Lagos-based lender, Unity Bank, appears to have implemented a strategy that has seen it take advantage of the newly introduced private sector-led bad banks arrangement to clean up its books for a renewed push on the Nigerian financial markets, businessamlive has learnt.
The move involved an outright sale of non-performing loans believed to be in the region of N361 billion to one or more institutional asset management companies, other than the well known bad bank, Asset Management Company of Nigeria (AMCON), set up by the Nigerian government a few years ago.
The Central Bank of Nigeria (CBN) not too long ago circulated a draft working paper on plans to open up entry to private asset management companies to perform similar function as AMCON, which would permit them to acquire, manage, restructure and dispose of eligible assets of banks, other financial institutions and banks in-liquidation.
businessamlive understands that discussions were on for months to structure an agreement that would enable this to happen between the bank and an unnamed company for the purchase but it is not clear when the execution of an agreement exactly took place.
Market analysts familiar with these kinds of transactions told businessamlive that they usually involved the seller taking a lot of haircuts and with the private sector coming on the scene, the bargaining was expected to be a harder one.
Unity Bank is repositioning itself to claim some good business in the banking space. It relocated to Lagos, Nigeria’s commercial capital, about two years ago, to redirect its attention to business and commercial transactions away from decades of doing a lot of government business from its legacy days.
Businessamlive learnt that with regards to the transaction, some form of ‘good faith payment’, representing a fraction of the initially agreed sum was made, ahead of the conclusion of the bank’s audit for the 2016 financials earlier this year.
The arrangement put in place was worked in a way that allowed for the reclassification of the carrying amount of the non-performing loans.