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JUNE 11, 2007 VOL. 21, NO. 9

Running on Faulty Springs

Mike Chukwu, MD, Spring Bank

As the board of Spring Bank Plc polarise along ethnic lines, shareholders seek the apex bank’s intervention
By Udo Onyeka
Aptly described in many quarters as a convergence of cultures from the Eastern and Western parts of the country, Spring Bank Plc emerged forth from the merger of six banks operating in the country before the consolidation era, namely ACB International Bank, Citizens Bank Plc and Guardian Express Bank from the east and Omega Bank Plc, Fountain Trust Bank Plc and Trans International Bank Plc, from the west. Surprisingly to critics who hold the opinion that the marriage was that of strange bedfellows, the bank achieved a seamless integration within a record time. Perhaps, the fear not to fail together with the determination to put to shame all those that predicted that the group could not be able to work together fired their zeal.
Spring Bank since Decembers 31, 2005 when the first phase of the consolidation exercise was concluded had moved on, holding its own as one of the banks to watch in the post-consolidation dispensation.
But suddenly, the reverse seems to be the case now, and it is as if the relationship among the board members has begun to wax cold. The centre seem not to firmly hold any longer as things have started falling apart, mainly due to a clash of interest among the owners of the six banks.
The situation is so bad that today in Spring Bank things are no longer the same, especially since the board members representing the six banks that came together to form the bank discovered that their former banks did not present their true financial standing.
At the time of the merger, the banks claimed to have varying shareholder’s funds and consolidated assets ranging from: TIB, N2.83 billion, ACB, N0.42 billion, Guardian Express, N9.58 billion, Omega, N9.53 billion, Citizens, N7.60 billion.
The Source gathered that based on the above figures, positions were allotted. While Omega got the chairmanship of the board position (Reverend Canon Segun Agbetuyi), two Executive Directors and two non-Executive Directors, Guardian Express got MD/CEO position (Mike Chukwu), four directors two Executives and two non-Executives Directors, TIB, one non Executive, Citizens got the position of vice chairman, two Executive Directors and one non-Executive Director and ACB one non-Executive Director.
Lending credence to fears that some banks cooked reports to enable them scale through the consolidation hurdle, a recent report of the Central Bank of Nigeria (CBN) audit inquiry into the operations of banks operating in the country revealed that all the banks in the Spring Bank group – except ACB – had given false reports about their state of financial health before the merger.
The Source was told that Citizens Bank had allegedly used depositions’ funds to purchase its IPO shares, and allotted shares to customers even without notifying them before doing so.
On its own, Omega Bank, it was said, had its shareholding discounted to pay for its huge debt portfolio, leaving it in deficit. However the promoters of the banks are still contesting the figures. Guardian Express on its part had reportedly lent money to its directors to purchase shares, obviously in flagrant disregard of CBN’s directives.
According to a source, Spring Bank may as well be far short of the N25 billion capital base required for banks operating in Nigeria.
The Source was equally told that the lack of confidence and disagreement among the board members culminated in the suspension of the chairman of the bank,. Agbetuyi and three other non-Executive Directors of the bank by the CBN over their unserviced loans running into billions of naira.
A source close to the bank intimated The Source that all along the board members were aware of the debt status of the directors that were suspended by the CBN, but because the board was united, they were able to cover themselves from the apex bank’s preying eyes. “It was when disagreement set in that the these four directors were exposed," the source said.
Surprisingly, instead of saluting the efforts of the CBN for calling to order the directors who were qurried for not servicing adequately their huge loans, the development sparked off a crisis in the bank, with the crisis been given ethnic colouration. Incidentally, all the four directors affected by the CBN order are Yorubas. This drew the ire of a section of the bank staffers and even among the board members, as they promptly petitioned the CBN, claming an ethnic plan aimed at getting rid of the Yorubas by the Mike Chukwu-led managements.
In terming the CBN order ethnic, a shareholder who spoke to The Source contended that the four persons affected were not the only board members that are indebted to the bank.
For instance, the source said that Cosmas Maduka, chairman of Coscharis Group, is owing the bank to the tune of about five billion naira. “This is one example there are so many others, then why single out a few from a particular area – that is a scheme to remove them from the board,” the source said.
The Source was also told by an insider that because of the CBN order, the affected directors began to pay back their loans. "When they began to service their loans there was no need for the order to continue. If you recall, the CBN gave them time pending when they would be suspended if they did not respond appropriately. I think they began to pay some of what they owe,” the source added.
However, concerning Maduka, the source said, “though he is owing, but as a good businessman he is always servicing his account. His debt has never been dormant.”
Even then, it was gathered that Spring Bank inherited a lot of unserviced loans running into billions of naira, and thus in line with the CBN's order to bank chiefs, the Chukwu-led management has been up and active in making sure that all debtors were made to repay all the loans they took.
For instance, the bank has appointed Osagay and Co as a reciever for City Mall, Shopping Complex, Onikan over a default in the servicing of a N1.1billion loan given to Janah Moukarim, the chairman of Mouka Foam and owner of the shopping mall.
The Source gathered that the bank took the decision as a last resort, after all efforts to obtain the repayment of the loan which Moukarim took from Omega Bank, one of the banks that make up the Spring Group, proved abortive.
Apart from the polarisation of the board and staffers of the bank along ethnic divides, The Source was told by a group of the bank’s Shareholders, which called itself concerned Shareholders" that “if nothing is done now and quickly by the regulatory agencies such as the Central Bank of Nigeria and the Securities and Exchange Commission (SEC), Spring Bank may hardly meet the expectations of its investors". Said the group: "Already, we are not happy with the performance of the bank which we believe could be better if the management of the bank do what they ought to do.”
The group through their spokes- man, Ganiyu Adedeji, also said “while other banks are giving their shareholders good worth as return on their investment, the board of Spring Bank are pre-occupied with fighting one another." He said that it was, therefore, not surprising why the share price of the bank is still at the lower rug of the ladder “when other banks shares are appreciating Spring Bank shares seem to be stagnated.”