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CBN and banks

Merger, acquisition fevers engulf banking sector following CBN’s hint

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Though the current largest bank in the continent by virtue of branch networks, Access Bank, has hurriedly denied any form of talks either with the management or shareholders of Union Bank relating to either merger or acquisition, industry analysts say the recent position of the Central Bank of Nigeria (CBN), has created disquiet in the industry.
Access Bank, one of the five tier-one financial institutions in Nigeria, is known for expanding its operations by acquiring other banks.
Business Hilights recalls that only three months ago, the financial giant completed its merger with Diamond Bank, which started as a rumour in late 2018. Even though it was hurriedly refuted by Access Bank and even defunct Diamond Bank, it became a reality earlier this year.
Access had started it haunt for stressed banks in 2011, when it acquired Intercontinental Bank following liquidity crisis that engulfed the bank under its last chief, Mr Erastus Akingbola who had been standing trial even till this day on charges relating to abuse of public fund.
Access Bank, currently managed by Mr Herbert Wigwe, in a disclosure to the Nigerian Stock Exchange (NSE), denied being in talks with either the Union Bank or its shareholders and noted in a terse statement that “Our attention has been drawn to recent social media report of Access Bank being engaged in talks to acquire Union Bank of Nigeria”.
“The Nigerian Stock Exchange and the general public are hereby advised to discountenance such rumour as same is devoid of truth.
Explaining more, the notice signed by Mr Sunday Ekwochi, company secretary, said “The bank is not engaged in any discussion with Union Bank of Nigeria or any of its shareholders regarding any such transaction”.
Analysts who followed the discountenanced rumour are however, divided saying Access Bank’s new trajectory to move Nigeria and African banking sector to new heights may not be unconnected with possible plan to pick up another bank in the system that had been having veiled issues.
The defunct Diamond Bank started with capital adequacy issue which forced it offload its UK outlet as part of efforts to survive, before Access appeared as a saving grace.
The apex bank governor, Mr Godwin Emefiele, while rolling out his five-year leadership roadmap after taking oath of office for his second tenure as CBN chief, said commercial bank will undergo another round of recapitalization which will be phases.
Emefiele’s argument was very clear considering the observed inability of several banks to pick up deep-pocket financing schemes in the last couple of years.
His key submission was driven by the collapsing value of naira to dollar between 2004 when the last recapitalization exercise took place and now.
In his address while unveiling his agenda for the next five years, he averred that “In the next five years, we intend to pursue a programme of recapitalising the banking industry so as to position Nigerian banks among the top 500 in the world.
“Banks will, therefore, be required to maintain a higher level of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system.
“Recall that it was Governor (Chukwuma) Soludo in 2004 that did the last recapitalisation we had. He moved the capitalisation from N2bn to N25bn. And I must commend those efforts because it resulted in positioning Nigerian banks not only in Africa but among the top banks in the world in terms of capitalisation.
“It also helps to increase the banking industry’s capacity to take on large transactions. And those are some of the things we badly need today.
“So if you relate N25bn with 2004 exchange rate which was about N100 (to a dollar), N25bn was about $250m. Today, if you relate N25bn at N360 (to a dollar) you will see that it is substantially lower than $75m.
Continuing, CBN Governor added that “So what we are trying to say is that the recapitalisation has weakened and there is a need for us to say it is time to recapitalise the banks again.
“It’s a policy thrust which would be discussed at the committee of governors’ meeting and of course, the framework for the recapitalisation of Nigerian banks would be unfolded for the whole world in due course.”

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