The News Chronicles can confirm that First Bank has received full repayment of an N456 billion loan extended to Heritage Bank. This recovery represents a portion of a bailout loan secured under the governorship of Godwin Emefiele, the previous governor of the Central Bank of Nigeria (CBN).
First Bank insiders claim that the CBN credited the tier-one bank before deciding to remove Heritage Bank’s license, saving First Bank from potentially suffering a hefty impairment penalty.
The CBN declared on Monday that Heritage firm’s license had been revoked, citing the firm’s eventual failure as a result of “the bank has continued to suffer and has no reasonable prospects of recovery.”
Information about the Payment
According to verified data from Nairametrics, First Bank received N456 billion, ending a seven-year period during which it had assisted Heritage Bank in meeting its debts.
According to First Bank’s financial documents, as of the first quarter that ended in March 2024, the bank had accounts with other banks totaling N688 billion, down from N735 billion in December 2023. These accounts consist of clearing balances from other banks that accept deposits.
Push for Recovery
Recoveries of the N456 billion debt became more urgent as Heritage Bank’s circumstances deteriorated over time. But until a new board and management assumed control of the bank’s parent company earlier this year, a resolution was not reached.
The seven-year wait was eventually over when the money was credited to First Bank before Heritage Bank’s license revocation was formally announced.
This payment is anticipated to strengthen FBN Holdings’ cash holdings and keep the bank from having to write down the loans in its half-year financial statements. In the first quarter of 2024, FBN Holdings announced a pre-tax profit of N358.8 billion accompanied with a N227.4 billion impairment provision.
Heritage Bank’s Economic Downturn
The problems at Heritage Bank started in 2019 when it was in serious turmoil and looked like it was about to fail. The CBN under Godwin Emefiele supported Heritage Bank in some ways as part of its goal of not letting banks fail.Â
The CBN approved First Bank’s plan to support Heritage Bank’s clearing duties. In Nigerian banks, clearing is the process of resolving financial transactions between banks and guaranteeing accurate money transfers between accounts. The integrity and effectiveness of the banking system depend on this procedure.
Financial Manoeuvre Using Strategy
The effective loan recovery represents a major financial play for First Bank and is the result of prompt regulatory intervention as well as prudent financial management to preserve stability in Nigeria’s banking industry. The 2021 audited financial statement states that as of December 2021, Heritage Bank has an N230.8 billion negative reserve.Â
The bank was technically insolvent since it had only N53.9 billion in share capital and N459.3 billion in total losses. According to Heritage Bank, as of 2021, its balance owed to Nigerian banks was N247 billion. First Bank was the only bank that owed the money at the time, according to the bank. Cumulative interests are likely included in the N456 billion that First Bank received.
Things To Note
Citing the bank’s ongoing financial instability and regulatory violations, the CBN immediately terminated Heritage Bank Plc’s banking license. The CBN revealed in a news release on Monday that regulatory action was required because Heritage Bank has not complied with Section 12 (1) of BOFIA 2020.
Heritage Bank has not been able to strengthen its financial position despite the CBN imposing several regulatory measures to counteract the bank’s deteriorating financial performance.
The CBN has to cancel the bank’s license because of its persistent underperformance, which seriously jeopardizes the stability of the financial system. After the CBN revoked Heritage Bank Plc’s banking license, the Nigeria Deposit Insurance Corporation (NDIC) began the bank’s liquidation.
Depositors are safeguarded, the Corporation said, since the NDIC is now confirming that bank customers may get payments of up to N5 million, contingent on their deposits.
In other events, the CBN refuted reports claiming that, in response to its recent regulatory action against Heritage Bank Plc, it intended to suspend the licenses of three other banks. Rumors of more moves against other banks surfaced soon after the CBN intervened in the regulatory affairs of Heritage Bank Plc. The public has been reassured by the CBN, nevertheless, that the Nigerian financial system is still strong and resilient.
