc, Spring Bank Plc and Bank PHB Plc. According to a notice by NSE to operators in the capital market, it became necessary following their nationalization by the Central Bank of Nigeria, CBN. As a consequence of the nationalization and delisting, shareholders’ funds in the banks were effectively eroded.

As at the last day of trading on the shares of the banks, Afribank had a total issued shares of 13.56 billion which was sold at N0.64 per share, Spring Bank Plc, with an issued share of 11.32 billion went for N0.84 per share while Bank PHB Plc, with an issued share of 20.15 billion was being sold at N0.57. Put together, the total capitalization or investment value of the banks stood at N29.68 billion.

On the delisting, a financial analyst, Mr. Opeyemi Agbaje, Managing Director, Resource and Trust Company Limited, said: “The most important consequence of all these is that ordinary investors have lost money in those banks, thus further eroding confidence in governance and regulation of our capital market and financial system.” He said:“Given that the licenses of the three banks had been revoked, and their franchises transferred to government-owned institutions, they clearly could not continue as quoted/listed companies on NSE.”

In a statement, Mr. Wole Tokede, Head, Corporate Communications, NSE, said the suspension was the first step towards their delisting from the Daily Official List, adding that the delisting became necessary since the banks no longer exist, following the revocation of their licenses by CBN. He, however, assured the investing public that NSE will continue its efforts at protecting investors in the capital market. “The more substantive issue is the propriety or otherwise of their liquidation and transfer to Enterprise, Keystone and Mainstream Banks by CBN/NDIC and AMCON. I believe that substantive action is open to legal challenge, as these actions were effected while judicial proceedings were pending, and before the regulator-announced deadlines.”

The CBN, had earlier withdrew the banking licenses of Afribank Plc, Spring Bank Plc and Bank PHB Plc, saying that the three rescued banks did not show the necessary capacity and ability to beat the September 30 recapitalization deadline. This led to a swift intervention by the Nigerian Deposit Insurance Corporation (NDIC), with the creation of three bridge banks — Enterprise Bank Limited, Keystone Bank Limited and Mainstream Bank Limited, to acquire all assets and liabilities of Spring Bank, Bank PHB and Afribank, respectively

The NSE had on August 8, 2011, immediately after the nationalization of the banks, announced the suspension of trading on the shares of the three banks. This was in response to an earlier directive by the Securities and Exchange Commission, SEC, that the shares of the banks be placed on full suspension to prevent a dumping of the shares.

According to a statement announcing the suspension of trading, Mr. Wole Tokede, Head, Corporate Communications, NSE, said the suspension is the first step towards their delisting from the Daily Official List, adding that the delisting becomes necessary since the banks no longer exist, following the revocation of their licenses by the CBN. He, however, assured the investing public that the NSE will continue its efforts at protecting investors in the capital market.