It is no longer news that our banks will need to make provisions against losses from margin and downstream oil sector loans. ETI set the ball rolling by releasing a very disappointing full year result. This was followed by FBN writing off N26 billion to everyone’s surprise. However, not many were surprised when Oceanic bank set a record by writing off N42 billion in one swoop.
Since then Zenith, Oceanic and UBA have released their quarterly results and all 3 have written off billions. I expect all the other banks to follow suit with write offs in their quarterly announcements. I am glad the banks have decided to come clean after being helped along by the new CBN governor. As an insider the Governor was very aware of the extent of the problem at least in FBN.
While i welcome the write offs so that we can move forward, i believe the management of the banks need to show some accountability. It is not just enough to write off billions and pretend all is well. We as shareholders need to know what management has put in place to avoid a future recurrence of almost complete breakdown in risk management. We need to know whether the key parties in the debacle have been sanctioned appropriately. As a minimum no one should get a performance bonus after such disastrous results. For many years bank executives have been handsomely compensated on the back of good results. Now that the tide has changed we expect to see some restraint on executive compensation.
I therefore call on all shareholders to attend the Annual General Meeting and voice their concerns. We need to see some remorse from management for such wealth destruction. We also need to hear what they are doing to avoid recurrence. Hopefully the end of the era of praise singing at AGM’s is in sight.
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3 comments:
I totally agree with you! These bank chiefs are so unrepentant, making provisions for bad loans just like that without showing remorse. They are doing it by force! You know, i have a feeling that if Yaradua had retained Soludo, or made someone outside the banking system the new CBN governor, these bank chiefs would still have somehow stubbornly clung to their old ways of secrecy and undisclosure. Believe me, if not for a personality like Lamido Sanusi, who is acutely aware of the rot in the system, shareholders would still be groping in the dark...
i notice a few suggestions in ur write up, but the part about forfeiting the performance bonus - i don't buy that. if that punishment is only mete out to the directors/those that directly granted the margin loans-fine. but for it to be across board, extending it to a diligent marketing officer/lower cadre officer who met all his/her target is totally misplaced and counter-productive on the long run.
so i submit it must be differential.
On the performance bonus definitely the big boys i.e. CEO, Exec directors and General Managers have no business getting a bonus for such a disaster. Lower level staff as u suggested could be rewarded based on their individual performance. However, even then it should reflect the overall poor performance of the bank i.e. it should be modest.
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