AMCON Losses widen in 2015 on Asset write-downs

Nigeria's "bad bank" AMCON on Thursday posted a 2015 loss of 304.35 billion naira ($982 mln), wider than last year's loss of 275.49 billion naira, after it wrote-down the value of collateral recovered from its purchase of bad loans, Reuters reports.

Executive Director Aminu Ismail said the 2015 loss was also partly due to interest paid on a 3.8 trillion naira ($12.3 bln) bond due to the central bank which it used to acquire the bad loans.

Asset Management Corporation of Nigeria (AMCON) was set up in 2010 to absorb bad loans as part of resolving a financial crisis in Africa's biggest economy. Ismail said 1.26 trillion naira in non-performing loans (NPLs) out of a total of 3.7 trillion naira had been settled.

Ismail said NPL ratios jumped to 93 percent of its total bad loans in 2015, up from 57 percent a year earlier, as the weak economy impacted debt repayment.

On the banking side, NPLs had started building up again. Nigeria's main rating agency, Agusto & Co, expects NPLs to jump to 12.5 percent of total loans this year, up from the central bank's target level of 5 percent at the end of last year.

Ismail said AMCON stopped buying NPLs two years ago and was now focused on recoveries to enable it to wind-down its activity by 2023, when its debt to the central bank matures. He said the decision to acquire NPLs would be that of the government and the central bank.

The central bank shored up mid-tier lender Skye Bank SKYEBAN.LG this month with a loan and replaced its management after its capital fell below levels required by regulators and it has been urging people not to panic about the banking system.

But pressure is building, with loan books - nearly half of them in dollars - hammered by a shrinking economy, a plunging currency and acute foreign exchange shortages in Africa's biggest oil producing nation following the slump in oil prices.

Ismail said AMCON had received interest from buyers looking to acquire nationalised lender Keystone Bank after rival Sterling Bank dropped out. He said the corporation will make an announcement on the sale process within 4-weeks.

myfinancialintelligence.com