87% of bank frauds in 2011 occurred in top 10 banks, says NDIC

The banking industry lost N4.07bn to frauds and forgeries in 2011 .
The top ten banks in Nigeria reported frauds and forgeries in over two thousand cases in 2011, the Nigerian Deposit Insurance Corporation, NDIC, said, in its 2011 Annual Report & Statement of Accounts released in Abuja on Thursday.

The number of cases reported by the top 10 banks is 87.1 per cent of the total  2, 352 that occurred within the banking industry in 2011, the Corporation said. The report shows an increase of 53.5 per cent in the total number of fraudulent cases reported in 2011 compared to 2010 when 1,532 cases were reported

The  total cases in 2011 involved the sum of N28.4 billion and caused a loss of about N4.071 billion to the industry. Though the value of fraud and forgeries in 2011 was lower than in 2010 (N21.29 billion), the expected loss was higher in 2010 (11.68 billion).

The report shows that the largest number of the reported cases were through the Automated Teller Machine, ATM, transactions, fraudulent transfers/withdrawals through insider facilitation,  internet banking, and suppression of customer deposits.

Details of the nature of the frauds show that ATM-related frauds topped with 738 reported cases, followed by fraudulent transfers/withdrawal of deposit (331 cases), presentation of forged cheques (280 cases) and outright theft (240 cases).

Other cases include suppression of customer deposit, 219; fraudulent conversion of cheques, 123; non-dispensing of money, but registered by electronic journal, 112; and internet fraud, 108.

The Managing Director/Chief Executive Officer of NDIC, Umaru Ibrahim, said most of the 195  Microfinance Banks, MFBs, that took the routine examination during the year, violated the basic principles of corporate governance as well as gross disregard for recommendations made in previous examination reports.

To sanitize the microfinance sub-sector, Mr. Ibrahim said,  about 55 directors, staff and related parties of 19 closed MFBs who were found to be responsible for the collapse of their banks in 2011 were prosecuted, while the cumulative recovery for the banks in liquidation since 1994 rose from about N21.756 billion in 2010 to about N22.236 billion during the year.

According to the report, the operating environment of the country’s banking sector witnessed improvements in asset quality, liquidity and capitalization of banks following the injection of fresh capital after their non-performing loans were taken over by the Asset Management Corporation of Nigeria, AMCON.

Consequently, the report said the shareholders’ funds of the banking industry increased by 696.18 per cent from N312.36 billion in 2010 to N2,486.95 billion in 2011, though it noted the slow recovery of the capital market, with the all-share index further depreciating from 24,770.52 at the beginning of the year to about 20,763.26 at the end.

The report noted the key macro-economic indicators as well as some specific indicators for the banking industry, pointing out that total asset for the industry recorded an increase of 17.31 per cent from N18.66 trillion in December 2010 to N21.89 trillion in December 2011.

Similarly, the report showed that total deposits within the banking industry also grew by 13.78 per cent from N10.84 trillion in 2010 to N12.33 trillion in 2011, adding that the tight monetary stance of the Central Bank of Nigeria, CBN, impacted on  total loans and leases, with marginal increase of 2.04 per cent from N7.17 trillion in 2010 to N7.31 trillion in 2011.

On earnings and profitability, the report showed that total operating income of the industry stood at N2.33 trillion in 2011, representing an increase of 7.90 per cent over the N2.16 trillion reported in 2010, while total operating expenses increased from N932.53 billion in December 2010 to N1.79 trillion in December 2011.

First Bank topped the insured banks’ shareholders’ fund with N318.78 billion as at December 31, 2011, followed by Zenith bank’s N296.04 billion; Access bank’s N187.79 billion; Guaranty Trust bank’s N173.99 billion; United Bank for Africa’s N141.68 billion, and First City Monument Bank’s N130.34 billion as well as Fidelity bank’s N104.88 billion.

Though the industry recorded total loss of about N6.71 billion for the year as against a profit of N607.34 billion recorded in the previous year,  losses reported in nine banks resulted in the negative Return on Assets as well as Return on Equity, which affected the overall industry performance.


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