Heritage Bank: NDIC steps in as liquidator, to establish bridge bank

After denials by the Nigerian Deposit Insurance Corporation (NDIC) of a liquidation process, Nigeria’s Central Bank has taken decisive action by announcing the revocation of Heritage Bank’s banking licence.

This revocation stems from Heritage Bank’s prolonged inability to engage in the requisite banking activities within Nigeria for a continuous period of six months.

The bank has grappled with significant challenges surrounding non-performing loans (NPLs) for an extended period, TechCabal reports.

On social media platforms, numerous commentators expressed astonishment at the delay in revoking Heritage’s licence, considering its notorious reputation for having one of the highest NPL ratios in the banking sector.

Also read: CBN revokes Heritage Bank’s licence over financial instability

Internal documents obtained by TechCabal reveal alarming figures regarding Heritage Bank’s financial state. Approximately 90 per cent of the bank’s active loan portfolio, valued at around N700 billion, was deemed either lost or doubtful as of March 31, 2024. Additionally, the bank’s tier-1 capital, comprising equity, reserves, and accumulated earnings, suffered a deficit exceeding N1 trillion.

Further examination of internal records exposed a dire situation: less than 5 per cent of outstanding loans were performing, while a staggering 90 per cent were classified as irrecoverable. Some of these non-performing loans trace back to 2018, coinciding with the bank’s report of a loan impairment of N37.5 billion in the first half of that year.

Reports suggest that Heritage Bank had been exploring various strategies to address its mounting debt, including aggressive debt recovery measures such as mobilising security resources to confront defaulters at their residences, hiring debt recovery agents, selling pledged properties, and engaging with former staff.

In response to Heritage Bank’s financial collapse, the NDIC has assumed the role of liquidator. NDIC officials will assume control of the bank’s management and commence the process of reimbursing insured deposits, with coverage recently raised from N500,000 to N5 million. An anonymous NDIC official indicated that depositors could access their funds as early as Wednesday.

Regulatory authorities will initiate efforts to find a suitable buyer for Heritage Bank. In the interim, a bridge bank will be established to manage the defunct bank’s assets and liabilities, ensuring uninterrupted access to deposits and banking services for customers, according to TechCabal.