September 21, 2011
THE current poor run at the Nigerian bourse has been attributed to several factors, which include waned investor confidence, lack of liquidity, diversion of funds to fixed income securities and apprehension over the fate of the rescued banks.
Despite the attractive value of most of the equities, investors are not looking the way of the stock market as expected. This slow demand for stocks has led to a persistent slide in their prices.
According to leading analysts and market operators, the nationalisation of the three out of the eight rescued banks, jolted many stakeholders in the market, who are watching how the remaining five would deliver on the deadline set by the Central Bank of Nigeria (CBN), lest the same treatment is meted out.
The analyst community believes that a successful resolution would act as a buffer or stabilising influence on the nation’s stock market and prevent the slide in the fortunes of investors in the market. They noted that unlike the three nationalised banks, the five banks – Intercontinental Bank Plc, Oceanic Bank Plc, Union Bank of Nigeria Plc, FinBank Plc and Equitorial Trust Bank Limited, have prospects of survival following the separate Transaction Implementation Agreements (TIA) they have entered with core investors.
Indeed, the banking sector consolidation actually moved into high gear only this July when Access Bank and Intercontinental Bank announced their TIA. The remaining four banks have since announced merger deals with other suitors.
FinBank is going with First City Monument Bank Plc, Union Bank is with African Capital Alliance, while Oceanic Bank and ETB are combining their businesses with Ecobank Translational Incorporated and Sterling Bank Plc respectively.
Shareholders of the various banks are preparing to endorse the TIA’s and operators in the capital market said that the singular action of approving these merger pacts would act as a boost to the nation’s economy because it would bring about the much needed calm and stability to a banking industry in need of a confidence vote to signal a return of investor belief in the nation’s stock market.
Besides, the acquisition of the rescued banks would give better protection and a safe harbour for the depositors of the rescued institutions and a seamless continuation of banking services to Nigeria’s growing banking customer base.
It has been estimated that N3.5 trillion of Nigerian banking industry deposits are held by the eight rescued banks with the largest portions in Intercontinental, Union and Oceanic Bank. A successful conclusion of the mergers would therefore mean good news for depositors of these banks.
Besides, the merger will create bigger institutions that would be able to contribute more to the growth of the nation’s economy.
For instance, the Access Bank/Intercontinental Bank proposed business combination has been described as the model in the current banking consolidation. Financial analysts are convinced that the deal was well managed and should deliver value-laden benefits to all stakeholders.