Is Heritage Bank At The Risk Of Collapse?

Heritage Bank

This is not the best of times for banks and especially Heritage Bank. If all the media reports about the bank is true, then the CBN might be taking over the management of Heritage Bank any time soon.

Last week, Hadiza Bala Usman, the new boss at the Nigerian Ports Authority, NPA was reported to have uncovered an alledged concealment of funds belong to the NPA to the tune of NGN11.2 billion. The said amount were in foreign currency and Heritage Bank is said to be in custody of about USD24.1 million of the total amount.

Unconfirmed reports claimed Heritage Bank’s management were reluctant to release the funds because the bank might collapse should in case such funds leaves its system. On top of this, the CBN has just being reported to have banned nine banks from the Forex market and Heritage Bank is on the list.

Media reports claimed that the said banks failed to remit USD2.3 billion belonging to the National Petroluem Corporations, NNPC. Amongst the list the bank is said to be holding on to at least USD85 million. The sum of alleged NPA and NNPC funds means that the bank is in custody of USD209 million that is about NGN69 billion which is more than double the amount the required capital base to set up a bank.

As at 2015 year end, Heritage Bank had in its treasury NGN312 billion in net deposits. The bank’s total assets which includes fixed assets and loans given out to borrowers was NGN483.4 billion. Should NPA and CBN pull out the funds, the bank will be insolvent and will need to raise its capital base to stay afloat.

However, the bank might already be seeing the signs. Last month, Heritage Bank Investment Services Limited, the majority shareholder in the bank signed a term sheet to guarantee a USD150 million Convertible Bond with the African Export Import Bank, Afreximbank to used for the growth of the bank. This funds might be needed now than ever.

No matter how small and regional it appears, the bank is key to the system. Heritage Bank has all the customers of Enterprise Bank after it bought over from AMCON. Many of these customers might be the ones getting the shorter end of the rope.

Heritage Bank might not bring a financial apocalypse should it go under, however, it is still a systemic risk to the banking sector. The financial system is currently stressed and cannot afford to have another collapsed bank at this time of economic recession.

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