Troubles Mount for Heritage Bank as NDIC Officials Visit Branches Amid Talks of Takeover

The Nigerian Deposit Insurance Corporation (NDIC) had a presence at various Heritage Bank branches on Monday, triggering speculations of a distress resolution takeover. Specific branches like Victoria Island, Allen Avenue, Ilupeju, and Ladiopo had at least twelve NDIC officials in attendance.

During the visit, one NDIC official was seen with a memo mentioning a ‘special assignment,’ although the official declined to provide further details when asked about it.

Sources with knowledge on the matter insinuate that the special assignment relates to distress resolution discussions and a possible takeover of Heritage Bank. Per the Banks and Other Financial Institutions Act (BOFIA), severely under-capitalised banks can be handed over to the deposit insurer by the Central Bank for resolution.

However, while some sources claimed of an imminent takeover, three NDIC officials refuted the claims and insisted that the visit was part of a routine inspection exercise ongoing at all banks.

The financial state of Heritage Bank has been facing public scrutiny for five years, with continuous reports on the erosion of its capital base. In a December 2023 report, it was alleged that the bank failed a stress test, prompting the Central Bank to urge the bank to seek strategic investors to aid its recapitalisation.

As per a financial insider, Heritage Bank currently holds negative shareholder equity of ₦900 billion, indicating a disparity where debts and liabilities outweigh the total asset value.

Despite a directive by the Central Bank in April 2024 for Heritage Bank to disclose its recapitalisation strategies, the bank allegedly made no headway in securing funds from investors to bolster its financial position. Talks to attract investors reportedly hit a snag, following which the bank laid off around 1,000 employees in April 2024, further exacerbating its troubles.

Since June 2023, depositors have encountered challenges accessing their funds at Heritage Bank. These liquidity issues were also highlighted in a 2019 Proshare report, indicating persistent liquidity hurdles faced by the bank.

Founded in 2012, Heritage Bank has struggled since 2018 due to weak corporate governance practices that led to questionable loan decisions. A significant setback came in 2014 when the bank purchased Enterprise Bank for ₦56 billion, a decision that resulted in adverse consequences despite the intended retail footprint expansion.

Following the implementation of the Treasury Single Account in 2015, which reduced public funds available to banks and affected Heritage Bank’s cost of funds, the bank’s deposit base with a relatively small customer network was further impacted.