Heritage Bank customers worry about deposits as NDIC steps in

…over 2,000 bankers enter job market as lender goes down

Customers of the failed Heritage Bank Plc on Monday thronged its branches in worry over their deposits as the lender became the first to collapse after tough capital requirement measures were introduced by the Central Bank of Nigeria (CBN) two months ago.

The Nigeria Deposit Insurance Corporation (NDIC) said it has commenced payment of deposit insurance coverage claims amounting to a maximum of N5 million to depositors.

The CBN on Monday revoked the licence of Heritage Bank Plc with immediate effect following breaches of banking legislation.

The management “have not been able to improve the bank’s financial performance, a situation which constitutes a threat to financial stability,” it said in an emailed statement.

The NDIC also told staff of the bank on Monday that they should expect salaries for the month of June only.

In the last three months, Heritage bank’s payment platform has been shut down. A prominent Nigerian church, Winners Chapel, claims to hold N11 billion with the bank.

One Heritage Bank customer who spoke to BusinessDay lamented how the incident hindered her market activities on Monday.

“I rushed down here first thing in the morning to know the situation of things because I have a huge amount saved in my account, but we were not allowed into the banking hall,” the distraught customer said. She said that she has been unable to withdraw for the past weeks from the bank.

“For over a week, I’ve been trying to withdraw all the money I have with Heritage Bank, I was only able to withdraw N10,000 over the counter as it’s the maximum they offer, their ATMs haven’t been dispensing, and neither is their USSD,” she said.

Likewise, another customer complained of his inability to withdraw money via Automated Teller Machines.

“They have been having issues before now. The bank app isn’t working, the USSD code is also not functioning. If not, I could have removed my money before this issue,” another customer at the Bank’s head office said.

Heritage bank has struggled with non-performing loans over the years.

An internal document released on Monday revealed that at least 90 percent of the bank’s active loan portfolio of around N700 billion was considered lost or doubtful as of March 31, 2024. The bank’s tier-1 capital comprising equity, reserves, and accumulated earnings was in the deficit of over N1 trillion.

Internal documents showed that less than 5 percent of outstanding loans were performing, with 90 percent classified as lost. Some of those loans date back to 2018 when the bank reported loan impairment of N37.5 billion in the first half of 2018.

Depositors of the bank that have alternate accounts within the industry will be paid up to the insured amount of N5 million per depositor using their Bank Verification Number (BVN) to locate their alternate account. While depositors with funds in excess of N5 million will be paid liquidation dividend upon realisation of the bank’s assets and recovery of debts owed to the bank.

The NDIC recently raised maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions in line with its established laws and also to factor current realities especially inflation, and exchange rates among others.

Commenting on the revocation, Uche Uwaleke, special adviser to the chairman Senate committee on banking, insurance and other financial institutions, said “I think the revocation of the licence of Heritage Bank by the CBN is a step in the right direction. This proactive step by the CBN is in the overall interest of financial system stability.”

“With the NDIC taking over the liquidation process, efforts should be made to protect the Depositors as well as interests of employees using liquidation dividends,” Uwaleke said.

“The maximum deposit insurance coverage for Deposit Money Banks (DMBs) was raised to N5 million from N500,000, which would provide full coverage of 98 98 percent of the total depositors compared with the current cover of 89.20 percent.