ERHC Partner Enjoys Year Of Growth

First Atlantic Bank PLC, the Nigerian partner that owns nearly 10 percent of ERHC, enjoyed a record year of growth and profits thanks to a successful lawsuit against the company, the Nigerian daily newspaper Vanguard reported today.

The bank won 60 million shares in a lawsuit from ERHC chairman Sir Emeka Offor in November 2004. The shares, valued at $0.41 at the time they were transferred by Offor's Chrome Oil Services, have increased more than 25 percent in value since then, a potential profit of $6,600,000 at today's $0.525 closing price.

First Atlantic reported a 108 percent rise in non-interest income.

The bank cannot sell the restricted shares for a year under the terms of the transfer. It has not yet filed a change of ownership statement with the Securities Exchange Commission, although it won the shares as a pre-trial settlement of proceedings in in Houston federal court.

The Vanguard reported:

First Atlantic Bank consolidates on its financial gains, grows gross income
By Omoh Gabriel, Business Editor
Monday, January 24, 2005

FIRST Atlantic Bank Plc in the 2004 financial year consolidated its gains and grew its gross income to N4.145 billion from the previous N2.830 billion in 2003. This represents a 46.4 per cent growth. As a result, net income rose to N3.097 billion in 2004 from N2.181billion in 2003, an increase of 12.2 per cent. The bank thus in 2005 saw a number of its other financial indicators moved up following a better performance in the financial year 2004. The bank’s operations were boosted by non interest income which expanded by 108.2 per cent far and above that of 2003. With an almost all round improvement in revenue lines, the bank retained its triple digit growth in gross revenue, a position it attained in 2000 financial year.

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Encroachment on earnings also came from loan loss provisioning, which rose to N430.6 million in 2004 from N363.0 million in 2003. The rise was, however, 18.6 per cent but constrained income and as a result reduced profit.

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Profit margin up

The bank’s profit before taxation which rose from N601 million in 2002 to N609 million in 2003 further rose to N821.0 million in 2004. This represents 34.8 per cent increase in profitability.

The bank’s operating expenses to total revenue rose from 54. per cent in 2002 to 55.5 per cent in 2003. This further rose to 61.1 per cent in 2004. The increase in overhead cost ate deep into the bank’s revenue and had a toll on profit. Also, loan loss provisioning increased at higher figure than the previous year’s. This also impacted negatively on profit. However, the rise in cost elements during the year led to a decrease in the rates of return in the year. Return on total assets which declined from 3.4 per cent in 2002 to 2.9 per cent in 2003 and further to 2.7 per cent in 2004. Return on equity which increased from 12.4 per cent in 2002 to 16 per cen in 2003 further improved as it rose to 19 per cent in 2004. The increase in return on equity was as a result of the growth in capital stock which responded faster than pre-tax profit.

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Strong liquidity

The bank’s liquidity improved at the end of the year. The bank’s liquidity, which stood at 70.5 per cent in 2002, rose to 76.2 per cent at the end of 2003. However this declined to 71.0 per cent in 2004. The bank during the year complied with the CBN minimum liquidity ratio of 40 per cent. During the year demand deposit accounted for 56.2 per cent of the bank’s total deposit liabilities. Time deposit accounted for 34.1 per cent while Savings was merely 8.4 per cent of total deposit.

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Management/Board

The bank has nine members on its board of directors. Six of the board member including the chairman, Mr. O’tega Emerchor, are non-executive, while the managing director, Mr. Okey Nwosu, and two others are executive members of the board, thus meeting the regulatory authorities corporate governance which stipulates that non executive directors should at least be one person more than the executive directors. In the bank, 59 shareholders hold 66.62 per cent of the bank’s share while the others hold 28.1 per cent. The bank’s shares are listed on the Nigeria Stock Exchange.

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First Atlantic Bank Plc has been strongly repositioned. With the policy of consolidation, the bank is going into the merger talks with some substance to negotiate with.

The bank's failure to register the shares with the Securities Exchange Commission continues to worry investors, who fear a selloff if the block awards expected soon are not seen as likely to improve ERHC's share price. It is uncertain whether the SEC's runs at all in the case of a Nigerian company, but the shares, to be traded. most be free of restrictions placed upon them by their Registrar in the transfer process.