CBN Designates Eight Banks ‘Too Big to Fail

The Nigerian Financial regulator,Central Bank of Nigeria (CBN) has designated the followqing banks as too big to fail.They are;
- First Bank of Nigeria Limited
- Guaranty Trust Bank Plc (GTBank)
-  Zenith BankPlc
-  United Bank for Africa Plc (UBA)
-  Access Bank Plc,
-  Skye Bank Plc
-  Ecobank Nigeria
-  Diamond Bank Plc

This is owing to the fact that their failure could pose a systemic risk to
the banking industry and the larger economy.
The eight banks alone account for 75 per cent of the banking
sector in terms of earnings, profitability assets, customer
deposits and branch networks.
Owing to their size and importance, THISDAY learnt that the CBN
has adopted a more robust regulatory regime to monitor and
scrutinise the eight banks, in order to ensure that they are
healthy.
In furtherance of the objective, the central bank has asked the
eight banks to increase their capital base in order to give them a
buffer against internal and exogenous shocks.
The Deputy Governor (Operations), CBN, Mr. Tunde Lemo, who
confirmed the development, described the financial institutions
as systemically important because of their size.
Lemo pointed out that any bank that accounts for five per cent of
the banking system is systemically important.
“What that means is that we have to take a closer look at them. It
doesn’t mean that they are weak, it is just that we have to focus
more attention on them because, God forbid, if something
happens to any of them, it may affect the entire system,” Lemo
said.
When quizzed on the capital base that the respective banks are
expected to have, the CBN deputy governor said: “It is not that
they were asked to raise their capital base, it is just that when an
institution is designated as systemically important, it is required
to have more capital.”
For Zenith Bank, its recently released results for nine months
ending September 30, 2013 showed that its profit after tax stood
at N64 billion with loans and advances of N1.1 trillion. The bank
also reported gross earnings of N255 billion at the end of
September 2013, up by 11 per cent from the N229 billion
recorded in the corresponding period in 2012.
Zenith Bank’s total market capitalisation on the Nigerian Stock
Exchange (NSE) stood at N675.024 billion yesterday.
Also, GTBank’s profit after tax stood at N69.24 billion at the end
of September 2013, as against N63.734 billion earned in the
same period in 2012. GTBank’s total assets also stood at N1.875
trillion, compared to the N1.73 trillion as at December 2012. Its
share price on the NSE closed at N25.99 per share yesterday,
giving it a market capitalisation of N764.916 billion.
In the same vein, UBA’s unaudited results for the nine months
ending September 30, 2013 also revealed that its profit after tax
climbed to N37.37 billion. With a market capitalisation of
N257.255 billion on the NSE, its share price closed at N7.80 per
share.
For Access Bank, its recently released unaudited nine-month
results showed gross earnings of N154 billion at the end of
September 2013. Its profit before tax also stood at N35 billion.
Access Bank’s market capitalisation on the NSE was N213.269
billion yesterday, while its shares closed at N9.32 per share.
Skye Bank Plc’s gross earnings rose to N102 billion at the end of
September 2013, while its profit after tax stood at N11.650
billion.
Diamond Bank also posted a profit before tax of N25.6 billion,
while its total assets stood at N1.377 trillion at the end of
September 2013.
First Bank of Nigeria Limited is yet to release its third quarter
results because of its holding company structure.