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Why CBN sold Polaris Bank to Strategic Capital Investment Limited.

CBN, Amcon sells Polaris bank for 50billion naira.

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The Central Bank of Nigeria (CBN)and AMCON have announced the completion of the sale of shares in Polaris Bank to Strategic Capital Investment Limited (SCIL).

The CBN confirmed this in a press release on its website on Thursday, October 20, 2002. “The Central Bank of Nigeria (CBN) and the Asset Management Company of Nigeria (AMCON) are pleased to announce the completion of a Share Purchase Agreement (SPA) for the acquisition of 100% of the equity in Polaris Bank (‘Polaris’ or ‘the Bank’) by Strategic Capital Investment Limited (‘SCIL’). “ It announced.

 

From denials to confirmation

The confirmation of the sale of the bank to Strategic Capital Investment Limited is happening after denials by Polaris Bank that a sale was being consummated by the apex bank and AMCON. Just this August, Polaris Bank issued a statement denying any sale and characterizing it as “speculative”.

The apex bank claimed SCIL has paid the upfront of N50 billion and in accepting the terms will repay fully the sum of N1.305 trillion being the consideration bonds injected by the CBN.

Whilst, the bank was sold for N50 billion, the repayment of N1.3 trillion means the bank will have to pay Polaris Bank about N52 billion a year in redeeming the bonds raised by AMCON. For the bank to repay the loans they will have to generate profits in excess of N60 billion.

What the sale means

Whilst, the bank was sold for N50 billion, the repayment of N1.3 trillion means the bank will have to pay Polaris Bank about N52 billion a year in redeeming the bonds raised by AMCON.

  • For the bank to repay the loans they will have to generate profits in excess of N60 billion over the next 25 years or whatever is left of the bank’s tenure.
  • Nairametrics analysis suggests the play by the owners may have to explore an equity raise, sale of assets, issuing more bonds, and from its profits.
  • Another option might be for the owners to go through a merger with a much bigger bank.

Why Polaris was sold.

It would be recalled that Polaris had been operating as a bridge bank since 2018 when the CBN intervened to revoke the licence of the former Skye Bank Plchttps://www.thecable.ng/breaking-cbn-revokes-skye-banks-license/amp and established Polaris Bank to assume its assets and certain liabilities.

As part of the CBN intervention, consideration bonds with a face value of N898bn (future value of N1.31tn) was injected into the bridge bank through AMCON, to be repaid over a 25-year period.

“The bank noted that the 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.

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.”

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