Looming merger, acquisition in banking sector to wipe off ageing banks
As the planned recapitalization of banks earlier signalled by the Central Bank of Nigeria (CBN) gathers momentum, fears have gripped two sets of banks in Nigeria.
First are banks that are old with massive branch networks and highly respected by majority of Nigerian retirees. These set of banks failed to join others during the technology race in the last 10 years and accordingly, they will not be in the merger market as deep pocket banks, but possible ‘good wife materials’. Examples with held to avoid trouble.
The second are banks that rushed into technology without credible professional guidance which had made them look confused in what they actually want as a banking institution. Such banks will be in the merger market as desperate suitors looking for banks that have clear view of their digital future. Also, examples with held to avoid trouble.
However, experts say such banks can cause issues capable of frustrating their principle to the extent of regretting the merger in the first instance.
Already, analysts have started advancing all manners of theories. Some equate the merger speculations between Zenith Bank and Union Bank to the comments of Archie, Jenny Jason who said, ‘It is not the big that eats the small but the fast that eats the slow’.
Jason further argued in his postulation that “Failure to embrace innovation and change with the changing times spells doom for any organization. Nothing like too big to fail or fall again if you are far from technological innovation.”
Still on Union Bank, observers say ‘the old war horse is tired, totally out of strength and needs to die at its ripe old age’.
They also aver that the horse’s reliability and big size may not be relevant in the face oif technology driven financial services after all.
Aside Zenith and Union, industry pundits argue that First Bank Plc may have opened merger talks with some other Nigerian and foreign banks ahead of the banking industry recapitalisation plan of the Central Bank of Nigeria.
The bank said similar to other Nigerian banks, it would continue to scan sub-Saharan Africa in general for potential acquisitions.
The FBN Holding Plc in a statement obtained from the Nigerian Stock Exchange explained that in line with Rule 17.10 of the Rulebook of the Exchange 2015, recent events in the banking industry had thrown up merger and acquisition opportunities for banks.
In a statement signed by the Company Secretary, Seye Kosoko, the group averred that it was therefore not unexpected that analysts would continue to share viewpoints about the evolution or potential consolidation in the Nigerian banking industry.
It said, “There will always be speculations on FirstBank’s involvement on account of its size, liquidity, systemic importance and historic support in backstopping the industry.
“Inorganic growth remains a strategic consideration for all financial institutions, but from First Bank’s perspective, will only be considered when it is value-accretive to shareholders and other key stakeholders.
“Similar to other Nigerian banks, First Bank continues to scan sub-Saharan Africa in general for potential acquisitions.
“FBN Holdings Plc is mindful of its responsibilities as a premium board-listed company and will make appropriate disclosures should it find such value.”
The bank was said to have started making moves to merge with Heritage Bank and Polaris Bank.
Business Hilights recalls that the CBN Governor, Mr Godwin Emefiele, had in June last year during the unveiling of his agenda said that the recapitalisation of banks had become imperative as their current capital could no longer finance large transactions.
He had said that the drop in the value of the naira to the dollar had weakened the capital of banks, hence need for banks to start thinking of stronger capital base in the near future from 2020.