Distress Signal in Selected Commercial Banks: Trend Analysis of Published Financial Statements

Abstract

The distress in the nation's financial system is a major concern to the government, legislative bodies, the banking industry and the general populace. Problems in the banking sector getting to an unprecedented magnitudes. Banks no longer have the prestige, responsibility, confidence and credence which previously endeared them to the public. Most banks, being financially distressed, are unable to meet adequately their functional obligations in recent times.Consequently, the then Finance Minister, Anthony Ani (1995) in his First quarterly economic review at Abuja, stated that there were about 47 distressed banks in the Country, some of which must be put into immediate liquidation.According to Agada (1995), the Central Bank of Nigeria (CBN) acquired six distressed banks at one naira each, as legal considerations for the purchase. The Banks in the historic transaction include: National Bank of Nigeria Limited, Pan African Bank Plc, African Continental Bank Plc, Co-operative and Commerce Bank Plc, Mercantile and New Nigerian Banks Plc. According to the report these banks were acquired when various redemption attempt, including cash injection and formation of interim Management Boards (IMB) by the CBN failed to turn the banks around. Therefore, the orchestrated acquisition of the six failed banks at N6 only is an evidence that the problem bank's liabilities far outweigh their assets, in which case they operate at negative assets and anybody acquiring them is doing so at a high loss.