Shareholders of tier-1 banks on Monday expressed their concerns over the surge in payments by banks to the Asset Management Corporation of Nigeria (AMCON) in the first six months (H1) of 2024. This is coming after Daily Sun analysis of some tier-1 banks revealed that payments to the corporation rose to N206.12 billion.

AMCON, established in 2010 to manage non-performing loans in the banking sector following the 2008 financial crisis, levies contributions from banks to fund its operations and settle outstanding obligations.

A cursory look at FBN Holdings financial 2024 Half Year (H1) results, showed that levy paid to AMCON stood at N77.26 billion from N62.12 billion recorded in the same period of 2023, representing a 24.2% increase. For GTCO, payments to AMCON stood at N36.66 billion from N27.43 billion, representing a 33.6% while levy from Zenith Bank to the corporation stood at N92.20 billion from N4.67 billion recorded in 2023, hence, resulting in a total of N206.12 billion as against N94.22 billion recorded in the corresponding period of 2023.

For the likes of Access Holdings and United Bank for Africa (UBA), the duo had informed the Nigerian Exchange Limited (NGX) that it will delay the submission of their results. Owing to the complexities of the post-completion audit of the banking group?s recently acquired sub-subsidiaries, Access Holdings got approval from the exchange. UBA on the other hand, revealed that the delay for filing its 2024 audited half-year financial statements was due to the ongoing review and approval process by the Central Bank of Nigeria (CBN).

The increase in payments signifies a growing financial burden on banks, impacting their profitability and potentially reducing dividends available to shareholders. As a result, stakeholders are worried about how these rising costs could affect banks? overall financial health and ability to reinvest in their operations.

Tier-1 banks, which are among the largest and most stable in the country, are expected to meet these obligations. However, the growing AMCON levies have led to concerns that this could limit their capital for expansion, operational efficiencies, and shareholder returns.

The National Coordinator, Progressive Shareholders Association of Nigeria, Boniface Okezie, noted that investors? primary worry is that these mandatory payments are eating into the banks? profitability and reducing the potential returns on their investments.

Okezie argued that AMCON has largely achieved its initial purpose of rescuing distressed banks and managing bad debts, hence there is no longer a need for such significant contributions. According to him, these funds could instead be reinvested into the banks? operations or distributed to shareholders as dividends.

?I think AMCON has outlived its purposefulness and needs to stop existing because they are not helping the growth of the banks. You can imagine that staggering amount, N206 billion over N94 billion recorded in 2023, that is like very huge money and I am sure next year it will increase?, Okezie said.

Furthermore, he said that shareholders feel that the payments are an unfair burden on well-performing banks, especially given that the majority of the toxic assets handled by AMCON were not created by the banks currently contributing to the fund. There has to be a critical review of the structure and necessity of these contributions, either there has to be a reduction or complete halt of these payments?, Okezie stated.

AMCON, on the other hand, has defended the continued need for the sinking fund, citing ongoing efforts to recover bad debts and maintain stability in the banking sector. The corporation argues that the banking system remains exposed to certain risks, and discontinuing the contributions prematurely could undermine financial stability.

This development highlights the delicate balance between regulatory obligations and maintaining profitability in a challenging economic environment. (Daily Sun)

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