In line with the hope of the Central Bank of Nigeria to prune the number of Nigerians banks, indications have emerged that the bid to acquire some rescued and health banks in the wake of the CBN reform may lead to the emergence of 12 mega banks before the end of 2010. Ayo Olesin reports
Local and foreign investors are targeting a handful of healthy banks apart from rescued banks, as preliminary activities leading up to another round of consolidation in the banking sector are being ramped up, our correspondent’s investigations reveal.
Industry insiders say that if most of the deals being proposed fall through, the number of big banks in the country may drop to between 10 and 12 by the end of year down from 24 at present.
Investigations reveal that banks being targeted for acquisition include Union Bank, Oceanic Bank, BankPHB, Fidelity Bank, Diamond Bank, Skye Bank and Sterling Bank.
Already, two high-profile multinational consulting firms have been commissioned to do due diligence on at least six banks including two that were recently rescued from collapse by the Central Bank of Nigeria with emergency cash infusion and wide-ranging guarantees of financial instruments.
Some of the banks in the acquisition race include First Rand and Standard Bank of South Africa; First Bank of Nigeria Plc, First City Monument Bank and Access Bank Plc.
Our correspondent reliably learnt that South Africa’s second largest bank, First Rand, has commissioned due diligence studies on Fidelity Bank, Diamond Bank and Sterling Bank to guide its decision in making an offer.
It had earlier registered its interest in Nigeria’s financial sector assets with the Central Bank of Nigeria late last year with a view to determining whether or not to buy up one of the rescued banks.
The banks rescued by the CBN with a total capital injection of N620bn are Afribank, Finbank, Intercontinental Bank, Oceanic Bank, Union Bank, Bank PHB, Spring Bank, Equatorial Trust Bank, Wema Bank and Unity Bank.
First Rand joins rival Standard Bank, which has also submitted expressions of interest in the rescued banks to the Central Bank of Nigeria in a bid to gain a foothold in Africa’s largest market. Standard Bank already has controlling stake in Stanbic IBTC Bank and both banks have cash to make further acquisitions according to industry sources.
Sources close to the parties said First Rand was initially interested in Skye Bank, but was advised to steer clear to avoid being bogged down in possible wrangling with political interests that currently have considerable influence in the bank.
It was learnt that the South African bank is not particularly keen on buying a rescued bank, which others consider as easy picking, and is looking for a “good” bank to quickly deliver size and scale especially in commercial and retail banking segments as it seeks to expand its frontiers in Africa with Nigeria being the market of choice.
Sterling Bank sources said had already “ secretly” offered itself for sale to First Rand but the South Africans have yet to reach a decision on the offer.
Analysts said First Rand is seeking to grab a share of the mobile money transfer business, retail and commercial banking, investment banking as well as debt and equity markets.
First Bank has also commissioned a consulting firm to do due diligence on two banks including one affected by the recent directive limiting the tenure of bank chief executive officers to 10 years maximum, according to bank sources.
Group Managing Director, First Bank, Mr. Bisi Onasanya, confirmed last week that the bank was looking at possible acquisitions but did not disclose its targets even while merger plans with Ecobank Transnational were ongoing. Industry sources however said on Sunday that First Bank might also be targeting Oceanic Bank, but this could not be confirmed.
Another bank, which is a target of acquisition, is BankPHB, which FCMB has set its sights on. FCMB, which lost the battle of acquire Spring Bank to Bank PHB last year, is seizing the opportunity to try to claim both the winner and the prize this time around.
It however has to contend with Habib Bank of Pakistan, which sources said, is seeking to increase it stake in the bank in partnership with two prominent Nigerian families.
Our correspondent also gathered that Union Bank directors have temporarily fended off a bid by second generation bank to acquire a sizable chunk of its shares on the stock exchange by taking heavy positions themselves after they discovered an attempt to mop up the banks shares on the floor of the exchange.
First Rands’s Chief Executive Officer, Mr. Sizwe Nxasana, has not hidden his desire to enter Nigeria since June last year shortly after his appointment and was in the country to attend The Economist’s conference a fortnight ago and held discussions with senior banking and government figures.
“We’re talking to a number of people in Nigeria to get a much deeper understanding of the environment,” he was quoted as having said on the sidelines of the conference.
Foreign investors analysts have been following Nigerian banking sector developments with keen interest since the start of the banking sector reforms that has so far seen the ouster of eight chief executives and three more due to go by the end of July consequent upon the application of new rules that have limited the maximum tenure of bank chief executive officers to 10 years.
Merrill Lynch analysts last month classified GTBank as “ the best-in-class bank within Nigeria that provides exposure to upside surprises to the oil and macro-economic story.”
They added that “Zenith, United Bank for Africa, GTBank and First Bank are the four largest banks in Nigeria by market capitalisation and appear well-placed to gain market share in a consolidated sector” in a note to investors.
Head, Corporate Affairs, Central Bank of Nigeria, Mr. Mohammed Abdullahi, confirmed to our correspondent on Sunday that several banks had submitted expressions of interest in the rescued banks but said these were still being studied.
He said, “Some people are interested in acquiring some of the rescued banks; some of them are foreign banks but we are doing our due diligence, we are following due process and until we complete that we cannot disclose any information about who is acquiring what.”