CBN may cancel Bank PHB-Spring Bank deal

IF the authorities embrace the advice of the Minister of State for Finance, Mr Remi Babalola, Bank PHB may wave a final bye to its troublesome acquisition of Spring Bank.

The Central Bank of Nigeria (CBN) is believed to be thinking of nullifying the 2008 deal.

The basis for the nullification is the report submitted by Babalola, following President Umaru Musa Yar’Adua’s directive. The President was said to have received many petitions from aggrieved shareholders of Spring Bank on the takeover, which many have defined as "hostile".

There were earlier indications in Istanbul, Turkey last week that the CBN was thinking of nullifying the takeover when CBN Governor Sanusi Lamido Sanusi maintained that some of the aggrieved shareholders would be accommodated in the new scheme of things at Spring Bank.

But Sanusi did not say anything about the Babalola report, which a Presidency source described as indicting.

Sanusi said that from a practical view, "what will seem to be a most reasonable thing to do is seen in what manner some accommodation can be reached with the aggrieved shareholders and in what manner their interest can be taken into consideration in any kind of arrangement that Spring Bank gets into in the future. This is the only way I see this happening; otherwise, it’s going to be very difficult," he said.

Among the six reasons given by the report for condemning the acquisition is failure to execute post-merger adjustment, which is fundamental to the determination of the ownership structure of Spring Bank Plc, before any other interests or purported sale of shares in the bank.

The Babalola report also alluded to the joint CBN/NDIC Investigation Team, which it said should have been implemented on the position of the shares purportedly acquired under an explicit breach of banking practices by some of the then directors of Legacy Guardian Express Bank.

The Minister’s report examined the recommendations and directives made by the Attorney-General and Minister of Justice on August 25, last year, but which the CBN ignored.

Babalola, a senior banking executive before joining the government in 2007, stated that the conduct of the interim management board of Spring Bank headed by Suleiman Ndanusa was not in good faith, professionally and impartially and that the CBN acted without due regard for the law in the conduct of its statutory responsibilities, despite the recommendations of the Attorney-General and Minister of Justice.

It indicted the Securities and Exchange Commission (SEC) for what it termed as tampering with the subject matter of the substantive suits before the courts and contravening the principle of lis pendis.

Babalola drew the President’s attention particularly to two suits: Abdul Wahab Muhammed & three others Vs Bank PHB plc, Spring Bank plc, CBN and SEC and Lord Chief Udensi Ifegwu and Emmanuel Okorie Vs Bank PHB plc & six others. These two suits, the report maintained, render any administrative decision subjudice at that stage and until their conclusion (or withdrawal), it will be difficult to resolve the various issues at stake.

SEC, according to the report, acted beyond its scope of responsibilities in the approval of the sale of shares of Springbank plc to Bank PHB Plc and Westcom Technologies. It urged the President to ensure that the directives of August 25, last year, made by the Attorney-General and Minister of Justice are fully implemented.

It also recommended that the Ministries of Finance and Justice should convene a meeting of the CBN, SEC, Nigeria Deposit Insurance Corporation (NDIC) and the principal parties involved in the PMA exercise to resolve all the outstanding issues within three months from the date of the meeting.

Besides, said the report, the CBN should invoke its powers under Sections 33, 36, 37, 38 and 39 of Banks and Other Financial Institutions Act (BOFIA) should the PMA not be concluded within the said three months.

Incidentally, CBN then under Prof Chukwuma Soludo ignored the recommendations, the source disclosed - a situation which angered Yar’Adua, who then reportedly refused former Bank PHB MD Francis Atuche’s entreaties in the weeks leading to his sack by Sanusi. The Yar’Adua family owns substantial interest in Bank PHB.