Exclusive: NDIC assumes control of Heritage Bank as the CBN cancels the struggling lender’s license

Exclusive: NDIC assumes control of Heritage Bank as the CBN cancels the struggling lender’s license.

In the midst of growing speculation about a distressed resolution takeover, the Nigerian Deposit Insurance Corporation (NDIC) paid visits to multiple Heritage Bank branches on Monday morning. TechCabal located a minimum of twelve NDIC representatives at the bank’s Victoria Island, Allen Avenue, Ilupeju, and Ladiopo branches.

According to a memo, one of the branch office officials was placed on “special assignment.” The official declined to offer any information or to comment on the message.

A minimum of two individuals possessing firsthand knowledge of the circumstances asserted that the special assignment is associated with a resolution of distress and an acquisition of Heritage Bank. The Central Bank must hand over seriously or severely undercapitalized banks to the deposit insurer for distress resolution under the terms of the Banks and Other Financial Institutions Act (BOFIA).

An inquiry for comments was not immediately answered by a representative of Heritage Bank. Any discussion of a takeover, according to three NDIC officials, is untrue, and the visit today is merely a “routine exercise” that all banks participate in.

A spokesperson for the Central Bank was unavailable for comments at the time of this report.

Since Heritage Bank’s high level of debt became known to the public five years ago, the bank’s declining capital basis has received extensive media attention. The Central Bank requested that Heritage Bank look for strategic investors to help with its recapitalization after a Nigerian publication in December 2023 reported that the bank had failed a stress test.

One source with knowledge of the bank’s accounts claims that it has ₦900 billion in negative shareholder equity, which is a measure of how much a company’s liabilities and debts exceed the value of all of its assets.

Despite a deadline of April 2024 to communicate its recapitalisation plans to the Central Bank, Heritage Bank failed to make any progress in talks to raise money from investors, one person privy to those conversations said.

The bank fired off 1,000 workers in April 2024 as those negotiations came to a standstill, and clients started having trouble accessing their deposits. In June 2023, TechCabal first reported those issues.

According to a 2019 Proshare study illustrating its liquidity problems, “the bank’s regular recourse to the CBN’s short-term borrowing window highlights persistent liquidity resolution issues.”

Founded in 2012, the problems at Heritage Bank started in 2018 as a result of years of poor corporate governance and dubious lending decisions. It completed the foolish acquisition of Enterprise Bank in 2014 for ₦56 billion, with the intention of growing its retail presence. That wager was unsuccessful.

ollowing the implementation of the Treasury Single Account in 2015, there were reductions in the quantity of public funds held in banks, an increase in Heritage’s cost of funds, and a decrease in deposits for a bank with a tiny client base.

This is an evolving narrative. Further reporting will be updated.

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