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Cameroon: Ecobank rids itself of irksome UBC bank

By Omer Mbadi
Posted on Thursday, 22 April 2021 13:52

Ecobank branch in Yaoundé, Cameroon. 17:48] Freelance ICONOGRAPHY © Adrienne Surprenant/Bloomberg/Getty

By refusing to recapitalise its subsidiary UBC, which it has been trying to get rid of for a decade, the pan-African group Ecobank has forced Cameroon to bail it out. However, Ecobank will have to pay an exit fee.

Union Bank of Cameroon (UBC) and National Financial Credit Bank (NFC Bank) came close to disaster. Under increasing pressure as the 28 February deadline approached, after which the Commission Bancaire de l’Afrique Centrale (Cobac) threatened to put the two banks into liquidation, the Cameroonian state finally intervened.

On 18 February, Cameroon’s President Paul Biya agreed to take charge of their restructuring, to the tune of 17.681bn CFA francs (€26.9m) for the first and 29.126bn CFA francs (€44.4m) for the second.

It is a pattern seen before; Yaounde in similar fashion with the Commercial Bank of Cameroon (CBC), removing CEO Yves Michel Fotso.

A “lame duck”

With the help of a recapitalisation followed by a reduction in the share capital that put the shareholders to one side, the state took control of the bank, cleaned up its balance sheet and, among other things, sold a portion of the compromised but recoverable debts to the Société de Recouvrement des Créances (SRC) at a substantial discount. While the Cameroonian state reworks the bank, it will prepare its withdrawal by selling all or part of its shares so that it can exit in five years.