Monday, 15 September 2014

AMCON Posts N625bn Loss, Begins Divestment

The Assets Management Corporation of Nigeria (AMCON), last weekend, released its financial statement for the year ended December 2013, posting a loss after tax of N627.59 billion, lower than N702.39 billion loss which it recorded for 2012 financial year.
The total assets of the bad bank which was established in 2010 to buy the bad debts of banks, stood at N2.536 trillion, 5.9 per cent lower than N2.629 trillion which it was at the end of its 2012 financial year, while total liabilities grew by 1.5 per cent from N5.936 trillion to N6.023 trillion.
AMCON in 2013 recorded a net fee and commission income of N16.25 billion, a 15.9 per cent improvement over N14.02 billion which it made in the 2012 financial year.
Commenting on the financials, the executive director, Finance and Operations, AMCON, Mrs Mofoluke Dosunmu, explained that the bad bank is yet to get to the stage of recording profitability.
“If you look at the track record of resolution vehicles across the world, the turnaround time is around 10 to 15 years and so it will take some time for AMCON to start making profits,” she stated.

This was also corroborated by analysts at the Financial Derivatives Company Limited who noted that the economic gain of the bad bank is more paramount than the losses it is currently recording. In the company’s Economic Bulletin released over the weekend, the analysts stated that although the loss recorded by the AMCON is “more than the 2013 fiscal budgets of seven states in Nigeria, these numbers becloud the economic reality of economic success.
“While the financial loss was N625.88 billion, the good news is that, the economic profit and the social benefits were approximately ten times higher. The question asked is “why and how do economists compute and measure profit differently from accountants?” This is because economic definitions are wider in dimension and concept,” the analysts said.
On the other hand, Afrinvest (West Africa) Ltd had, last week, raised alarm that the acquisition the AMCON’s debt by the Central Bank of Nigeria (CBN) threatens banks in case of another banking crisis. According to the managing director and chief executive of the company, Ike Chioke, over 40 per cent of CBN’s asset portfolio is unmarketable, comprising principally of the AMCON bonds, intervention funds and development finance loans.
Speaking at the launch of the 2014 Nigerian Banking Sector Report, Chioke explained that these were long term investments without a discernable exit time frame other than the eventual performance of the loan portfolio. He furthered that the 190.5 per cent surge in other liabilities from N2.1 trillion in December 2009 to N6.1 trillion in November 2013, traceable to the acquisition of the AMCON’s debt by the CBN, is alarming.
“In the event of another crisis in the banking space, the CBN may not have the capacity to bail out the banks without avoiding the option of printing money, which will have significant consequences on price stability,” Chioke said.
Meanwhile, the bad bank, which announced Heritage Bank’s investment arm as the preferred bidder for the sale of Enterprise Bank and Fidelity Bank as the reserve bidder, said it will begin to divest its investments from next month.
The AMCON is already pulling out of some banks having sold its shareholding in Ecobank Transnational to Quatar National Bank (QNB).
It has also divested from Union Bank.
Source: Leadership

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