Guardian

Nationalising the banks is one thing, rebranding is another, Financial analysts and stakeholders, who took a look at the rebranding issue, told BUKKY OLAJIDE and SULAIMON SALAU that the exercise was paradoxical given the raison d’etre for the financial institution’s take over.

WITH over 600 branches to rebrand, financial experts and stakeholders have called to question the need to rebrand at all.

The three new nationalised bank; namely Afribank, Spring Bank and Bank PHB were nationalised and their names got changed.

With Afribank’s over 222 branches, Bank PHB’s 230 branches and Spring bank’s over 200 branches, experts estimated that the rebranding of almost 700 branches as well as their letter headed papers and others things that needed to be changed may have cost billions of naira.

According to The Guardian findings, the cost implication on the new banks is quite unprecedented by the time all the necessary changes in documents and logistics are made.

The Guardian investigations showed that nothing less than N3.2 billion would be expended on change of logistics by the nationalized banks.

With total branches of about 700 across the country, the banks would need to change things like their documents starting from letter headed papers to cheques, drafts and vouchers among others. Others things that would be affected by the change of name include stamps running into thousands pieces, seals, signboards, bronches, branded envelopes. These are far from other painting expenses that are associated with the change in colour and logo of the banks, as it would necessitate re-painting of the banking halls, re-branding of cars, motorcycles for dispatch.

A sketched estimate of the expenses indicated that stamps alone would gulp about N28 million across about 700 branches of the three banks, seals would cost at least N21 million, letter headed papers, N70 million, Bronches and other corporate tags, N42 million, branded envelops, N21 million while signboards would gulp about N1.4 billion.

Besides, the re-painting of branches for 700 estimated branches alongside re-branding of cars and dispatch motorcycles would cost N700 million, N700 million and N42 million respectively.

All these estimates are excluding the cost of printing new cheques, bank drafts and vouchers, which equally run into another billions of naira. These are expected to be printed by the security printing companies, and The Guardian could not obtain their estimate.

Going by these estimates, it could be deduced that the so called nationalisation of the banks, coming with new brand names is another major burden on the banks and means a lot of unscheduled expenditure to the banks. This is, however, a colossal loss to the financial sector, caused by the decision of the CBN.

It is obvious that the cost of rebranding would be borne by the rescued banks but from which source. Do rescued banks have money? Probably no is the answer. So where will they get money to rebrand?

A banking expert who pleaded anonymity told The Guardian that the rebranding money will come from the same source – intervention money pumped in by the government.

“It is a colossal waste,’’ said Ade Oladele, a financial analyst. According to him, the banks should have been allowed to maintain their status quo in terms of names instead of spending so much to rebrand. After all, everybody knows that ownerships have been changed’’, he said.

On a visit to some of these branches, some carry the new logo while majority still carry the old logo. Some of the signboards have, however, been stripped of their former logos and are therefore bare.

Looking at the issue from the legal angle, a legal practitioner, Eze Onyekpere said if there is any particular contract or parts of any contract which becomes impossible or unlawful for the new banks to perform as contemplated in the original contract, the banks are under obligation to notify the other party of the circumstances leading to the frustration of contract so that they can mutually agree and take measures to vary the contract.

Speaking to The Guardian, a financial expert, who preferred anonymity, said that nationalising the banks may be good but changing their names is what he does not understand.

His words: “It is common knowledge that these three banks have been struggling for some time. Even the 2009 bail out did not mean anything.

But then the regulators went ahead to revoke their licences before the expiration date and changed their names.

“The change of names and the redesigning of sign boards as well as logos would have cost the banks billions of naira, in a situation where fund paucity was given as excuse for their respective prostate profiles,’’ he said.

“Ahead of the September 30 deadline given rescued banks to recapitalise, the regulators of the banking industry ordered the revocation of licences of Afribank, Spring and Bank PHB for failing to measure up to regulators expectations since their management teams were named in August 2009.

“Definitely, the cost implication of setting up the bridge banks that took over the assets and liabilities of the three nationalised banks is enormous. Aside the billions of bail-out funds, the bridge banks have to change virtually everything to reflect the new status of the nationalised banks. Already new board and management staffs have been hired, there will be change of identities including logo, crest, letter-head papers, signages, billboards, as well as other promotional stuffs.

“The bridge banks will also have to develop and run new radio, television and print media adverts. Media and Public Relations  consultants  will have to be hired to do this. As we approach the end of the year, contracts for calendars, diaries and other promotional materials meant to appease old customers and attract new ones will also be awarded. All these are at a great cost to the new banks. The bridge banks will also have to be enlisted on the Stock Exchange.  Am not sure they can continue to trade under the names of the nationalised banks. This will also be at a cost.

“I suspect the new board and management may also want to hire auditors to take a second look at the books of the nationalised banks so that they know exactly the status of the accounts, assets and liabilities of the rested banks they took over from. This will also be at a cost. Thus, there are a lot of cost implications to the setting up and nurturing of the bridge banks. Whether these new banks can afford inevitable cost is another thing altogether. They may have to do many things in phases, according to priorities. The most important thing, however, is for the new managements and boards to strive to restore the investors’ confidence and satisfy their depositors, both old and new.”

The revocation of the licences of the three banks comes two years after CBN injected $2.55 billion into the banking sector.

Announcing the revocation, Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), Ibrahim Umar, said the assets and liabilities of the three banks have been immediately taken over by bridge banks, as part of efforts to ensure that the banks continue to operate under new identities.

MainStreet Bank Limited has been licensed to take over Afribank Nigeria Plc, Keystone Bank Limited has assumed the assets and liabilities of Bank PHB while Enterprise Bank Limited, will run Spring Bank Plc. The three bridge banks acquired the assets and liabilities through the purchase and assumption model.

The three banks were among the 10 that failed the CBN stress test conducted in June 2009, while banks like,  Wema and Unity Banks have resolved their difficulties  and new core investors have emerged for Intercontinental Bank, Oceanic Bank International, and Union Bank.