CBN, AMCON Sells Polaris Bank For N50bn, New Core Investor Agrees To Liquidate N1.305tr Bonds

The Central Bank of Nigeria (CBN) and Asset Management Company of Nigeria (AMCON), on Thursday said Strategic Capital Investment Limited (SCIL), as new core investor, has acquired 100% equity stake in Polaris Bank Limited at an upfront consideration of N50bn.

Announcing the completion of a Share Purchase Agreement (SPA) for the acquisition, the statement by Osita Nwasinobi, Director, Corporate Communication at the CBN said the sale brings to an end four years of Polaris being operated as a bridge bank.

The statement recalled that “as part of the CBN intervention, consideration bonds with a face value of N898bn (future value of N1.305tr) was injected into the bridge bank through AMCON, to be repaid over a 25-year period. These actions were taken to prevent the imminent collapse of the bank, enable its stabilisation and recovery, protect depositors’ fund, prevent job losses and preserve systemic financial stability.”

He said the new core investor, Nwasinobi said, accepted the terms of the agreement, including the full repayment of N1.305tr, being the consideration bonds injected, noting that the CBN has “received an immediate return for the value it has created in Polaris Bank during the stabilisation period, as well as ensuring that all funds originally provided to support the intervention are recovered.”

The sale, he continued, was coordinated by a Divestment Committee (the ‘Committee’) comprising representatives of the CBN and AMCON, and advised by legal and financial consultants.

The committee, he stressed, “conducted a sale process by ‘private treaty’, as provided in Section 34(5) of the AMCON Act to avoid negative speculations, retain value and preserve financial system stability. In the process, parties who had formally expressed an interest in acquiring Polaris Bank, subsequent to the CBN intervention in 2018, were invited to submit financial and technical proposals.

“Invitations to submit proposals were sent to 25 pre-qualified interested parties, out of which three parties eventually submitted final purchase proposals following technical evaluation. All submissions were subject to a rigorous transaction process from which SCIL emerged as the preferred bidder having presented the most comprehensive technical/financial purchase proposal as well as the highest rated growth plans for Polaris Bank.”

The statement quoted CBN Governor, Godwin Emefiele, as saying the eventual sale after being blocked by the House of Representatives recently, “marks the completion of a landmark intervention in a strategic institution in the Nigerian banking sector by the CBN and AMCON.

He commended the efforts of the outgoing board and management “for their vital role since the bridge bank was established; in stabilising the Bank’s operations, its balance sheet and implementing strong governance structures to address the issues that led to the intervention.

“This process has provided the CBN with an unprecedented opportunity to recover its intervention funds in full and promote financial stability and inclusive growth. We wish SCIL well as they implement growth plans to build the bank from the strong foundations that have been established,” he added.

Polaris Bank in its audited financials for the year ended December 2020 reported a Profit Before Tax (PBT) of N28.9bn, up by a marginal 4% year-on-year growth, when compared to the 2020 full-year number, driven by what the management called “the combination of the significant reduction in interest expense due to the bank’s pursuit of low interest-bearing deposits as well as lowering impairment charges on loans and other financial assets.”

As of that date, Polaris Bank’s total assets stood at N1.18tr, 3% better than the previous year’s, while Shareholders Funds improved by a better N14bn, or 17%, largely attributed to internally generated profits.

Also, customer deposits rose by N56bn, which were predominantly low-cost deposits in spite of difficult economic and industry conditions, just as gross loan book by N38bn, reflecting the bank’s modest and prudent risk strategy to grow its Portfolio of Quality loans for optimal interest income generation.